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Management Case StudyExecuting Strategy and Aligning FinancialPlanning: Balanced Scorecard Best Practice

at RBGE

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Executing Strategy and Aligning Financial Planning: Balanced Scorecard Best Practice at RBGE API Case Study

Executing Strategy and Aligning Financial Planning: BalancedScorecard Best Practice at RBGE

ByBernard Marr* and James Creelman

Abstract: This case study explains how RBGE created a strategic performance

management framework that contains objectives in five interconnected perspectives.

The framework depicts how its activities deliver the desired impact and outcome

objectives, all of which are underpinned by resource and governance objectives.

The case study also describes how the Strategic Objective Costing System has

been aligned to the Balanced Scorecard so that it provides information to senior

management on where staff efforts (and costs) are being deployed and how this is

contributing to the delivery of the strategic objectives.

Version: 02January 2012 * corresponding author

Bernard Marr is the Chief Executive and Director of Research at the Advanced Performance Institute. E-mail:[email protected] Creelman is working in the Strategic Planning and Quality Management Section of the Ministry of Works, Bahrainand is a Fellow of the Advanced Performance Institute.

The Advanced Performance Institute (API) is a world-leading independent research and advisory organisationspecialising in organisational performance. It provides expert knowledge, research, consulting and training to performanceorientated companies, governments and not-for-profit organisations across the globe. For more reading material orinformation on how the API might be able to help your organisation please visit: www.ap-institute.com

How to reference this case study:Marr, B., and Creelman, J .(2012) Executing Strategy and Aligning Financial Planning: Balanced Scorecard Best Practice

at RBGE, Management Case Study, The Advanced Performance Institute (www.ap-institute.com).



Executing Strategy and Aligning Financial Planning: BalancedScorecard Best Practice at RBGE

Introduction

Founded in the 17th century as a physic garden, theRoyal Botanic Garden Edinburgh (RBGE) is aworld-renowned centre for plant science andeducation. RBGE’s 250 employees are committedto the building of public understanding, scientificcapacity and world class research to shape a betterfuture for all and to champion the importance ofplants as the foundation of the biosphere. Thiscommitment is crystallized in a focused mission:“Exploring and explaining the world of plants for abetter future.”

Boasting a rich living collection of plants acrossfour gardens in Scotland, RBGE is organized intofour divisions: Science, Horticulture, CorporateServices and Enterprise, with a directorate staffsupporting the Regius Keeper (the Chief ExecutiveOfficer) Professor Stephen Blackmore CBE FRSE,whom is also appointed the Queen’s Botanist inScotland. Governed by a Board of Trusteesappointed by Scottish Ministers, RBGE is a NonDepartmental Public Body that is sponsored andsupported financially (approximately 74%) by theScottish Government’s Rural Payments andInspections Directorate. RBGE also receivesincome from research grants, commercial activity,admisions, education courses, donations and othercapital grants.

Reasons for Introducing the BalancedScorecard

The Balanced Scorecard (which comprises aStrategy Map – see Figure 1 – and anaccompanying set of Key Performance Indicators –KPIs - and targets) is the RBGE’s framework fordelivering its mission and therefore executing itsstrategy. The present Balanced Scorecard wasconfigured in 2010 but evolved iteratively from aninitial scorecard system that was established andimplemented in 2004.

Dr Alasdair Macnab, the Director of the CorporateServices Division (responsible for the organization’sfinances, personnel, estates management, ICTrequirements, corporate planning and performancemanagement amongst other services) explains thatthe scorecard was introduced primarily as amechanism for creating and implementing corporateplans that met the requirements of both RBGE andthe Scottish Office (a department of the UKgovernment until 1999) and then the ScottishGovernment (following that year’s establishment ofthe Scottish Parliament). “Although corporateplanning commenced in RBGE in 1988, it had longstruggled to produce corporate plans that were bothof strategic and practical value to the organizationwhile also being acceptable to the Scottish Office,”he says, adding that this failure was in part due tothe vagueness of the generic performanceguidelines that were issued by the Government.



