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In short, there is no doubt that effective development of staff can have a direct impact on bottom line and can also directly affect all of increases in profit possible through operational improvements. Simply increasing staff efficiency by 1% can often have effect of improving profitability by twice as much.
Linking The Balanced Scorecard To Strategy
The objective of any measurement system should be to motivate managers and staff to implement organization’s strategy. By translating strategy into measures within Balanced Scorecard, objectives and targets can be communicated to everyone. They can then focus on critical drivers and align initiatives and actions to meeting of strategic goals.
Why is it important for a Scorecard to communicate strategy?
•It describes organizational vision to all departments •It ensures that meeting of performance targets contributes to achieving strategic objectives •It focuses effort on key objectives and measures
How can we build a Scorecard that translates a strategy into action?
•By establishing cause-and-effect relationships between measures •By creating a framework against which underpinning objectives and actions can be assessed, valued and prioritized •By ensuring that cause-and-effect paths link through to on-going financial strength
An effective Scorecard enables an organization’s strategy to be inferred simply from cause-and-effect links between measures. Outcome measures signal ultimate objectives of strategy and performance drivers indicate actions or initiatives that are required in order to create future value. Ultimately, Scorecard retains a strong emphasis on outcomes and financial outcomes in particular.
Benefits Of The Balanced Scorecard
The Balanced Scorecard’s prescriptive approach to performance measurement requires performance measures defined in each of non-financial perspectives to be linked to each other and to financial measures, ensuring that organization’s ultimate goal; that of continuing to be successfully in existence, remains paramount.
The extent to which business results can be improved by decisions taken based on a Balanced Scorecard view of organization is significant. Furthermore, these business results tend to be very sensitive to minor improvements in performance in key areas (such as legal department). The following table illustrates point:
Balanced Scorecard PerspectivePotential ImpactTypical Profit Impact (*) OrganizationDecrease in legal costs7%
Legal DepartmentReduction in wastage2%
Innovation and LearningImproved efficiency and identify best practices5%
TOTALIncrease in profit14%
(*) Based on historical LexTech,Inc. figures
Information Systems To Support The Balanced Scorecard
Information systems play an invaluable part in assisting managers to analyze beyond summary level Balanced Scorecard measures. When an unexpected signal appears on Balanced Scorecard, managers need access to underlying data to investigate cause of any problem or to analyze trends and correlations.
If information system is unresponsive, however, it can significantly impact effectiveness of performance measurement.
Such an information system must then incorporate all of following features:
•At-a-glance exception alerting •Rapid access to summarized data •Drill down to successive levels of detail •Easy to follow dependency paths to identify causes of performance •Reporting initiative, objective and process information •Reporting of impacts of underlying objectives upon Scorecard measures •Reporting of impacts of objectives upon each other •Graphical creation and modification of objectives, measures and relationships •Support for dynamic re-planning for change •Integration with other office tools •Inclusion of rich text information •Graphical trending and tabular representation of data •End user configuration and analysis options •Integration with existing organizational data sources – with support of additional direct entry of values and annotations
To meet challenges ahead, legal departments need to develop a perspective on role of legal function in both qualitative and quantitative business terms. They may use a Balanced Scorecard of metrics that integrates law-department’s short-term actions with long-term organizational objectives. Effective solutions should meet this criteria:
•Be specifically designed to support implementation and ongoing evolution of a Balanced Scorecard measurement system, alone or integrated with other performance management approaches and initiatives, such as Six Sigma, process review and benchmarking. •Be backed by expert consultancy for strategy and training •Implement services without need of additional staff or technology. •Enable corporate legal managers to put into every day use best practice recommendations that in past may have seemed impossible to achieve, with minimal additional overhead, time or other resources. •Maximize benefits to be attained from existing performance measurement and management.
The Balanced Scorecard, with a comprehensive information system to support it, provides a means to make a real difference throughout legal department, and organization as a whole, from individual team member satisfaction right through to significant improvements in bottom line.
Richard Hall is founder/CEO of Hall’s Benchmarks & LexTech, legal information companies that help public & private entities Manage the Business of Law©. Rich’s meld of technology & statistics produced a techno-analytical model of law practice. In 1994, he invented linguistic SW which automatically budget codes, reports GAAP accrual financials & conducts compliance analysis. t 530.820.4070, f 530.820.4071, firstname.lastname@example.org