Governance and Strategy Implementation: Expanding the Board's Involvement

Original publication by Julie I. Siciliano
In Business Horizons, November-December 2002, pages 33-38
Synopsis by Elisa Adelman, Claremont McKenna College '03

A SCORECARD MODEL FOR IMPLEMENTING ORGANIZATIONAL STRATEGIES

One of the difficulties in successfully achieving strategic organizational change is that while planning committees debate new strategies, they are often less concerned with how to implement them. Often, when a board approves of a strategy, they assume that the firm will change their structural systems correspondingly, in order to implement the new plan. However, this assumption underestimates the complexities of the implementation process.

The lack of attention given to implementation processes in the early stages of strategy development is problematic because management teams will lack the guidance they later need to encourage the changes. Unfortunately, because research on implementation processes is scarce, only a few models have been able to provide guidance on ways to institutionalize a firm's strategic plans.

Siciliano advises that planning committees (generally comprised of board members and top managers) should consider implementation processes while they are still forming new strategies. Another solution would be to increase the board's involvement so that the members take a more active role and interest in outcome measurement and impact evaluation. In her article, Siciliano refers to a proposal made by Grates (1999) who suggests that strategic planning would be more effective if the board were to be responsible for creating meaningful, concise strategies, and communicate measures of success clearly. Siciliano acknowledges another suggestion made by Donaldson (1995) who believes in the benefits of creating "strategic audit committees," where the board is able to review the operations and implementation, without interfering directly with the management division.

While these two proposals aid strategic planning, Siciliano believes that there still exists the problem of finding a long-term solution to overcoming potential implementation problems. Her solution is to develop implementation scorecards, where planners can keep track of the activities, monitor performance, and align the operational activities of the firm with their new strategies.

Through the scorecard paradigm, the implementation process begins as soon at the planning committee has identified the firm's mission, and approves the new strategy. Incorporating the firm's long term goal into the scorecard at an early stage, increases the likelihood that the firm will act realistically, not assume an automatic trickle-down response, and rely on more than financial measures as indicators of the company's success. A team should be created to communicate the firm's goals and develop objectives to accomplish these changes. Because the firm's main vision is encompassed in the scorecard, even though individual units may create their own sub-goals, they will all have the common vision in mind.

In order to better understand the advantages of implementation scorecards, Siciliano relates an example of a credit union that underwent strategic planning in order to create a new vision and future for their firm. In order to change its vision, the credit union's planning committee first reviewed the firms strengths and weaknesses, and its mission statement, eventually deciding its goal was to be the primary, rather than auxiliary, financial source for its consumers. The committee formed four strategies to fulfill the new mission: "(1) quality personal service delivery, (2) facility management, (3) technology enhancement, and (4) a coordinated marketing effort."

Until this point, the committee had followed the usual method for strategic planning. However, at the next stage, the board developed an implementation scorecard that reviewed information for each of the goals, incorporated time frames and addressed ways in which the success of these goals could be measured.

After the plan was approved, the board members met quarterly to report the progress based on the implementation scorecard, revolving their discussion around the scorecard's measures. The scorecard and the board's involvement successfully helped the committee deal with the difficulties in implementing its goals. For example, while strategizing to market their logo, the committee had overlooked the product activity by individual members, focusing instead solely on metrics such as the number of members per account. After they began to implement their new strategy, they realized that the individual activity per account was declining. With the help of the scorecard, however, the strategic team was made aware of the danger, and was able to rapidly change their activities to encourage the desired behavior.

Through this example Siciliano highlights the advantages of introducing implementation scorecards in the early stages of strategic planning. Scorecards allow companies to better track their progress towards the new goals, encourage greater participation from board members, and ensure that implementation issues are considered from square one.