Chapter Summaries

Chapter 1: Management Challenges in China
Chinese executives and managers face multiple external and internal challenges to creating business success. The external challenges include: rapidly changing business conditions; increasing competition; and increasing customer expectations. A key question is how to compete in this dynamic and competitive business environment. Companies must formulate clear business strategies and then execute them effectively.
There are internal organizational challenges to clearly formulating and successfully executing a company's business strategy. The strategy formulation process can include several topics for analysis, discussion and agreement among senior management teams:
     · competitive analysis
     · brand positioning and
     · choice of value proposition to target markets
Management's internal strategy execution process must cope with several fundamental issues:
vertical and horizontal organizational alignment; organizational silos; and issues around people and culture. The people and culture arena includes challenges in five key areas: information sharing; teamwork and problem solving; initiative; motivation; and talent development.
Amidst these external and internal challenges, executives have a need for an organizational strategy and infrastructure that enables them to be more effective in formulating and implementing their business strategies. The Balanced Scorecard [BSC] is a highly useful management tool in this challenging competitive context. The BSC Methodology, adapted for China, can be used to help create an infrastructure for strategic management. This infrastructure enables management to:
     1.Establish clarity and focus on what is strategically important throughout their organization
     2.Execute the strategy
     3.Learn from the results that are obtained.
This book presents an explanation of the design and implementation issues for establishing and using this strategic management infrastructure.

Chapter 2: Balanced Scorecard Overview
This chapter identified the six major components of the BSC Methodology:
     1.Analysis of the company's business situation
     2.Definition of the company's business strategy
     3.Development of company performance objectives in four key areas - financial, customer, process, and         learning/growth
     4.Communication of the strategy throughout the organization and cascading objectives to lower levels of the         hierarchy, potentially down to individuals
     5.Linkage of the BSC to performance management, competency development, and variable pay
     6.Periodic reporting, analysis of results and adjustment of the strategy.
The chapter identified the elements of a single Balanced Scorecard: Perspectives; Objectives; Measures; Targets; Initiatives; and Tasks. Each of four Perspectives were identified and briefly discussed. Key questions for each Perspective were also specified for management's consideration.
Eight reasons were identified and discussed for why the BSC Methodology is useful in China:
     1.Balance is a concept embedded within Chinese culture.
     2.The BSC methodology helps a company develop its infrastructure for strategic management.
     3.The BSC methodology provides a strategic framework for managing performance.
     4.The BSC methodology enables hypothesis testing of cause-and-effect for strategic management.
     5.The BSC methodology enables organizational learning.
     6.The BSC methodology enables change management.
     7.The BSC methodology includes tools for measuring performance and communicating results.
     8.The BSC methodology provides organizational lubrication [and glue] for dissolving organizational silos and         establishing alignment.
This summary of the BSC methodology's components and the elements of a single scorecard provide a useful overview for the remainder of the book.

Chapter 3: BSC Historical Development
This chapter briefly summarized the historical development of the Balanced Scorecard, covering the time period from 1990 to 2002. The second part of the chapter briefly summarized the evidence for effectiveness of the BSC. The Balanced Scorecard was an outgrowth of a study group seeking to develop a more effective approach to performance measurement. From that beginning in 1990, among Robert Kaplan, David Norton and executives from twelve major companies, the BSC approach has evolved considerably. It has moved from a focus on measuring performance, to managing performance, to a more comprehensive approach to strategic management. This latter approach is described in the remainder of this book within the context of what we call the Balanced Scorecard Methodology

Chapter 4: Global BSC Applications
This chapter presented a wide variety of case applications of the Balanced Scorecard. The chapter summarized nine different cases, seven in the business sector and two in the government sector. The cases include examples in multiple areas: technology; automobile; health care; hotel; global business; electronics; semiconductor; US government; and city government. A summary of each published case report was presented, followed by analysis of the case for its relevance to China.
Each case analysis points out one or more key issues to be considered in applying the Balanced Scorecard to organizations, with special reference to China. Each of these key issues is addressed at some point in the remainder of this book.
The Balanced Scorecard Methodology provides a systematic approach to formulating, implementing and adjusting a company's business strategy.. Many of the practical issues that must be addressed in accomplishing this are illustrated in these nine cases.
The remainder of the book describes a comprehensive approach toward creating organizational improvement throughout China.

