Executives of a multinational corporation mandated the roll-out of the Balanced Scorecard (BSc) throughout the organisation. Departments such as Sales, Marketing, Research & Development (R&D), Human Resources, Manufacturing, Logistics, & Purchasing were required to present key performance indices (KPIs) to upper management and show corresponding targets & action plans.
Department managers immediately attended BSc seminars & workshops. They drafted long lists of objectives, performance measures, and action plans and presented these to their superiors. Executives applauded the managers for their commitments and promised support.
In less than a week, the corporation’s BSc drive was a thing of the past. Executives nagged managers about getting more sales, reducing costs, and resolving customer complaints, which was what they did before the BSc was introduced. The KPIs managers had presented and committed to were forgotten.
The executives occasionally (like once a year) asked for a review of BSc performance measures which were presented in that first workshop. Managers would cram and invent figures to accommodate for presentations which executives would again applaud but afterward forget. For the executives, having a BSc presentation gave them a security blanket that their organisation remained sold to the concept, even though they no longer (if ever) were not.
The Balanced Scorecard is a popular concept among enterprises. Its thrust is to unite the departments of an enterprise by implementing performance measures under four (4) broad categories: learning & growth, business processes, customers, and finance.
With BSc, executives can analyse non-financial and financial information in single reports as sourced from various departments. The aim is to give executives an up-to-date picture of performance which would result in greater control and identification of improvement opportunities.
Enterprises who have enrolled into the BSc do not disagree with its philosophy; it’s just that many enterprises implement it differently from what its creators, David Norton & Robert Kaplan, had written in their book.
For example, some enterprises use totally different categories other than the four the Balanced Scorecard originally preached (i.e., learning & growth, business processes, customers, and finance). Some would instead classify their KPIs based on operations, functions, market category, etc.
Some companies implement KPIs via a top-down approach, i.e., executives dictate to managers, supervisors, and staff what performance measures to use. The executives would then instruct the managers, supervisors, & staff to come up with action plans to meet goals tied to those performance measures.
Others, like the example of the multinational corporation, would delegate department managers to formulate their own goals & KPIs and present their plans on how they would meet those goals Executives would just simply approve what the managers would present and observe the managers’ performances from time to time.
Some enterprises would use the Balanced Scorecard as the basis for performance appraisals of managers. Managers would be expected to meet scorecard objectives and be subsequently rewarded if their scores meet or exceed expectations or be punished if they don’t.
In most cases, the Balanced Scorecard implementation doesn’t prosper. Organisations would regress to what they were doing before. As in the example of the multinational, executives would backslide to their perceived urgent issues such as meeting sales targets, controlling costs, and addressing customer complaints.
History is replete with enterprises pushing popular buzzword business concepts only for them to fall flat and fail. Examples include Total Quality, Just-in-Time, Manufacturing Resource Planning (MRP II), Lean Six Sigma, Enterprise Resource Planning (ERP). The concepts sounded good, and they were successful for a few companies who seriously used them; it was just that what the executives were trying to put in wasn’t really addressing pertinent problems.
It’s not that the idea of implementing the Balanced Scorecard is a bad one. The Balanced Scorecard and all other management concepts come with methodical approaches to solving problems. They are not meant to be philosophies to adopt but relevant ideas to address issues.
The executives in the multinational example were preoccupied with getting more profits and market share and thought that enrolling their organisation into the Balanced Scorecard would automatically bring about a boost in results.
But it didn’t. Executives got impatient and slid back to what they were doing before, which was to nag their managers on sales, costs, and complaints. The BSc approach just didn’t suit what the executives really wanted.
Especially for enterprises with supply chain relationships, buzzword business philosophies won’t be cut out for success unless we apply their approaches appropriately as solutions to problems. We shouldn’t force fit our organisations to concepts; we should tailor them to fit into our organisations. (Analogy: we don’t force ourselves to wear small-size pants so that we can look thin; we either find the right-size pants or physically exercise to really get thin).
With the barrage of information from numerous people who think they know better than we do, we’re tempted to try things which attract our attention and spur our interest. What we should ask ourselves whenever we see these so-called ideas, is how they can be solutions to whatever our problems are.
It would, therefore, be to our advantage to know what our problems are. We should define them as we observe and experience them. We should seek them out as we develop goals and strategies. We should be aware of the challenges and potential disruptions as we formulate the roadmaps to our visions.
The famous automotive industrialist, Henry Ford, once said:
“Obstacles are those frightful things you see when you take your eyes off your goals.”
Some would say we should therefore keep our eyes on our goals. We’ll run into problems and get stuck if we don’t. Keep our eyes on the road and we’ll be there at our destinations before we know it.
But we can also say: let’s solve the problems, especially those that are right there blocking our path, the ones disrupting our driving, and even the ones that may open a shorter and faster route to where we’re going.
Obstacles may indeed be frightful, but we should face them when they challenge us. All we need is some courage and commitment, without the need of a buzzword.
Ellery's Essays 