Figure 1: RBGE Balanced Scorecard Strategy Map



“This became a source of irritation, frustration andultimate disillusionment to RBGE staff, who feltthere was no useful collaboration with ScottishOffice officials and who therefore began to perceivecorporate planning as little more than an annualexercise completed solely for the benefit of theScottish Office. That said, despite the challengesRBGE’s senior staff continued to expend significantamounts of time and effort into developing corporateplans and supporting divisional strategies that jointlywere intended to inform future work as well asserving as a useful internal communicationmechanism. “It was clear from internal interviewscarried out in 2009/2010 that staff members did findthe corporate and divisional plans useful forlearning more about their organization and whatactivities other than their own were carried out”,comments Macnab. “However, what becameapparent from the interviews and documentaryanalysis was that staff suffered from a lack of clearunderstanding of what was required of them.”

Macnab continues that although there was anabundance of material contained in the plans, theylacked a logical way to synthesize the plans whichcame from the divisional levels up to the corporatelevel. “What was missing was an understandingamongst the senior staff that the divisions had towork together to achieve the overall corporatestrategy,” he says. “Because of the frustrationsarising from this inability to communicate effectivelydownwards (to staff) or upwards (externally to theScottish Office) these difficulties manifestedthemselves in a failure to fully implement ourstrategy and typically the organization simplycarried on with its current work programs with littleconcern for the future.”

Macnab recalls that contributing to these failureswas the lack of a suitable framework to bringtogether all available information in a cohesive andintegrated way that would permit a strategy for thefuture to be formulated and that would also captureand benefit from the input from a variety of expertstaff at differing organizational levels. “It wasconcluded that if RBGE was able to identify aframework that would guide and focus the efforts indeveloping a corporate plan, that internal staffwould be better informed about how their activitiescontributed to the overall success of RBGE andwould provide a basis for informed discussions withthe Scottish Government, our principle externalstakeholder,” he says. Additionally, if amethodology could be identified and constructedthat would match costs to objectives then a morerational basis for resource allocation could be put inplace to assist senior management withprioritization of activities and thereby improve thegovernance processes at RBGE.

With a previous employer, Macnab had trained as alead assessor for the European Foundation forQuality Management (EFQM) Excellence Model (1). Although supportive of the Model, he concludedthat it was unsuitable for the needs of RBGE. “Therigidity in applying the model was one downside aswas the fact that a team of assessors would need tobe trained to conduct the required assessmentsagainst the Model’s nine criteria, a resourcerequirement that would not be tolerated withinRBGE,” he recalls.

In scouting for an alternative, Macnab turned hisattention to the Balanced Scorecard, which he wasaware of thanks to his professional managementaccounting training (CIMA). “I built on the



knowledge I had by reading a number of books andarticles on the Balanced Scorecard and I noted itspopularity amongst a cross section of types oforganizations, each of which claimed to be able touse it successfully,” he says. “I considered that ofall the popular frameworks available the BalancedScorecard would be the most likely to meet theneeds of RBGE.” He adds that he believed thatthere was also an opportunity to develop aneffective costing system to support RBGE’sstrategic management needs by associating acosting system with the Balanced Scorecard (whicheventually led to fruition – see below).

Scorecard Evolution

The Balanced Scorecard was introduced to RBGE’sSenior Management Group during the 2004 annualplanning conference. The original BalancedScorecard comprised the four perspectives ofaudiences; governance; internal resources; andstaff, resources and infrastructure. The SeniorManagement Group Planning Conference reviewsthe Balanced Scorecard each September forcurrency and relevance and amends as requiredand which serves as the first stage of the annualcorporate/strategic planning cycle. The firstiteration in 2004 posed challenging questions suchas who were our audiences, which was quiteilluminating and it took time to remove theperception of that all the “customers” were internal,says Macnab.