Chapter 5: BSC & Business Strategy
Formulating and describing a company's business strategy can be an ambiguous and complex challenge. This chapter explained how the BSC Methodology can be systematically used for the formulation and description of a company's business strategy. The chapter began by describing seven challenges for strategy execution. The BSC Methodology as described in this book addresses each of these challenges for strategy execution. The seventh and most important challenge is the absence of an infrastructure for setting objectives, reviewing performance, adjusting strategy, and aligning the organization for change. Each of these topics is addressed later in the book.
The chapter presents two diagrams related to the challenge of developing an infrastructure. For strategic management and deployment of the BSC Methodology. The first diagram illustrates the fundamental elements for strategic analysis in China. The diagram includes both external and internal elements. The external elements for strategic analysis are:
     · Government policy, regulation and WTO
     · Customers
     · Suppliers or partners, and
     · Competitors
The internal elements for strategic analysis include:
     · Strategic goals
     · Business processes
     · Information, tasks and transactions
     · Technology, and
     · People
Each of these elements should be considered when formulating a company's business strategy, company objectives, and defining the desired business results to be obtained.
A second infrastructure diagram illustrated a high level strategic management process for the Balanced Scorecard Methodology. The first stage of this high level strategic management process includes three components:
     · Analysis of the business cycle for a company and/or its products/services
     · SWOT analysis of the company's strengths, weaknesses, opportunities and threats, and
     · Formulation of the company's value proposition.
The book deals later with each of these components in this strategic management process.
A table was presented that illustrated how three different types of companies may have different strategic objectives, depending upon where they are in the business cycle of grow, earn, or harvest. SWOT analysis was briefly described in the context of the BSC Methodology. A brief introduction of the value proposition concept was presented.
Then the chapter shifted to consideration of three additional critical elements for strategic analysis in the BSC Methodology:
     · Mission
     · Vision, and
     · Strategic themes or focuses.
Examples of mission statements from foreign and Chinese organizations were presented. A brief section addressed the issue of stakeholder scorecards and how they can be useful, but are different from scorecards in the BSC methodology.
Another section was briefly devoted to the topic of linking business strategy to a Balanced Scorecard in two ways:
     1.Through the use of financial and non-financial objectives, and
     2.Through the inclusion of leading and lagging measures of performance.
Another section recommended that management treat their assumptions and beliefs as hypotheses that can be tested. The concept of strategy map was introduced for describing a company's strategy. This concept was illustrated in a diagram through a generic strategy map. The strategy map can be designed to illustrate senior management's hypotheses about the cause-and-effect relationships that exist among the key elements of the company's business strategy. This topic is specifically addressed in the next chapter.

Chapter 6: BSC, Objective Setting and Measurement
This chapter addressed two critically important topics: setting objectives and the choice of measures for those objectives. The chapter began with a caution about building a scorecard up from a large number of KPIs. The correct usage of a Balanced Scorecard is first, to describe the company strategy, and second, to help guide and measure the execution of that strategy.
A key purpose of a company scorecard is to explicitly describe senior management's hypotheses about how to achieve their important strategic objectives. A strategy map example illustrated how this is accomplished, as well as the measurement issues that must be addressed.
The BSC measurement issues, problems and opportunities are described. Even though measurement is always imperfect, it includes valuable opportunities for design and learning. Through this learning, senior management teams can develop their competency for strategic management.
The remainder of the chapter was devoted to separate sections for each of the four BSC perspectives: Financial, Customer, Process, and Learning/Growth. Each of these four sections described measurement examples and issues. The Financial section identified three categories of objectives and offered measure examples for each category. The Customer section identified fundamental questions to help senior management develop customer objectives from the previously identified financial objectives. This section offered examples of typical outcome measures that have been used for the Customer perspective.
The Process section presented examples of measures for several high level processes: innovation; sales and marketing; and operations, supply chain and production. Key questions that can usefully be addressed were offered for two other high level processes: distributor relationship management and customer service. The Learning and Growth section covered three key issues: developing key competencies; improving access to information; and improving company culture to enable strategy execution.

