Overview
In 1992 Robert S. Kaplan and David P. Norton wrote an article in the Harvard Business Review called "The Balanced Scorecard - Measures that Drive Performance." The article stressed the importance of not relying solely on financial measures to measure organizational success. It stressed the need for balance between short-term and long-term objectives, between financial and nonfinancial measures, between leading and lagging indicators, and between internal and external performance measures. The article was short on specific application, but its concepts struck a cord with many senior managers.
The popularity of the article forced Kaplan and Norton to write a couple of other articles in the HBR and two books on the subject (refer to the list of references at the bottom of this page). Each article and book attempted to provide more "how to" instructions but the majority of the content continued to focus on describing the concepts and philosophy. There are two key components of the Balanced Scorecard (BSC). The first is "what gets measured gets done." The second is that financial measures are not sufficient to manage the organization. The BSC creates a dashboard of indicators from all aspects of the organization's activities. It identifies measures from the perspectives of financial performance, customers, internal business processes, and people growth and learning. The expectation is that when these measures are linked to the organization's strategy people will naturally adopt appropriate behaviors to achieve the goals.
The basic concepts of the BSC are not new! The BSC is very similar to the concepts of Management by Objectives introduced by Peter Drucker back in the '50s. The concept of balancing focus on the multiple aspects of running a successful organization has been around since people began to work together. Every leader of an organization knows that you cannot treat employees poorly and expect success. You cannot ignore customers and then expect them to purchase additional products and services. You cannot continue to use the same processes and equipment and expect productivity gains. You cannot sell products and services for less than it costs to deliver them. These are basic organizational truths! Unfortunately in their rush to increase short-term shareholder value, many senior executives have forgotten these basic concepts. The primary benefit of the articles and books by Kaplan and Norton is that they have helped executives rediscover the basic concepts.
There are now many accounts of organizations adopting the concepts of the BSC with excellent results. There are also other organizations that tried to implement the BSC and failed miserably. The problem is that the successful organizations (and the consultants that helped them) claim that the BSC was the cause of their success. The organizations that failed (their consultants can't be contacted) claim that the complexity of the BSC caused its failure. In reality neither statement is true. The concepts of the BSC are excellent. It is a great tool to identify a balanced set of measures that organizations can use to manage their efforts, but it is just one piece of the total management system. It is not a silver bullet that will cure all problems. Just like any other good process it requires management investment and nurturing for success. The biggest downside of the BSC is that while the concepts are great, actual implementation is left to the consultant's whim.
So how can TQE help?
TQE's primary core competence is in the area of Hoshin Kanri. By using TQE's Hoshin software your organization can leverage the structure of the Hoshin Kanri process and deploy the concepts of the Balanced Scorecard throughout the organization.
Because the BSC has been implemented independently or with consultant's help, there are many different implementation methodologies. Kaplan and Norton have recently tried to address this weakness, but much of what they propose is rooted in classical MBO and positioned as something new. In many cases they are reinventing the wheel. Hoshin Kanri is a proven technique for documenting, deploying, measuring, and reviewing any strategy including the BSC.
Hoshin Kanri has always stressed the importance of selecting counter-balancing performance measures to monitor the results of efforts. Generic counter-balancing measures are quality, cost, delivery, and people. Consistent with the BSC approach, measures can instead be selected from the areas of customers, financial, internal processes, and people growth and learning. This simple change allows the bulk of the BSC philosophy to be implemented.
The BSC also attempts to map organization strategy into the key scorecard perspectives. This is easily accomplished using Hoshin Kanri. The organization's vision is documented on the Hoshin Long Range Plan and the key strategies to achieve the vision become the four scorecard perspectives. The Hoshin Long Range Plan is used to identify the improvement objectives that must be accomplished this year and then they are documented in the Hoshin Annual Plan. Each improvement initiative can then be deployed using the four scorecard perspectives. Following this process implements the basic concepts of the BSC. TQE's Hoshin software has built-in performance measure tracking and periodic review. Using the software means you don't need to "invent" a new system to implement the BSC. It already exists!
TQE can help your organization implement the Hoshin Kanri planning process. TQE's Hoshin Handbook describes the Hoshin Kanri process and provides step by step instructions. The handbook is also used as the text for the on-site workshop. It can help get you and your team up to speed quickly. To complete your Hoshin implementation, TQE provides both web-based and PC-based software to help reduce the paperwork and provide structure for your planning process. The software will help make your Hoshin plan become the way you manage instead of a document collecting dust on the shelf.
TQE's products and training services can help your organization reap the benefits of a Balanced Scorecard approach.
|