Gradually evolving in content and form, theBalanced Scorecard become a valuable tool formore effectively implementing the strategy ofRBGE, communicating with the ScottishGovernment and for encouraging the divisions towork effectively for the greater good of the

organization. But a major scorecard updatecommenced during the RBGE Senior ManagementGroup Planning Conference in September 2009: arevision which Macnab calls “the secondimplementation phase.”Part of the reason for a major review and updatewas that the senior management team waspreparing for the November 2009 Strategic ReviewGroup – a quinquennial (five yearly) review of theRBGE’s Science, Horticulture, Education, andVisitor Services offerings by a panel of internationalexperts on these various output activities carried outby the RBGE. “This forthcoming review very muchfocused the minds of the Senior ManagementGroup as the global reputation and standing of theRBGE stood or fell by the report from the StrategicReview Group,” Macnab explains. “Additionally, theStrategic Review Group was expected to makeconstructive suggestions to the RBGE on strategyand, therefore, their views would be taken intoaccount when formulating the Corporate Plan.”

Scottish Government’s National Outcomes: AFifth Perspective

A more powerful reason for a substantive review ofthe scorecard was the introduction of the ScottishGovernment’s National Outcomes in January 2009.These outcomes represent the vision of the ScottishGovernment “to create a more successful countrywhere all of Scotland can flourish by increasingsustainable economic growth.” This set out theirambition to live in a successful Scotland: a healthy,safe, well-educated country, with a vibrant economyand opportunities for all. A Scotland that is fair,tolerant and green. All public bodies had tocontribute to at least one National Outcome.



The requirement for RBGE to link to theseoutcomes led to the formulation of a fifth BalancedScorecard perspective, called simply: ScottishGovernment National Outcomes. As much asanything this addition would fully align the work ofRBGE with the requirement of the ScottishGovernment, which had been evolving for a numberof years from a very poor position (as cited earlier).A revised Balanced Scorecard was prepared inearly 2010, with all divisions reporting to the newversion from April 1 2010 – the beginning ofRBGE’s financial year. “The strategy maps for theRBGE and divisional scorecards were redrawn, newobjectives statements written, development of workprograms - which described the supporting activitiesfor objectives- designed and written, and newrelevant measures discussed with staff and agreedwith directors before being attached to theobjectives within each scorecard,” he explains.

Of the myriad benefits delivered through the newscorecard, Macnab argues that most importantly,perhaps, was that of adding this fifth perspective.“In 2010, RBGE presented a Corporate Plan thatset out the direct contributions that we make to theachievement of eleven of the National Outcomesset by the Scottish Government,” he says.“Subsequently, the First Minister [the leader of theScottish Government] wrote to express hisappreciation of the way in which we had been ableto make direct linkages from our Impacts to theNational Outcomes”, (see below for a description).

Moreover, Macnab adds that by understanding andrelating to the macro-environment it became easierto better position RBGE when making cases forsupport from Government funding for projects ofvarious kinds. “An example being the major

refurbishment of the RBGE glasshouses – whichwould contribute to Scotland’s carbon reductiontargets as well as reducing significant energy costs,thereby increasing efficiencies at a micro-economicenvironmental level,” he says.

RBGE 2010 Balanced Scorecard – TheCorporate Plan

Perspective 1: The Scottish GovernmentNational Outcomes

Visually described in figure 1, the eleven ScottishGovernment National Outcomes with which RBGEis aligned sit at the top of the RBGE Strategy Map:outcomes such as “research and development,”“environmental impact,” and “public services.”Figure 2 shows RBGE’s KPIs and Targets for theNational Outcomes.

Perspective 2: Impacts

Descending down the Strategy Map we find RBGE’s“Impacts,” of which there are eight. These capturethe key effects that RBGE has on society andtherefore the delivery of the outcomes: Impactssuch as “discovery,” “conservation,” and “improvingquality of life.” Each impact has a brief descriptionthat is then more fully explained and is supported byKPIs as well as a listing of key partners with whomRBGE must work closely with to most effectivelydeliver the impact.

