Balanced scorecard needs a strategic management system for best benefits

Although many companies now have performance management philosophies in place for implementing strategy, this is not enough. They also need a compelling strategic management system to support this, allowing them to dig deeper and manage activities across the entire enterprise.

"Today, businesses need a system that gets everyone in the organisation to focus, communicate and collaborate on strategy from a single vantage point, and then turn it into action," says Andrew Milner, business specialist, Strategic Performance Management (SPM), SAS Institute SA.

"Companies competing in today's global economy can no longer simply monitor financial and operational performance. They need to communicate a strategic vision to their employees, empowering them to execute it proactively before events occur that demand a reaction."

According to Milner, key to staying ahead - instead of merely surviving - is drawing on knowledge so that decisions are based on hard facts and not assumptions.

"Businesses need to analyse key performance indicators that generate shareholder value, gauge performance and drive behaviour based on business strategies," he explains.

A good strategic performance management system will capture a business' corporate strategy, no matter which management philosophy is followed - and take it further. It will integrate, distribute and analyse enterprise-wide information, and then act on it before the competition. This enables organisations to see the cause and effect relationships of the various organisational activities on the strategy, identifying true sources of business failure and isolating best practices that lead to success.

One company that has derived huge benefit from strategic performance management is Berlin's DeTeWe, which has successfully been providing telecommunications equipment for more than 100 years.

The company needed the analytical ability to measure human resources functions, and improve them. Affected by the sweeping changes hitting the European telecommunications industry in the mid-1990s, the company's HR had to change from a department focused mainly on day-to-day operational activities to one that aligned closer with activities driving the organisation's strategy.

"We had to look at measuring the return on our investment," says Wolfgang Binder, DeTeWe's director of human resources and senior vice-president.

DeTeWe implemented SAS Strategic Performance Management for Balanced Scorecard. The HR department is now able to react very quickly and delivers real value to the organisation, instead of being a cost centre. In addition, the company has retained its best employees, and become stronger. Other benefits include drastically shortened reporting times, and decision-making based on real information.

HR can now analyse where the best candidates find out about their jobs and eliminate advertising in unproductive channels. The company can compile detailed statistics on training to figure out what educational processes work best for the individual as well as the organisation as a whole. In addition, the company can compute profitability per customer and benefit costs per employee.