Chapter 7: Designing Organizational Alignment with BSC
This chapter defined a system as a group of parts that acts as a whole. Organizational architecture refers to the design of organizational components and systems to fulfill the organization's mission, vision and strategic objectives. The purpose of company systems and processes should be to enable the formulation, execution and adjustment of the company's business strategy.
Organizational alignment refers to the process of designing and implementing the company's structure, systems and processes so they fit well together and with the company's strategy. There are multiple sources of misalignment. Vertical misalignment was illustrated in a case example of a disconnect between a GM and his purchasing manager. This was diagrammed in a diagnostic map. Horizontal misalignment was illustrated in a case example involving three Deputy GMs and a new MBO performance appraisal system. Another diagnostic map illustrated the complexity of this case.
Organizational silos, job descriptions, and performance appraisal are potential hindrances or barriers to establishing organizational alignment. MBO performance appraisal systems in China are particularly susceptible to the undesirable influence of organizational silos. If job descriptions are developed from the "bottom>up" they can often hinder strategy execution. Basing job descriptions on historical precedent does not consistently help a company adapt to dynamically changing business conditions. The chapter points out several ways in which global HR practices have not yet caught up with the evolutionary improvements made possible by the BSC Methodology.
The chapter describes how the BSC Methodology can be used to establish both vertical and horizontal alignment. Case examples were described for establishing both vertical and horizontal alignment. The BSC Methodology provides a new context for discussing what is important at work and how work should be performed. A diagram illustrated the desired context for job descriptions. Another diagram illustrated how horizontal alignment can be achieved through shared responsibility for key objectives.
The chapter concluded with a discussion of organizational structure and improving business results. This section made two useful points: [1] If strategy formulation, implementation and adjustment is well executed, a wide variety of organizational structures can be successful; and [2] The most carefully designed structure will not deliver the desired results if the strategy is faulty or poorly executed. Possible useful approaches to reorganization were identified.
The BSC Methodology can be applied to the vast majority of factors contributing to poor business results. When the BSC Methodology is deployed, management problems are more easily identified. This leads to a focus on HR systems, which is the topic of the next chapter

Chapter 8: BSC & Human Resource Systems
The chapter addressed the importance of linking the company's strategy to the company's human resource systems. The BSC Methodology enables a strategic linkage that has previously been difficult to accomplish. The chapter covers three areas for establishing these strategic linkages: competency development; variable pay; and recruitment, selection and retention.
Competency was defined as a combination of knowledge, attitude and skill that can be demonstrated behaviorally and that enables outstanding performance. A distinction was established between core competencies and technical or functional competencies. Another distinction was established between competency development and management training. Similarities were identified between analytical problem solving and the BSC Methodology. Performance management includes diagnosing the causes of performance problems. Key questions were identified for this diagnostic process.
Building a competency model often uses a criterion-based approach. The basis for and problems with this approach were described, along with the key elements that are typically included. The BSC Methodology relies on an alternative approach to competency development. Five stages were described for how link the BSC Methodology to competency development:
     1.Identifying key competencies
     2.Identifying required competency levels
     3.Competency assessment
     4.Gap analysis
     5.Competency development.
Each of these stages was described. There are benefits to using competencies that have been defined in a manner that includes multiple levels. Two examples of competencies defined via five levels were offered. A specific approach to competency development relying on coaching was described. A case was described and analyzed.
The second major section in this chapter addressed the linkage of BSC performance management to variable pay. Difference approaches to variable pay were described. Key questions were identified that are useful during variable pay system design. If variable pay is not linked to the company's business strategy, the risks of this were identified. Key variables for consideration in variable pay design were identified.
The third major section discussed linkage of the BSC Methodology to recruitment, selection and retention. Each of these areas were addressed. The final section of the chapter was devoted to the HR Manager's changing role in China. A table was provided that summarizes each of the strategically useful changes that HR managers need to make. The three major sections of this chapter provide specific detail worthy of HR management's consideration. The major shift they need to make is moving from a focus on administration to a focus on supporting and enabling the formulation, execution and adjustment of strategy. The BSC Methodology provides an ideal framework and structure for HR management to undertake this change in their role.

