BKK

The Balanced Scorecard management system enables BKK to achieve group-wide strategic alignment following growth by acquisition and diversification.

I. Background

For Bergen, Norway headquartered BKK, the 1990s was a decade of growth and expansion. Fuelled in part by acquisition, the organization made two key strategic shifts.  Firstly, it switched from being a narrow producer of electrical power to a vertically integrated provider, adding wholesale and distribution capabilities. Secondly, it diversified to capitalize on emerging market opportunities, such as the exploding demand for broadband services.
“As a result, we became a much more complex organization than we had been historically,” says Tore Jensen (Controller).  Perhaps most notably, significant reorganization and acquisition meant misalignment in managerial principles and approaches across the BKK group.
To counter the alignment challenges, in 2001 BKK launched a group-wide process improvement program, mandatory for all business units, to identify local and enterprise-wide Critical Success Factors (CSFs) and Key Performance Indicators (KPIs). As a complementary initiative, BKK also initiated a data warehousing program to match systems to databases and to capture the data produced when assembling the KPIs.
“By 2003 the process improvement program had served its purpose,” says Jensen. “It was a bottom-up initiative and we needed to take the alignment effort to a new level. We wanted to understand how to use all the data we were gathering more effectively for decision-making purposes, how to ensure that the KPIs we developed were appropriate and remained key, and we also required a framework within which to place all the KPIs.”
He adds: “More than anything, we needed to switch emphasis from a bottom-up viewpoint to a top-down performance perspective. In short, we required a strategic view of performance.”

II. Introducing the Balanced Scorecard
Championed by the Chief Financial Officer, who recognized its potential for delivering the strategic requirements, BKK introduced the Balanced Scorecard in 2003. Indeed, Tore Jensen’s position was established in order to guide the scorecard effort.
 The Balanced Scorecard was first piloted within two BKK companies. The pilots served as proof of concept, and the successes were used to market the scorecard as a potentially powerful performance management system to other business units.
Also marketed group-wide were the results from a successful 2003 pilot of Corporater’s Balanced Scorecard Solution.  “When we began our scorecard implementation we worked with another vendor but we couldn’t get the solution to perform as we wished, especially in working with our data warehouse,” recalls Jensen. “The pilot proved that the Corporater solution would meet this, and other key requirements. So it was decided to roll out the Corporater solution group-wide,” he adds.

III. Creating the Corporate Scorecard
With the Balanced Scorecard proving its value in group units, in 2005 BKK developed a corporate level scorecard. In creating this top-level Strategy Map and Balanced Scorecard, an in-house team adhered to the classic, and proven, scorecard creation process.
The process began with the vision of where the organization wanted to be in the future and an analysis of BKK’s strategic plan.  Based on structured interviews with senior managers, a draft Strategy Map was then created, comprising objectives for the four perspectives of financial, customer, internal process and learning & growth.  The draft map was debated, refined and agreed by the senior team. Jensen describes a clear benefit of the structured mapping process. “For the 2004 strategic plan we created a Strategy Map. However, the senior team’s discipline in discussing and agreeing on the drivers of strategic success during the scorecard process meant we ended up with a Strategy Map in 2005 that was very different from the one inserted in the strategic plan.” 
The agreed map then became the basis for subsequent round of interviews and discussions to create the top-level Balanced Scorecard of KPIs, targets and strategic initiatives. As one example of a strategic objective and KPIs, within the internal process perspective, an objective of effectiveness in safety working practices is supported by KPIs that monitor frequency of injuries compared to man-hours worked, number of reports of safety incidents and time from incidents being registered and remedial action taken. The first is a lag measure and the latter two are lead measures. Jensen comments that since implementing this objective and supporting KPIs, there has been a significant improvement in safety performance.

IV. The Importance of Strategic Initiatives
Interestingly, BKK does not make the mistake common to scorecard users of believing that a full assessment of progress to strategic objectives can be made through KPIs. “Status on strategic objectives is evaluated through strategic initiatives and checklists as well as metrics,” says Jensen.
He elaborates by stating that it is through strategic initiatives that the real work in strategy implementation takes place, as these action programs are where resources are allocated to drive quantum performance improvements. “Therefore to gain a truly accurate crucial overview of how we are progressing strategically, then we need to capture initiative progress within the red, yellow and green traffic light system we use on our Strategy Maps,” he says, adding: “This we have been able to do through the Corporater Balanced Scorecard.”

V. Corporater Flexibility
According to Jensen, a further benefit of the Corporater solution was it provided the flexibility that BKK was looking for as part of its Balanced Scorecard cascade. “The Corporater Balanced Scorecard could be used effectively by a small unit that perhaps just required a performance overview to a few key objectives and didn’t require the data warehouse link and by the senior management team that needed a comprehensive overview of group-wide performance as well as full leverage of the data warehouse,” he says, adding, “Basically it could adjust to the differing needs of the organization.”
He adds that another advantage was that little effort was required to train users of the Corporater Balanced Scorecard, “We required just two days training to use the solution,” he says.  “We were then able to build scorecards into the system.”  

VI. Differing Scorecard Usage
Such flexibility and ease of usage were crucial as the Balanced Scorecard is now in place within most BKK units. And its experience with the scorecard so far has certainly shown that usage differs according to organizational level. “Within BKK we have a performance cycle from plan to action to results, and then circling back to plan,” explains Jensen. “To move from plan to action we use the Strategy Map, while to move from action to results we essentially use the Balanced Scorecard. We then use the Strategy Map to learn from results whether we are focusing on the right objectives and whether the causal relationships on the map are proving accurate.”  
Therefore, experience is showing that senior management mainly focuses on The Strategy Map, while lower level managers typically focus on the Balanced Scorecard.

VII. Senior Management Reviews
Top management formally reviews performance to the Strategy Map on a quarterly basis. Each member of the senior executive team has responsibility for objectives within the Strategy Map and they must report on progression (or regression) since the previous period. Results, trends, initiatives, traffic light status and commentaries are all fully captured and visible on the Corporater system.
Moreover KPI owners have to produce their own status reports for the senior management team, which are also captured in the Corporater scorecard solution. Owners are also responsible for suggesting action plans to improve KPI performance.

VIII. Benefits
Tore Jensen is certain that the Balanced Scorecard is delivering benefits to BKK. “The process improvement program of 2001 was a bottom-up metrics project,” he says. “The scorecard program is a top-down strategic project. We are now able to link metrics to strategy, which is the greatest benefit of the scorecard effort thus far.”
He stresses that there is still work to do, not least in better shaping strategic initiatives. But he is certain that this will be strengthened through continued usage of the scorecard, and the focus on taking account of initiative progress when assessing performance to strategic objectives.
Jensen is equally certain that the Corporater Balanced Scorecard solution has also delivered tangible benefits to BKK.  His belief is echoed by Corporate Controller, Eivind Fretheim, who comments:
“BKK uses Corporater Balanced Scorecard linked to a data warehouse. This solution means that data from a wide range of sources can be combined and automatically updated in the scorecards in the different enterprises. This gives BKK an excellent foundation for enterprise performance management.”

About BKK
Headquartered in Bergen, BKK is the leading power company in Western Norway and one of Norway's largest companies in the production, wholesaling and transmission of electrical power. BKK also supplies district heating in Bergen and broadband to customers in Western Norway. BKK also offers alarm services. BKK reported 2005 sales of NOK million 3,291 and operating profit of NOK million 1,444.