For example, “Discovery,” is described as: “We willchampion innovation and generate new knowledgeas a centre of excellence in plant biodiversity,taxonomy, systematics, and horticulture. This workis the foundation upon which our Institution’sreputation and expertise is built. Our research isuser driven and for the benefit of other bioscientists,



the Government, conservationists, naturalists andthe public.”

The detailed explanation considers the role of thediscovery objective on both a national andinternational level. For example, a section reads:“RBGE is Scotland’s leading international player inplant systematics and biodiversity and we contributeto the Nation’s role in global initiatives to describethe world’s plant biodiversity”, and later states: “Ourscience underpins endeavours that addressenvironmental challenges in biodiversityconservation, climate change impacts, conservationof ecosystem services, promotion of sustainableuse, habitat restoration and poverty alleviation.”

A KPI considers the total number of publicationsand key partners include Scottish Government’sDirectorate for Rural & Environment Research andAnalysis (RERAD), University of Edinburgh, andConsortium for the Barcode of Life (CBoL), which isan international initiative devoted to developingDNA bar-coding as a global standard for theidentification of biological species

Perspective 3: Activities

Next on the Strategy Map we find RBGE’s fiveActivities. Collectively these represent the primarywork of a research botanic garden. These Activitiesare aligned upwards to achieve the Impacts, whichin turn contributes to achieving the NationalOutcomes: Activities such as “biodiversity,”“education,” and “environmental sustainability.”

As with Impacts, the Activities are fully explained,and are supported by KPIs and a listing of the keypartners. For example, a part of the description of“Environmental Sustainability,” reads, “RBGE aims

to place the principles of sustainability at the heartof all its activities. These principles will embrace thefundamental role of plants to a sustainable planet,the protection and enhancement of the natural andcultural heritage, and the recognition andunderstanding of the effects of climate change.”

An Environmental Sustainability KPI is Tonnes ofCO2e Produced and key partners include TheScottish Government and Carbon Trust Scotland(an independent not-for-profit company set up toaccelerate the move to a low carbon economy).

Resources

Returning to the RBGE Strategy Map, supportingActivities we find the resource areas requiringinvestment: resources such as “people,” “land andbuildings,” and “finance.” These Resources aredescribed and have fully fleshed out strategies.

Strategic Objective Costing System

Given the enormous resourcing challenges that UKpublic sector must contend with over the comingyears, a pioneering Strategic Objective CostingSystem has been implemented by RBGE andprovides useful insights into safeguarding strategicinvestments when purses are tight. “One of thedangers of any crises, including financial ones, is fororganizations to switch to concentrating on savinginput costs without due regard to the impact onoutcomes which after all is the purpose of theorganization”, explains Macnab. “The BalancedScorecard, combined with our Strategic ObjectiveCosting system, will help keep the organizationfocused on its outcomes, meaning that we will bebetter placed to deploy our scarce resources to best



effect by understanding the impact of our actions onthe objectives.”

To explain, the principal purpose of strategicobjective costing is to provide information to seniormanagement on where staff effort is being deployed– either directed or self–managed. Macnab explainsthat because organizational structures do notnecessarily follow the corporate strategy, there isinherently a disconnection between the financialinformation provided from cost centre reports andreporting on the achievement of strategic objectives.“The results from this innovative accounting processovercome such deficiencies by showing informationon which staff members contribute to each strategicobjective, and also how the staff members groupedby cost centres contribute to one or more strategicobjectives,” he says.

With costs for achieving the strategic objectivescalculated, a Strategic Objective Budget is thendeveloped. For control purposes the budgets areallocated to Divisional Directors and then delegatedto cost centre managers and therefore the StrategicObjective Budget is also reconciled to the traditionalcost centre budgets to enable effectivemanagement control activity to occur.

