BSC Implementation and the Internal Business Process Perspective

Lessons Learned From the Balanced Scorecard Implementation at BAE

BAE Systems competes in several of the most complex, capital- and knowledge-intensive areas of the aerospace and defense industry making each of their product lines and divisions highly dependent on accuracy, efficiency and quality management. For BAE Systems, ensuring exceptional orchestration of each aspect of a project is essential for their growth and continued viability as a business. From their aerospace product lines to the defense-related product lines that include components, assemblies and subassemblies, the tighter the coordination across each of the divisions that comprise BAE, the more successful the company operations. With each of the divisions lacking coordination and not being synchronized with each other, BAE was beginning to fall behind competitors while seeing their performance to existing contractual schedules also slip (Murby, Gould, 2005). With the business units lacking integration and drifting apart, senior management chose to implement the largest strategic change management progamme in the company's existence. The plan centered on breaking apart the divisions of the company and re-assembling them to ensure greater interlocking processes and systems than had been present in the past, creating a more unified and coordinated enterprise in the process (Murby, Gould, 2005). BAE Systems was formed when British Aerospace, who had chosen to become privatized in 1979, merged with Marconi Electronic Systems in 1999. The combining of these companies created the largest European aerospace and defense contractor and the second largest globally at that time (Murby, Gould, 2005). As the mergers brought together very-scale aerospace and defense contractors, the total headcount of the companies quickly swelled to over 100,000 associates and expanded the reach of the enterprise to nine of the largest aerospace and defense markets including Australia, Canada, France, Italy, Germany, Saudi Arabia, Sweden, the UK and the U.S.A. that together accounted for annual sales of over £12 billion with an order backlog of £41 billion based on contracts with key customers globally (Murby, Gould, 2005). With business development, operations and sales across nine of the largest aerospace and defense markets, BAE Systems was still unable to attain consistent revenue and profit growth. A common reaction to this type of challenge is to complete process and subprocess improvement programs including the addition of lean and Six Sigma (Sim, Koh, 2001) and retooling of machines, production centers and entire divisions. BAE Systems initially tried all of these strategies in addition to implementing activity-based costing, systems analysis and business process reengineering (BPR) strategies yet none of them worked (Murby, Gould, 2005). Based on the failure of all of these traditional approaches to solving large-scale enterprise performance management problems, the senior management at BAE Systems chose to completely realign divisions using an innovate approach to implement Balanced Scorecard (BSC) analysis at the process, performance and change management levels of the organization.

Analysis

Enabling greater alignment of strategic objectives and the direction of an enterprise is one of the most common reasons why enterprises adopt a balanced scorecards (BSC) framework and methodology. BSC frameworks have often led to greater insights into the performance of a business and given operational managers greater control based on more effective use of the information and reporting systems they have (Sim, Koh, 2001). The broader a BSC implementation is adopted across an enterprise, the greater the ability to understand why variations between actual and planned performance occur. Best practices in BSC implementation are predicated on explaining the variance between planned and actual performance at the operational level of the business, explaining this variance in both quantified operations metrics and financial results (Sim, Koh, 2001). This is why BSC initiatives are so popular in many enterprises; they provide operational and financial feedback on why variances in performance relative to strategic plans exist.

For all the value BSC frameworks and initiatives provide in terms of measuring variance in performance relative to plan, they often lack or provide little room for measuring and acting on cultural and change management program development and execution (Sim, Koh, 2001). This is what makes the BSC implementation at BAE Systems so unique. BSC programs are often seen as externally imposed series of metrics that define how associates need to improve, and as a result are often rejected and even feared as they are seen as ranking which employees will be kept or let go during a layoff (Sim, Koh, 2001).

The senior management and BSC implementation teams at BAE Systems were well aware of the resistance to change challenges they would face. In anticipating this aspect of the BSC change management program, the teams responsible for the project first focused on the contributions teams and individuals were making first. This immediately increased the level of trust in the program, encouraged ownership of the process and progamme, and communicated that every person was critical to its success. BAE Systems project managers were acutely aware of the fear of the programme as well, as every BSC implementation faces these concerns from employees when first introduced (Sim, Koh, 2001). Instead of allowing these areas of resistance to fester, the project managers quickly and clearly implemented an outward-based vision of how the BSC programme would help to unify the entire company and make it more competitively stronger in a very challenging aerospace and defense market (Murby, Gould, 2005). By taking these additional steps and infusing ownership of the BSC framework into the company, the BAE Systems project managers significantly improved the probability of success for the implementation. As the project progressed, the contributions and value of each employee was continually underscored and acknowledged. This in turn fueled trust and helped the entire company adopt the BSC initiative as a metaphor for making their company stronger and more capable of competing and winning large-scale, prestigious new contracts in their served industries (Murby, Gould, 2005). BAE Systems succeeded with a very large-scale and unique BSC initiative where many others had failed by galvanizing change management as a core part of their program.

By taking the extra steps and implementing a more thorough change management programme, BAE Systems was able to side-step the areas where many BSC initiatives fail (Murby, Gould, 2005). By creating a unique, highly relevant, externally focused vision ABE's project managers were able to create a more effective approach to implementing the actual process-related changes as well. With the employees understanding the "why" of the change and having ownership of them, the entire implementation took on greater meaning. All of these factors taken together greatly improved the probability of success.