LEADERSHIP
KEY BALANCED
SCORECARD PROCESS
LINKAGES
By Dr. Kellen Kiambati
I
n an era when quality products are
merely the ante to get you a seat at
the competitive table, increasingly
it’s the conception and execution of
differentiating strategies that elevate
certain companies above the pack.
Learning from the measures in a
Balanced Scorecard has provided the
boost to new heights of competitive
advantage for many of these winning
companies.
Using the Balanced Scorecard as a
measurement system undoubtedly
provides substantial benefits, but
leading Scorecard practitioners
recognize the vast potential in linking
the tool to key processes throughout
the organization, forging a bond
between short-term actions and longterm strategy.
In this column we’ll examine three
critical organizational processes:
Budgeting, Compensation, and
Corporate Governance, and consider
how the Scorecard serves as the thread
that bonds all three to corporate
strategy.
Budgeting
The excessive time and money
demanded from planning and
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budgeting might be considered
tolerable if the significant toil yielded
real benefits for the organization.
However, the converse may be true,
as organizations and management
pundits around the world have
united in their vitriolic diatribes on
our antiquated budgeting systems,
suggesting they are a waste of time
in the hyper-competitive landscape
of modern business, which renders
budgets out of date before the ink
on the paper used to print them
has dried.
A key shortcoming of budgets
is the sad fact that about 60% of
organizations are unwilling or unable
to link the process to their strategy.
In today’s short-term-focused world,
executives and managers are under
immense pressure to deliver “expected”
numbers to placate fickle analysts and
investors just waiting to pounce on the
poor company falling a penny or two
short on revenue or profit projections.
This myopic viewpoint comes at the
expense of strategy, because leaders are
hesitant to spend precious resources
on strategic initiatives that promise to
possibly add value three or four years
down the road. Why take such a risk
when the same capital could be used
to prop up current earnings, satisfying
Wall Street and keeping everyone on
an identical road to mediocrity.
It has been suggested that in extreme
cases, the use of budgets may provide
a root cause for the massive collapse
of corporate ethics witnessed in the
past several years. Operating in such
stifling, pressure-cooker environments
eventually causes some normally
moral and responsible people to make
errors in judgment that can ultimately
lead to ethical landslides of mistrust,
crime, and frequently, bankruptcy.
Fortunately for most of us, the
budgeting process doesn’t lead to a jail
cell, but it probably does send the sales
of pain relievers and antacids through
the roof as the pain of preparation and the inevitable game playing that
accompany the task - are enough to
test the wits of just about anyone.
There is a light at the end of this
painful and time-consuming tunnel,
however, and that radiant beam is
provided by the Balanced Scorecard.
Rather than completely exiling the
budgeting process, many organizations