Whether you are engaged in strategic planning for your organization’s risk management program or for its overall general management, an amazing tool is available to you and your leadership team.
And it’s all on a single sheet of paper!
In traditional risk management, only those risks that produce a loss (fire, earthquake, liability, etc.) are addressed. However, when an organization’s risk management system is taken to the next level of enterprise risk management, risks are addressed that can produce either a loss or a gain.
This shift usually elevates risk management to become part of an organization’s overall strategic planning process — with a renewed emphasis on the management of risk.
Two Harvard Business School professors, Drs. Robert Kaplan and David Norton, created a planning tool that’s now used all over the globe in organizations of all types and sizes.
This is only because it works!
On this single page will be your organization’s mission, vision and value statements, your long-term strategic goals plus current-year annual operational (tactical) objectives. In addition, a column is included to track current key performance indicators. Optional columns can be added to illustrate annual KPIs for the same operational objectives in preceding years.
And all on a single page!
One fundamental principle for its use is to stratify strategic and operational segments based on these categories:
• Customer focus — internal and external customers
• Continuous process improvement and innovation
• Professional development — training and education
A fourth segment is added to show the financial goals needed to fund the overall strategies and operations. This is where the “magic” of the Balanced Scorecard — as well as that part of its name, “balanced” — is found.
When the strategic goals and operational objectives in the BSC are balanced, without any one goal or objective overwhelming the others, the outcome is successful accomplishment of all financial targets! Reports on the BSC say this occurs “invariably” but I feel compelled to say “almost invariably.” Yet I’ve not seen this outcome fail to be accomplished.
The Balanced Scorecard captures all these values — and their tracking — on a single page!
I continue to emphasize that the notion of a single sheet of paper for a reason. I’ve seen so many strategic plans that are the result of arduous work by dedicated team members, yet a voluminous document is all too frequently the product. It ultimately finds itself on the proverbial shelf that only gathers dust.
Simplicity is good. Simplicity has never been more needed than in our current complex times. Simplicity can be more effective than complexity.
This one-page plan is perfect for board meetings where board members’ perspectives are properly strategic from “30,000 feet.” Ground level operations are not. That perspective leads to micromanaging by the board — the nemesis of leadership of any organization.
Yet the “dirty little secret” that never seems to be mentioned in Harvard Business Review articles or others on the internet about the BSC is that supplemental “one pagers” are essential at the operational level. And that’s good, of course!
What’s needed at this operational level are action plans — one for each operational objective.
An action plan is intended to help board members know how their strategic goals in general, and operational objectives in particular, are intended to be accomplished by staff over time. Each is drafted by those responsible to do the work! Each will show who will do what by when and, if a budget is needed, for how much.
These two separate and distinct “one-pagers” are needed by any organization to make its vision a reality, to accomplish its strategic goals and operational objectives, and do so on schedule and within budget. Obviously, the board will need to approve — with or without revisions — any action plan before it’s implemented, especially where a budget is required.
For more detailed information, search “Balanced Scorecard” or “Kaplan and Norton” on the Internet. For a sample template, plus more detailed information than above, email me at email@example.com.
Then try a BSC pilot experiment within a department in your company or a committee within your organization. This test will prepare you well to use this amazing tool throughout your overall organization to transform your strategic plan into reality.
Then it will be time to celebrate!
John Pryor, CPCU, ARM, is a risk management and general management with CSU Bakersfield’s Small Business Development Center and an adjunct professor in the School of Business at CSUB.