Chapter 9: BSC & Organization Culture
The cultures of successful enduring companies have four characteristics: conservative financial strategy; agility; employee commitment; and tolerance of ambiguity and differences. The BSC Methodology enables a company to focus on developing these characteristics for success. The chapter offered two definitions of organizational culture. Strategy execution in China often involves changes in company culture. The BSC Methodology creates a strategic framework for defining and implementing the changes that are needed. This was discussed in relation to the typical four perspectives addressed by a balanced scorecard. The process section addressed both quality and efficiency. The people section addressed a variety of areas, including analysis, learning and employee satisfaction.
China's shift from a production to a market economy is driving changes in company culture. The multiple factors that are interconnected in this complex system were briefly identified. The next section addressed different types of enterprises and their cultural readiness for the BSC Methodology. This section offered a logical rationale for adjusting the sophistication and complexity of BSC deployment according to the enterprise's readiness for change. Four enterprise types were considered: SOEs; private enterprises; foreign invested enterprises; and government. The SOE section dealt with four different types of SOEs: dinosaurs, dragons, survivors and privatizing companies. The value of determined leadership for implementing the BSC Methodology was described for companies in the survivor category. The typical problems of foreign invested enterprises were identified. Almost all of these problems can be improved through the BSC Methodology. Finally, the potential benefits of the BSC Methodology for government organizations was briefly described.
This chapter has described the cultural context for important strategic change related to the BSC Methodology. The next chapter describes the issues related to executing those changes through the linkage between the BSC Methodology and Business Processes

Chapter 10: BSC & Business Processes
This chapter addressed the all important arena of business processes. The linkage of BSCs to business processes is critical for strategy execution. The BSC Methodology establishes this linkage with a specific focus on business process improvement/redesign [BPI/R]. The chapter introduced the five key elements of any process: [1] supplier; [2] input; [3] work activity, task or decision; [4] output; and [5] customer. These are the fundamental elements for process analysis and improvement or redesign.
The next section discussed linking BSCs to BPI/R. This section described the approach we use in China for change management and process improvement. This has been evolving since 1993, when we began helping companies in China map, analyze and improve their important cross functional business processes. This section included a case description of successful strategic change that was achieved through a combination of BSC, BPI/R and training. Key success factors in China for change management and process improvement were identified.
The next section was drawn from our experience with more than 70 companies in China. This section identified nine common process problems: process clarity; process consistency; process measurement; process ownership; unclear responsibility; "white space" between functions; bureaucratic inefficiency; little to no understanding of internal/external customer needs; and little to no evidence of purposeful process design. This led into a brief description of five alternatives for how to approach process improvement: ISO; business process improvement; business process redesign; business process reengineering; and six sigma.
The next section described core tools for process improvement and redesign: communication and problem solving skills; mind mapping; brainstorming; process mapping; swim lane process maps; fishbone diagrams; sequence diagrams; value assessment diagrams; action planning tables; and Gantt charts. The next section addressed process measurement. Five different measures of process performance were described: effectiveness; efficiency; cycle time; cost and adaptability.
The next section discussed the business arenas for process change and improvement that can be addressed by senior management: [1] product and service development; and [2] supply chain management. This section included case examples of process improvement in each of these arenas. The next section addressed the value of creating a company environment conducive to creativity and innovation. The chapter concluded with a brief discussion about how the BSC Methodology can help a company create a culture of "focused improvement".