Macnab continues: “As we monitor progressmonthly we can adjust emphases throughout theyear to maximize overall achievements. TheStrategic Objective Costing system provides thenecessary information to show the input costs foreach strategic objective which can then be marriedup to the KPIs that are linked to these objectives.The Balanced Scorecard conjoined with this costingsystem increases the Board’s and executivemanagement’s knowledge of what the organization

is doing and achieving and, therefore, governanceis improved.”

Governance

A Governance perspective is found at the base ofthe RBGE Strategy Map and is the way that RBGEdirects and controls its functions and relates to itsstakeholders: There are three Governanceobjectives: “Management and Control,” “Strategy,”and “External Relations.”

Macnab neatly describes the causal link from theGovernance perspective through the other enablingperspectives and ultimately to the Scottish NationalOutcomes.

“A great benefit of the Balanced Scorecard is that itenables the Senior Management Team to assessthe relationships between the objectives in eachperspective with those in other perspectives,” hesays. “As one illustration, by selecting suitablyqualified staff (people) and investing sufficientfinancial resource (cash) high quality biodiversityresearch (Activity) can be carried out leading toRBGE’s Discovery (Impact) occurring which in turncontributes to Research and Innovation (ScottishGovernment’s National Outcome). Anotherexample of the cause and effect relationship couldbe the investment of capital funding in a new VisitorFacility to provide improved educational, retail,catering and exhibition offerings. As aconsequence of this investment the visitor numbersincreased, the financial returns dramaticallyimproved and greater communication of ourpurposes was achieved by the increased visitor flowthrough our exhibitions.”



Divisional Scorecard

The RBGE Corporate Balanced Scorecard issupported by aligned scorecards for each of the fourdivisions. Each divisional scorecard is designed tocontribute to the corporate objectives and themeasures attached to each divisional objective arecapable of being abstracted up the hierarchy,thereby ensuring alignment. “The contributingdivisional objectives are discussed and agreed byme and our coordinator in consultation with thedivisional directors who will have previously helddiscussions with and obtained ideas and agreementfrom their Heads of Departments,” explainsMacnab.

He continues that those Heads of Departments willhave consulted with their staff, thus ensuringorganizational buy-in to the goals and objectives.“These objectives are then reflected in theindividuals’ forward job descriptions against whichindividual performances are judged during thepersonnel appraisal process. It should be madeclear that there is sufficient flexibility to allow foremergent strategies to come forward during theplanning period and for the system to be amended/updated reflecting agreed changes.”

Staff Involvement

Macnab stresses the critical importance of involvingstaff in developing the divisional scorecards, thatdiscussions on objective definitions and theselection of metrics has led to strategy andcorporate planning entering the everydayvocabulary of staff and so is no longer confined tojust a few very senior members of staff. “There ismuch greater awareness of what the organization istrying to achieve and how it is going about it,” he

says, adding that, “It is also easier to communicatein an intelligent manner the future strategy andexpected performance in days of severe restraint inpublic sector financing and the resultant resourcingconstraint that RBGE, as with all similarorganizations, must live with.”

Moreover, the Balanced Scorecard is proving auseful framework for encouraging continualdialogue between the various levels of the RBGE’shierarchy with emergent views on how to improvethe current strategies being proposed by staffmembers who had engaged with the strategymaking process. “This is attributable to the fact thatthe staff care about their work and the BalancedScorecard provided them with the means toarticulate their concerns and hopes,”” Macnabexplains. “Of course, in such an environment someunpleasant truths will emerge but as long asmanagement view this as a positive outcome ratherthan destructive criticism then the organization canimprove its performance as a consequence.”

As a measure of how the scorecard is enabling line-of-sight from individual performance toorganizational strategic objectives, Macnab cites thelink with Scottish Government’s National Outcomes.“By developing the fifth perspective in the BalancedScorecard, staff are more aware of the ScottishGovernment’s agenda and are able to see wheretheir personal contributions make a difference toRBGE and in turn those of the Government,” hecomments.

