Balancing company strategy and performance metrics

How do I design department-level Balanced Scorecard projects?

Question: We are a wholly foreign-owned enterprise with an annual output value of about 40 million yuan. How should we design the projects or KPIs of the Balanced Scorecard of the Research and Development Department, Finance Department, Purchasing Department, Marketing Department, and Administration Department? (Asked by: Leo Chen)

Answer: The Balanced Scorecard of the Design Department or Before KPIs, you need to develop your company's strategy map and balanced scorecard. The company should have set its strategic goals and priorities for the year, which should be broken down into various departments.

When establishing the appraisal system, if you don't pay close attention to the company's strategic goals and only focus on improving and supplementing the system, it is easy to separate the strategic relationship between the performance appraisal system and the company. There are two immediate consequences of this fragmentation: horizontal imbalance and vertical inconsistency. If the goals of functional departments are contradictory, then when these departments strive to achieve their own goals, they will ignore the goals of other departments. This internal friction phenomenon is horizontal imbalance. For example, when the finance department is trying to tighten its budget, it may weaken the company's research and development department to develop new products. Likewise, if the goals of departments and individuals are not aligned with the goals of the company, no matter how well the tasks of the departments and individuals are completed, it cannot add impetus to the company's progress, which is vertical inconsistency.

Vertical inconsistencies and horizontal imbalances are often inseparable, resulting in loosening of the company's muscles and bones, causing the various forces within the company that should have formed a joint force to cancel each other out, making it impossible to hit a heavy punch in the competition. Therefore, while the inconsistent company is likely to put in more effort than the vertically aligned company, the effect is very different.

In decomposing the company's Balanced Scorecard to the departmental level, horizontal coordination issues are to be considered. Breaking down the indicators and goals of the Balanced Scorecard into departments is an important step in maintaining vertical consistency and horizontal balance. There are three factors to consider in this step. The first is the company's strategy, metrics and target values. Second, consider who the BSC owner's internal customers are. The needs, requirements and expectations of these internal customers must be clearly defined. This provides important information for individual departments to design their own goals. Third, departmental goals should be set based on these factors and in conjunction with the department's key functions.

What key issues should be paid attention to in formulating a scientific and effective management system?

Problem: As an enterprise grows from small to large, its management methods are constantly improving. When the company first started, there were few personnel and few management levels. Basically, the leaders directly managed the employees. Now that the company is slowly getting bigger, management has to be divided into layers, and system management has become very important. So what are the key issues that need to be paid attention to in order to develop a management system suitable for your company? (asked by: cyanbird)

Answer: The management system of a company is a very broad issue. The following suggestions will be made based on my understanding of your question. Management systems include company policies, business processes or SOPs (standard operating procedures), or HR systems including performance appraisal systems. First, all of the above systems need to be in place so that companies can operate on a system basis rather than relying on individual instructions. However, an important goal of establishing an effective management system is to enable all employees to work together to help the company achieve the desired performance outcomes. The most critical question is: "What are the expected performance outcomes?" The company must define its direction, first with a mission and vision, followed by a strategy to achieve a three- to five-year vision.

Companies need to define strategic priorities and key performance indicators based on business strategy. These goals need to be broken down into departments and individuals so that all employees can work together to achieve the company's goals. In the process of developing a strategic performance management system, it is necessary to ensure vertical and horizontal unification. The latter refers to the unification between company departments. Each department should consider the needs and expectations of other departments when establishing its own KPIs.

In addition, effective execution involves a continuous cycle of planning-execution-verification-improvement, referred to as the "PDCA" cycle. It ensures that the company's performance management system becomes a continuous process, in which the company can continuously learn and improve.

What are the job functions of the "Management Office" of the company?

Question: I am the manager of the material department of a Taiwan-funded enterprise. Recently, the company needs to set up a "Management Office" department due to its development needs, and I am required to be the head of this department. Excuse me: What are the specific functions of the "Management Office"? How to form the department well? (Asked by: Deping)

Answer: First of all, I need to understand the organizational structure of your company and the functions of each department, so that I can accurately answer the questions about the job functions that should be included in the "Management Office" of your company. The organizational structure of each company is different, some companies do not have a management office, some companies have a management office, and their functions are also different, which depends on the organizational structure design of the entire company.

I can provide the following information for your reference:

⒈ In addition to setting up a management office, some companies also set up a strategic planning department. In this way, the main responsibilities of the management office may include: establishing, promoting and improving the company's management system; establishing company system legislation and conducting internal system review; promoting the improvement of company processes and promoting the organization/institutionalization of new processes; The responsibility of the HR department is to do personal performance evaluation); set the company's project evaluation standards, control project nodes, and review the company's project results; ensure that the company's strategic goals and priorities are communicated and implemented.

⒉ Some companies do not have a strategic planning department, so in addition to the responsibilities mentioned above, the main responsibilities of the management department may include communicating with executives and assisting in formulating the company's strategic plan.

What kind of vice president is a qualified vice president?

Question: In the general manager's mind, what kind of vice president is a qualified vice president? (asked by: Xia Ke Xing Jiang Hu)

Answer: My answer is very simple---the vice president who can help the company achieve the expected performance results is a qualified vice president. How do you measure whether a vice president does this? The general manager must clearly define the VP's primary responsibilities and work with them to develop SMART (clear, measurable, attainable, results-oriented, time-bound) goals.

In addition to the above quantifiable indicators, the general manager also needs to measure some necessary qualities of the vice president, such as: initiative and sense of responsibility; can accept new ideas, strong learning ability and can quickly adapt to new Effective management methods; have the ability to manage strategically; be a good mentor and coach for employees; be willing to take certain risks when needed to achieve excellent company performance; have excellent leadership skills - able to direct their employees to strategic priorities Align, design an effective execution process, and lead employees to successful execution; know when to negotiate with the general manager, when to make decisions by yourself, and when to authorize.

