Using Scorecards for Governance
Posted on Execution Premium: September 29, 2008 9:49 AM
I didn't anticipate that I would leave the country of Iceland with a renewed awareness of the different governance challenges faced by private and public sector organizations, but that's just what happened. I was in Iceland recently to participate in a Balanced Scorecard (BSC) event, where I heard presentations from the main electricity and water provider for the capital city of Reykjavik; the country's ministry of road safety; and a leading Nordic management consulting company. The presentations highlighted how our strategy execution system has been applied in a small country by both private companies and public sector enterprises.
During the Q&A session, one panelist asked whether he should use the BSC with his corporate board, which brought about my reflection on the different governance challenges for private and public organizations. It's clear, based on my observations, that the BSC is certainly a valuable information system for any corporate board. After all, a primary board responsibility is to review, approve, monitor and guide the company's strategy. But with all the compliance activities imposed on boards by stock exchanges and Sarbanes-Oxley, much of their time can be consumed reviewing quarterly and annual financial statements, internal controls, and internal and external audit reports. While important and necessary, none of these financial reviews helps a board understand and monitor the company's strategy.
Quite a few companies now have their boards approve their strategy maps and scorecards and, once approved, distribute updated maps and scorecards prior to each board meeting. Reviewing all the objectives and measures on a company's scorecard would take more time available at any single board meeting. A board could, however, review the objectives and metrics of one of the BSC's perspectives, or one or two of the map's strategic themes, at each meeting so that over the course of the year, it will have done an in-depth review of the company's complete strategy.
For public sector agencies, however, the governance process is less clear. The boards of private sector companies represent the shareholders' goal to enhance long-term firm value. But the governance of public sector enterprises is done by elected legislators and executive branch personnel (mayors, county commissioners, governors, and the President). Their primary objective is typically re-election and their decision time frame extends to the next election. Only rarely do legislators and other politicians run for office based on how much they have improved the performance of government agencies. Thus, dedicated agency heads and civil servants encounter much more difficulty in getting their governing authorities to buy into their strategies for more effective and efficient services, and to attract funding for strategic initiatives that help them enhance the quality of services they deliver. The sorry state of the US air traffic control system and of the information systems of most US federal agencies testify to the inability of the US Congress and executive branch to support strategic investments that enhance the capabilities of government agencies. Public sector agency heads, therefore, must be much more creative and pro-active to build awareness and commitment among their governing authorities, having them fund projects that build capabilities, and holding them accountable for delivering improved performance to citizens.
How about in your organization? For those in the private sector, are you sharing the company's strategy map and scorecard with your board, and are these documents discussed at each board meeting? How did you educate the board about this approach and what barriers did you have to overcome? In the public sector, has anyone succeeded in building awareness and resource commitments from your governing authority to your long-term strategy?
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