Tuesday, August 31, 2004

Balanced Scorecard and Corporate Governance

Robert Kaplan adds an additional role the Balanced Scorecard can play to its already impressive feature list. Kaplan's article

Recent failures (Enron, Tyco, WorldCom) triggered several regulatory and legislative responses, including the Sarbanes-Oxley Act and new Securities and Exchange Commission-approved NYSE and Nasdaq governance listing standards. Currently, prior to a typical board meeting, members receive reams of paper that are difficult to wade through and make sense of. Kaplan says the risk now is that boards will become overly focused on regulatory compliance and corporate governance issues. As a result monitoring the company's overall strategy might not get the attention it deserves.

Kaplan has spotted an opportunity for his Balanced Scorecard in this situation: with only limited time available to review the information before the meetings and to perform their monitoring and governance functions, board members must receive the information that is most relevant to their governance responsibilities and that will enable them to more effectively participate in board meeting discussions.

Extending the Balanced Scorecard and strategy map framework to board members will enable them to perform more effectively and efficiently. First, the board should use the corporate strategy map and Balanced Scorecard, which together describe the company's strategy, as prime information sources. Second, it should produce a board scorecard to make clear board responsibilities and accountabilities. This provides a mechanism for the board to set objectives and subsequently review its performance.

Should Mr. Kaplan's idea be considered a valuable contribution to ensuring boards maximize shareholder value or do you believe his article must primarily be considered as a skillfull salespitch?

Monday, August 30, 2004

Managing for Value

Michael C. Mankins, managing partner of Marakon Associates, in the September 2004 HBR issue, once more measured what everybody already knows: typical company’s senior executives spend less than three days each month working together as a team, and in that time they devote less than three hours to strategic issues. Moreover, these three hours are seldom well spent. Strategy discussions tend to be diffuse and unstructured, only rarely designed to reach good decisions quickly.

One global firm spent more time each year selecting the company’s holiday card than debating its vital Africa strategy.

However at a number of Marakon clients — ABN AMRO, Alcan, Barclays, Boeing, Cadbury Schweppes, Cardinal Health, Gillette, Lloyds TSB, and Roche — executives have found ways to improve teamwork at the top. Leaders spend their time together addressing the issues that have the greatest impact on the company’s long-term value creation.

Based on the experiences at these companies, Mankins provides 7 techniques for exploiting valuable time of executive boards:

  1. Deal with operations separately from strategy
  2. Focus on decisions, not on discussions
  3. Measure the real value of every item on the agenda
  4. Get issues off the agenda as quickly as possible
  5. Put real choices on the table
  6. Adopt common decision-making processes and standards
  7. Make decisions stick

Mankins' article ("Stop Wasting Valuable Time") fits well in the Value Based Management tradition of Marakon Associates. My time reading this article was certainly not a waste of time and I recommend reading it to any topmanager and MBA student.

Thursday, August 12, 2004

Companies refering to VBM

Here I'm starting my modest collection of companies that refer to VBM having contributed to their results. If you see a statement with a publication date after August 12th 2004, please add it in a Comment!
Let's use the following Template as the first line of the Comment:
Name of the Company - Industry - Country - Publication type - Internet URL