How to formulate the company's annual plan?

Question: How to formulate a one-year business plan? (Asked by: vfull)

Answer: The one-year business plan should be based on the company's vision and strategy. Therefore, the annual business plan must answer a key question, that is, how can the company achieve the company's 3-5 year vision year by year. That is to say, when a company formulates its annual business plan, it must first clarify what its business strategy is.

In China, strategy has become a hot topic in management. However, many companies do not have a clear strategic focus. They face a crisis of lacking a clear strategy. Now the Chinese market environment is becoming more and more mature, the competition is becoming more and more intense, and the market gap is getting smaller and smaller. Only those organizations that have both strategy and effective management can become good companies with a long-term foundation.

Once a company has a clear business strategy, it needs to translate the strategy into clear goals, including financial and non-financial goals, which need to be linked to the company's budget process. The company's financial budget needs to consider the following factors: market research and forecasts of future company and industry growth; the company's revenue growth and expenses over the years; understanding of competitors; the company's long-term growth positioning and investment strategy.

Companies also need to establish non-financial goals in terms of customers, processes, and learning and growth to support the successful execution of the company's business strategy. There should be a causal relationship between strategic objectives and indicators.

Developing a company's annual business plan is only the first step. The most important management practice is to ensure its implementation, and its main management measures include: consultation with various stakeholders to determine the goal; attention to maintaining an accurate company forecast model and the factors affecting it; development of an effective communication plan; tracking actual and Result data from forecasts; understand gaps between forecasts and targets, and use such information to improve the quality of management and operational processes; inform stakeholders, either through a formal reporting process or by allowing stakeholders to review control information question.

How to manage the performance of export business personnel?

Question: Our company has an export business department, which is responsible for the export sales of the company's products and affiliated companies. Most of its staff are young people, energetic, literate, and have a certain degree of enthusiasm. However, how to implement performance management for them has always been a difficult problem for the company, such as how to balance coordination and division of labor, how to establish quantitative records, and so on. (asked by: qihengxu)

Answer: In order to establish an effective personal performance management system, the following points need to be paid attention to:

1. Employees must understand the importance of establishing this system, and understand that the system will benefit the company and the its personal benefits.

2. The individual performance management system should be linked to the company's mission, vision and strategy so that employees can see their contribution to the company's success. The company's goals are broken down into departments and individuals.

3. Goals should be SMART (ie, clear, measurable, attainable, results-oriented, time-bound). The performance management system must be objective and impartial.

4. In order to design and formulate personal KPI indicators, it is necessary to have vertical and horizontal unity. Said that the performance management system should be balanced coordination and focus on division of labor and cooperation.

5. The performance management system should be linked with the individual variable salary, so that the company and the individual can achieve a win-win situation. This is the principle of the floating salary design.

If you want to know more about how to establish such a strategic performance system, you can refer to the book "Strategic Practice of Balanced Scorecard in China" co-authored with Dr. Bi Yiwen. Detailed explanation.

How to improve management quality?

Question: The improvement of management quality is the foundation of improving the competitiveness of enterprises. Then, to improve the quality of management functions such as planning, organization, leadership, and control, to improve the quality of managers, or to build a learning organization, which of these three aspects is more important? How to effectively improve its quality? (asked by: finder)

Answer: All three factors are critical to the success of a company's business. This points to the need for a regulatory framework that can foster improvements in these three areas. I think the Balanced Scorecard provides the most effective management framework for all three. The Balanced Scorecard invented by Professors Kaplan and Norton depicts strategy and performance management from multiple perspectives. A typical balanced scorecard has four angles. (See Figure 1)

As can be seen from Figure 1, the Balanced Scorecard approach includes the three aspects you describe:

First, it is an effective planning, organizing, leading, and controlling process. Once a company has defined its strategic goals, it needs to translate the strategy into specific goals on four levels. Companies can measure performance by how well these goals are accomplished. There is a clear cause-and-effect relationship between these four perspectives: a well-done learning and growth perspective usually leads to improvements in internal business processes, which in turn enhance the organization’s image in the eyes of customers, and satisfied customers ultimately lead to improvements in business processes. And it will bring good financial performance.

Companies use the Balanced Scorecard as a tool to track their scorecard financial and non-financial metrics and to monitor the company's short-term performance. They use this tool to assess whether their action plan is being implemented as planned. The process is similar to a monthly job review, except that instead of just evaluating financial performance, managers evaluate all the metrics of the Balanced Scorecard and take corrective action. This process not only establishes strategic priorities, but also promotes strategic learning to improve the timeliness, objectivity and traceability of performance evaluations, and to establish a scientific and balanced monitoring and analysis platform for the effective execution of client strategies and plans.

Second, the Balanced Scorecard approach focuses on the concept of "balance". What is needed is a balance between financial and non-financial, short-term and long-term, external and internal, and results and drivers. (Refer to Figure 2)

Establishing strategic goals and targets is only the first step. How to achieve the expected result? An action plan is a change process or action designed to achieve a goal, an effort to achieve the target value designed for the indicator. Action plans can be large or small in scope and are usually managed as a project by a single person or group. For example, in order to achieve the expected results of the metric, the action plan should include designing an effective leadership competency model, defining what it means to be a learning organization, how to achieve it, and how to measure the results.

This article is organized by Stephen Chen. For more questions and answers, please visit the CEConline website.

Balancing company strategy and performance metrics

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