Whatever Happened to the Balanced Scorecard?

No, the balanced scorecard (BSC) hasn't gone away but I guess there has been a decline in popularity since Drs Kaplan and Norton pioneered its use in the early 1990s.  The BSC is used to manage the delivery of a business strategy.  Typically, the business will be viewed from four perspectives - Financial, Internal Business Processes, Learning & Growth and Customer.  It should be noted that the Financial perspective is a measure of past performance, which is driven by the management of Internal Processes, the development of human capital by Learning & Growth initiatives and maintaining first-class Customer and other external relationships.  So on one side of the balance we have the Financial perspective, which is balanced by the Internal Business Processes, Learning & Growth and Customer perspectives.  At the core of the BSC is the company's Vision and Strategy.  Introducing the appropriate measurement systems within each perspective allows targets to be set and actions to be taken to drive the business towards the achievement of its vision.

Sounds good doesn't it?  Well it did to me when I introduced it into the company that I was heading-up in the early 2000s.  For a while it had a motivational effect as it provided a means for most employees to measure their performance against the company's strategic objectives.  But did it improve the company's performance?  If I'm honest, I don't think so and when I talk to others who have experienced BSCs in different environments, there would appear to be a lot of criticism aimed at this type of strategic management tool.  At first sight, the BSC business model appears quite rightly to represent the business as a coherent whole, with four linked perspectives - Financial, Internal, External and Learning & Growth.  The coherence of the model, however, appears to get lost as the performance metrics flow into the bowels of the organisation.  Managers often pay lip service to the BSC and set their own ideas of performance targets on their staff, generally using metrics that are easily understood and measurable, but don't necessarily relate to the overall business objectives and strategy.  This can lead to conflicts in the organisation and the resultant degradation of overall business performance.

The problem would appear to be the cascading nature of management by objectives.  So, although the BSC at the top level looks like a systems representation of the business, once the four perspectives are managed as separate entities, systems thinking is replaced by reductionism.  It is assumed that the whole (business) can be managed by independently monitoring (through simple metrics) and control of (management by objectives) the parts (the four BSC perspectives and any subsequent reductionism).  It's all assumed to be totally linear so, for example, if within the Customer perspective, a salesman wins more orders, then that will in turn trigger the Internal Business Processes to do their job, generating timely deliveries and more profit....

....but it ain't that simple!....

And therein lies the problem.  Like many management fads and even long-running ones like the BSC,  there is an attempt to force a complex non-linear world into a linear mould.  The simple models of an unrealistic static business operation, might look good on a whiteboard or PowerPoint slide, but couldn't be further removed from the real world.  That said and despite the scars from my personal BSC experience, I do feel the BSC model does have a use, albeit limited, in strategic management.  The use of four perspectives to provide a method to examine any business and then looking at how those perspectives relate to the company vision and relate to each other, at any point in time, is worthwhile.  But don't spoil it all by assuming today's model will bear much relationship to next year's model.  What's more don't be naive and set up a whole host of simple metrics and mechanistic performance monitoring processes, under the assumption that the BSC will be the engine room to deliver the company's strategy.

Any business is complex and taking a simple view of it doesn't change its complexity.  We are part of that complexity and we can observe its characteristics and for sure we can influence its behaviour but we certainly can't control it.

For me, BSC RIP!

Your Theory's No Better Than My Theory!

We live in a subjective world.  Why?  Because we are all subjects and the objects around us are what we observe them to be.  Perception is reality.  So I'm not sure of the meaning of 'objectivity'.  If a square shape to me looks like an oval shape to you, but we both use the word 'square' to describe it because that's the language we've learnt, does that mean the shape has been judged objectively to be square?  Objectivity suggests we can get into the minds of others, which I don't think is possible.

