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?

Shale Gas & Fracking - Week 4

It's the final week of the MOOC and it's a shame because I am thoroughly enjoying it but all good things come to an end!  This week we have learnt about regulation, communities and public engagement.  There's little point in me using this blog post to repeat the course material, I would rather summarise my closing thoughts on the issue of fracking to society.  I will admit that my views have changed somewhat during the period of the course.  Opinions amongst those who are directly engaged or have an interest in fracking, appear to be polarised - for or against.  At the beginning of the course I was against and now that we are approaching the end of the course, I'm still against.  So what's changed?  Well, three weeks ago I was very dismissive of pro-fracking views, whereas I now have a greater understanding of the pro-fracking arguments.

Professor Sarah O'Hara provided an excellent presentation on the perceptions of shale gas where she summarised some of the results from The University of Nottingham shale gas survey, which has been running since March 2012.  One of the most interesting results, from my point of view, was that although there has been a decline in the yes vote since the Balcombe protests, still over 50% of the population are of the view that shale gas extraction should proceed in the UK.  Public opinion really is split and in my opinion, that's not surprising when you view the issue from the perspectives of UK national energy security, an alternative to 'dirty' coal and a 'bridge' to a low carbon economy.  If you look at fracking from these three perspectives in isolation and within the framework of a well regulated and therefore, hopefully, safe environment, there is almost (but not quite!) a compelling argument to proceed with fracking for shale gas.  In my opinion, however, where the argument is flawed is when you look at the bigger picture and in particular, the urgent need to tackle climate change by drastically reducing carbon dioxide emissions and well before the timescale of a 'bridge' to a low carbon economy.  So I believe we need massive global investment into renewables, or even 'safe nuclear', now rather than pursuing a diversion into shale gas.

That's it!  I've had my say.  Thanks to Sarah, Mat and Wil, together with their supporters and all the guests, for a really first class MOOC, which has been a fantastic learning experience for me.  It's been great! 

Shale Gas & Fracking - Week 3

Well it's week 3 and the time's flying.  This week we are learning all about the environmental considerations.  Oh boy, there are plenty of conflicting opinions amongst the experts on just how clean, or conversely how dirty, shale gas is.  The arguments are continuing to be well debated on the course.

There is a lovely phrase, which is "the bridge to a low carbon society".  A few words that make the extraction of shale gas by fracking seem such a logical thing to do.  The argument goes something like this.  Energy emissions from shale gas are about 40% cleaner than coal, so let's use shale gas as a replacement for coal on our journey (hence the 'bridge') to something even cleaner.  Sounds good!  But then along came a guy called Howarth who looked at fugitive emissions (leakages of methane gas during fracking going straight into the atmosphere) and he concluded that when viewed on a timescale of 20 years, the greenhouse gas footprint for shale gas is at least 20% greater and perhaps more than twice as great as coal.  Wow!!

Well of course Howarth really did rock the boat until Cathles offered his response and argued that Howarth's analysis was "seriously flawed" because he had overestimated the fugitive emissions.  So who's right?  We don't know because there isn't enough evidence to make a judgement.  Now that in my opinion is the real worry.  The 'bridge' is beginning to feel a bit wobbly.

As well as greenhouse gas emissions, we also learnt about other concerns like seismic activity, water pollution and the possible harmful effects on health.  There is a tremendous amount of data but really no firm conclusions because many of the findings were by inference rather than evidence-based.  I haven't trawled through all the comments that have been posted, but it would appear the views are very polarised for or against fracking.  That said, there are many well-thought-through arguments to support each stance.  Have I changed my anti-fracking views?  No, but I do feel I am becoming much better informed.

Shale Gas & Fracking - Week 2

I'm now into week 2 of the Shale Gas & Fracking Course.  This week we are focussing on the economics and energy security of shale gas development.  The material and quality of tuition continue to be excellent.  Although I admit to being opposed to fracking, I came into the course determined to become better informed and take a serious look at both sides of the argument.  Well so far my views have not changed.  The information provided on the world's energy mix and specifically the actual usage for 1990 to 2012 and the forecast for 2012 to 2035, illustrated a predicted growth in energy requirements and a continuing dependence on fossil fuels.  Probably not surprising as the data were provided by BP!  My comment on the forecast is that it would appear to be an extrapolation of the past with a small increase in absolute terms of renewable energy.  Maybe that's what will happen if we continue business as usual, but as far as I'm concerned that is a totally unacceptable scenario.  We should determine what energy mix there needs to be by 2035 if the planet has a chance of survival and then take positive actions to achieve our objectives.

As well as some very informative material on natural gas and how it's used, we were also provided with an analysis of energy security, as well as a positive and a negative view on the economics of shale gas.  The debate will continue with an online discussion later this week.  I don't want to repeat the course material in this blog post, so I will conclude this post with my personal view based on the debate so far.  I feel that no matter how the economic argument is presented, the financial justification for fracking is extremely flakey.  But that aside, I think the cost benefits or penalties are immaterial.  We really shouldn't be perpetuating the combustion of fossil fuels.  In my opinion, shale gas will not provide a bridge to a low carbon economy, as claimed by some of those in favour, but an excuse for world political leaders to delay further the actions that are already overdue, to go green.

So, that's almost half the course completed and it's going too quickly!  Watch this blog for my next update.

Shale Gas & Fracking - Week 1

I have commenced the Shale Gas & Fracking: the Politics and Science MOOC (Massive Open Online Course), delivered by The University of Nottingham for FutureLearn.  Shale gas is a hot topic in the news right now and I felt this course would be an ideal follow-on to the Climate Change MOOC that I completed last year.  I will be interested to see if the knowledge that I gain from the course will change any of my views on fracking.  At the moment, I strongly believe that fracking is perpetuating the combustion of fossil fuels and therefore, exacerbating global warming and climate change.  In my opinion, the effort and resources directed towards fracking could be better spent developing green energy, for which the technology is available but frankly, the political will seems to be lacking.  So that's what I feel now!  It will be interesting to see the views that I express in my Week 4 blog post at the conclusion of the course.

This week I have learnt about the geology of shale gas, how it is extracted by hydraulic fracturing (fracking), the story so far from the developments in the USA and the locations and resource estimates in the UK.  I have learnt that there is a big difference between what might be present (resource) and how much can be commercially extracted (reserve).  So far the UK is in the exploration stage for shale gas and oil and it is too early, therefore, to determine its commercial viability.

So that's the story of my course so far.  I'll keep you posted!