Chapter 11: BSC, Leadership & Learning
The BSC Methodology provides a valuable context and set of tools for leadership in China. Our sixty years of work experience suggests there is a key to the mystery and challenge of organizational leadership. It is balancing the three elements of leadership: analysis, action and learning. The BSC Methodology provides the mechanism for achieving this balance of analysis, action and learning.
A case example illustrated how the BSC Methodology can be used to link strategic goals, competency development and performance measures. This case involved a variety of cross functional process improvement projects. The organizational transformation effort was successful in localizing the GM position. A comprehensive three tier model for leadership was described: strategic leadership; implementational leadership; and interpersonal leadership. Each of these arenas for leadership was described. The relationship between this three tier leadership model and the BSC Methodology was explained. The next section addressed the issue of organizational learning. A case illustrated how this has been accomplished in China. Several dimensions of organizational learning were described. Another case illustrated in detail how the BSC Methodology promotes and enables organizational learning.
The next section explained how the BSC Methodology includes all of the elements that have been previously recommended in Kotter's model for leading change. A table mapped the BSC Methodology to Kotter's 8 stage process for leading change. The chapter concluded by explaining how the BSC Methodology provides a framework for measuring and developing comprehensive leadership in China. Improvement of organizational performance is enabled through collective leadership action. The BSC Methodology provides clear guidance for collective action that improves organizational performance.

Chapter 12: BSC Implementation
This chapter addressed the process and success factors for implementing the BSC Methodology. Discussion of the implementation process covered timing and organizing, plus a description of seven stages for implementation:
     1.Analysis
     2.Strategy formulation or clarification
     3.Defining company objectives
     4.Cascading objectives
     5.Linkage to HR and IT systems
     6.Linkage to BPI/BPR
     7.Reporting, analysis and adjustment.
Although the implementation stages follow a logical sequence, it is helpful to have guidance when going through the implementation process. We have identified six success factors that can make a significant difference in the degree of implementation success for the BSC Methodology:
     1.Top management commitment and involvement
     2.Management commitment to overcoming implementation hurdles
     3.Using the BSC Methodology to overcome functional silos
     4.Establishing linkages to competency development and variable pay
     5.Using an infrastructure to communicate the strategy, track performance and make adjustments based on         results
     6.Elevating Human Resources to the status of a strategic partner to line management.
The BSC Methodology is a powerful approach to strategic management and organizational change in China. It is worthy of management's time and energy in learning how to practically apply it for the organization's benefit. Our experience indicates this investment will yield benefits for the organization, management and employees for many years to come.
The final chapter addresses current status of the BSC Methodology in China, and the future direction for how it will evolve in the short, medium and long term.

Chapter 13: BSC & China: Current Status & Future Directions
This chapter addressed the current status and future directions of the BSC Methodology in China. Current status is described by the following observations:
     · China is on the front edge of a modernization wave.
     · The current status of change within organizations is fragmented.
     · Organizational culture is heavily influenced by Chinese history and culture.
     · Strategic management is becoming increasingly important.
     · BSC Methodology is consistent with, and supports the application of, China's first indigenous management          theory.
     · BSC implementation success has been inconsistent.
Future directions are predicted for the short, medium and long term. These predictions are:
     · Short Term: The BSC Methodology will enable significant organizational improvements. These include          improvements in strategic clarity, execution and alignment, as well as solution design and implementation.
     · Medium Term: The BSC Methodology will enable companies to achieve organizational agility, 
         which includes: [1] timely responsiveness to dynamic changes in target markets; [2] rapid response to          external competition and the ensuing requirements for internal improvement; and [3] rapid increases in          organizational learning.
     · Long Term #1: The BSC Methodology will enable strategic management for each organization to become a          situational science. The purposes of science, strategic management and the BSC Methodology were          described.
     · Long Term #2: The BSC Methodology will enable Chinese organizations to accelerate the pace and success          of strategy execution.