If we can't be sure that the existence of a square shape is a 'fact', what about more complex assumptions that are generally known as theories?  I do a lot of reading and get involved in Internet-based discussions on esoteric subjects, such as systems thinking.  As soon as the word 'system' comes into play, it conjures up a plethora of meanings.  That's because systems are mental constructs and exist only in our minds.  A system is a set of interacting or interdependent components forming an integrated whole.  So a tree can be thought of as a system that includes a root, a stem, branches, leaves and internal conveying systems.  The tree is an open system that interacts with many other systems, including animals, humans, birds, bees, soil, atmosphere and the sun.  But it's not a system, it's a tree!!  If I draw a system diagram of a tree, it is merely a mental construct to help me to understand how the tree functions and explain my understanding to others, who, by the way, might think differently.  The map is not the territory.

We all have theories, which can sometimes be supported by sophisticated modelling and simulation techniques to make a point.  I don't have a problem with that because the more information we have to support a theory might allow our thinking to converge with others to the point where our perceptions might align.  The words I use to describe something might be similar to, or even the same as, the words someone else uses to describe something.  However, a square in my mind might be an oval in yours, even if our descriptions are the same!

What is sometimes irritating to me is when someone will support their opinion with a theory from a guru, like Russell Ackoff, Peter Senge or Buckminster Fuller, in a way that suggests the guru's opinion legitimises their own theory.  Why should it?  Why are Peter Senge's theories, for example, better than my theories?  Don't get me wrong, I have a great deal of respect for Senge et al, but we are all human beings with our own mental constructs that help us to describe and try to understand life.

"Theories pass.  The frog remains.

Thank you Jean Rostand. 

United by Red

Life is complex.  We think we have so much knowledge and understanding, yet surprises keep popping up after every twist and turn.  So it's little wonder that we crave for some 'anchors' that keep our ships in check whilst we bob up and down on the waves.  Maybe we are looking for a purpose beyond basic survival or perhaps we just like to follow others and reinforce an established common goal....like football....forgive the pun!

I have never been passionate about football, although I do enjoy a good game whether watching on television or, as I did the other day, whilst sitting on a London bus stuck in a traffic jam, observing a game in a park with lads who looked to be as committed as any English Premier League player.  But watching the occasional game is not the same as being committed to a football club, as a player, manager, support staff or fans.  For many, like the players and managers, the commitment can be short-lived, being, for example, with Arsenal one season and Manchester United the next.  But for fans the commitment is very often for life, boy and man, girl and woman.  Manchester United, for example, has fans all over the world and from every region of England.  They don't all come from Manchester!  They are from all races, religions, political affiliations, jobs and professions, but United by Red.  In any large group there are bound to be dysfunctional elements who practise racism, sexism and vandalism, which gives the media an ideal opportunity to focus on the unacceptable face of football to help sell newspapers.  United by Red will not, however, be destabilised by anti social behaviour, the unity of purpose provides a secure and stabilising influence in the supporters' lives.

In business life, unity of purpose is also an essential ingredient for success.  United by Apple could well be a slogan for the world's most successful computer manufacturer, although I hasten to add that's not its strap-line!  All companies are united by a desire to out-perform their competitors and maximise their market share, i.e. their position in their 'league table'.  Yet in companies, as in the world of football, there are undesirable practices, which might temporarily sour a company's market reputation but rarely tarnish the corporate desire to succeed.

In political life a common purpose can also mask abhorrent acts.  In Hitler's Germany, for example, racism, especially anti semitism, was a central feature of the regime.  Many Germans, however, turned a blind eye to the atrocities directed by Adolf Hitler, whilst in the midst of the Great Depression, the Nazis restored economic stability and ended mass unemployment.  Extensive public works were undertaken, including the construction of the Autobahns.  The return to economic stability boosted the regime's popularity and provided a unity of purpose.

So it is evident that we homo sapiens seek and are driven by unity.  Yet we will accept the positive and negative aspects of that unity.  That begs the question, how bad does the unacceptable face of unity have to be before we no longer want to be part of the united front?

United by Red....So what's your Red?