Applying Balanced Scorecard to a Professional Practise

In a continuation of our series focusing on the applications of the Balanced Scorecard in different sectors, this article concentrates on its application to a professional practice such as Accountants, Solicitors, Chartered Surveyors or an Architects firm.

The main difference between a professional service application and a manufacturing application is the administrative processes and the professional relationship between the organisation and its clients.  Professional services are very much centred around high end, expert knowledge and maximising this expertise and client relationship is key to achieving a greater success.

Let’s first start by understanding the components that make up the DRIVE concept

• D covers the direction your practise is taking or needs to take
• R is the financial resources that you need to finance your practise
• I is about focusing on impressing your clients past, present and future prospects
• V covers all of the processes you use to deliver your services to your clients
• And finally E, the Evolution Engine that helps understand the impact of passion, performance and people in your practise

To do this, visualise a pyramid containing each of the elements of DRIVE stacked as shown.  We have already discussed that the best outcome is where strategy is driven down through the elements and performance is driven up.

This visual map will become our template for defining the areas of the practise to be analysed and monitored, and highlight themes to address that will create significant improvements.

The next stage is to consider the pyramid in a bit more detail.  The diagram is simplified for an organisation, showing 12 areas to be reviewed.

The process starts with the goal of the Practise, which is likely to hinge around financial earnings or profit.  Ultimately this goal is what the entire practise will be aligned behind.

Next are the financial resource measures.  Simplistically, we have illustrated financial management and return on investment, although other measures are likely to be included such as client profitability, overheads and fee income.

The following layer considers what the client values in what the practise is offering.  Their decision to engage with the practise’s services will be driven by the service offering, your perceived image in the market and the way you manage the relationship with them.  A balance is needed across these to ensure a sustained relationship and it is important to consider all these in terms of past, present and future clients.

Next is the vehicle of your practise, and the way in which you deliver your services to the client.  Again three areas need to be considered: firstly, those processes directly involved in delivering professional services to the client; secondly all those departments, processes and services that whilst not directly involved with the client play a very important part of the overall delivery; finally the management of safety, quality and environment throughout the practise.

The final part of the pyramid will deliver the biggest element of change, again split into three areas of consideration.  First is passion, which covers the level of morale in the Practise and the effectiveness of the communication, both are inherently linked.  Next is the pipeline, a funnel to channel innovation through from concept to completion.  This pipeline may look to contain ideas in terms of future services, efficiency improvements or capital investment.  The continuous flow of ideas is imperative.  The final area for review is the skills capability of every staff member – from the Managing Partners to the most junior role.  A detailed skills matrix considering technical and soft skills, industry and local knowledge will highlight skills gaps that collectively could be having a significant impact on the effectiveness of your services.

This template will now enable a process of reviewing and monitoring a diverse set of measures that collectively highlight themes running through the practise, which if managed effectively will DRIVE the practise forward.

Having considered the detail of the DRIVE concept and a simplistic application, let’s reflect on what the benefits would be to taking a DRIVE approach, or on the flip side, consider a practise without it.

If you take decisions purely on financial information you are reacting to past events; almost like driving a car by only looking in the mirror.

If you do not monitor performance in a balanced approach considering all areas and their impact on one another you could be hindering the speed at which you practise can adapt.

If you are not measuring the key areas that will help you achieve your goal, you cannot manage performance.

The key to success with the DRIVE concept is to understand your practise, measure it and manage it by exception.  This doesn’t mean reviewing every measure every management meeting, but identifying the themes running through the measures and creating a culture of management around those themes.  It does mean moving away from the traditional departmental approach to leadership, but in doing so creates complete alignment and focus on the core goals.

Without DRIVE you are working in a practise that at best will move second and continually have to react to market conditions. With DRIVE behind you your journey toward business excellence has begun.

Find out more about Balanced Scorecard for professional practices on the Inspired Change website.

This post is in: Balanced Scorecard