Performance Reporting

To report performance to the scorecard, a staffmember from Corporate Services produces reportsfrom the performance management system (RBGE



uses a customized performance managementsoftware application). “A report is presented monthlyto the Senior Management Team and the Board ofTrustees,” explains Macnab. “The reports providequantitative data (the KPIs), narrative analyses,recommendations for action, objective costs, andrisk profiles. The decisions taken on therecommendations by the Senior Management Teamare recorded and the report is then published on ourintranet for all staff to view.”

Key Challenges in Scorecard Implementation

As with most organizations, RBGE has experiencedsome challenges in scorecard implementation.One challenge was that there were staff members

that did not complete their reports on time, despitefull explanation, consultation and training had takenplace and the opportunity to be involved with thedescriptions of the objectives and design of themeasures within the system had been afforded.

Macnab explains that when discussing the matterwith some of the individuals involved it becameapparent that some staff were simply, “railingagainst the notion of being held accountable fortheir actions,” he says. “This seemed to reflect ontheir past working practices where they, for the mostpart, self-determined their research activities andtheir science strategy had been largely a rehearsalof the work they wished to carry out to pursue theirown academic interests. They were not used tobeing directed on their work or, indeed, explain whatthey were doing. However, in more recent times,and certainly since 2007, the Science Division haddeveloped a strategy which aimed to align withScottish Government’s biodiversity strategy andother plant science strategies of a more global

nature. Therefore, to some extent the concept ofworking to a plan not of their own making was nolonger foreign to them.”

To overcome this challenge and others that wererelated to buy-in, the Senior Management Groupcontinually endorsed the purpose of the BalancedScorecard and supporting performancemanagement system and reaffirmed their backingfor its implementation. “I also realized that I wouldneed to spend a considerable amount of timecommunicating with and teaching my colleagues asto what was required and what sort of informationthey should put into the system,” commentsMacnab.

Conclusion

Although the Balanced Scorecard is now well-established and successful within RBGE, Macnabstates that there is nothing particularly out-of-theordinary to explain the success. “The well-documented critical factors for a successfulBalanced Scorecard implementation apply as muchto RBGE as any other organizations.” These, heexplains, include adequate communications onpurpose, feedback of results to staff, training onprocess and performance management systems,cascading to lowest level etc. “However, the mostcritical factor is most definitely strong leadershipand commitment from the senior managementteam,” he says. “It is they who are ultimatelyresponsible for the success or otherwise of thestrategy.”

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Bernard Marr (2010), “The Intelligent

Company: Five Steps to Success with

Evidence-Based Management”,Wiley, Oxford

References:

1. The EFQM Excellence Model is used as a basis for self-assessment, an exercise in which an organisationgrades itself against nine criteria, five enablers :Leadership; Strategy; People, Partnerships & Resources;Processes; Products and Services; and fur results criteria: Customer Results; People Results; SocietyResults; and Key Results This exercise helps organizations to identify current strengths and areas forimprovement against strategic goals. This gap analysis then facilitates definition and prioritisation ofimprovement plans to achieve sustainable growth and enhanced performance. For more information seehttp://www.efqm.org

Further Reading

2. .

3.

4.

5.

6.

7.

8.

9.

Bernard Marr and James Creelman (2011),“More with Less: Maximizing Value in the

Public Sector”, Palgrave Macmillan,Basingstoke

Bernard Marr (2009), Managing and DeliveringPerformance: How Government, Public Sectorand Not-for-profit Organizations can Measureand Manage what Really Matters, Butterworth-Heinemann, Oxford

Marr, Bernard (2010), “Balanced

Scorecards for the Public Sector”, Ark

Group, London

Bernard Marr (2006), “Strategic

Performance Management”, Butterworth

Heinemann, Oxford

Find out more and read free sample chapters: http://www.ap-institute.com/books.aspx

Bernard Marr (2012), “Key Performance

Indicators – the 75+ measures every manager

needs to know”, FT Prentice Hall, Harlow



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