Tuesday, September 8, 2009

Ode to the balanced scorecard

Do you feel yourself being elevated from your chair just thinking about balanced scorecards? I didn't think so. But speaking of balanced scorecards, I am about to commit heresy and I can only pray that Kaplan and Nortan can forgive me some someday.

Over the past 10 years, there has been a struggle to bring balance to business. The attempt was to move the industrial revolution model where the bottom line is the bottom line to a more holistic, balanced and, dare I say, human approach that recognizes that people, customers and processes enable profit.http://en.wikipedia.org/wiki/Balanced_scorecard

It was a valiant attempt, I would say. Companies all over the world implemented balanced scorecards into their corporate psyche. They set measures and targets for employee satisfaction and engagement and client satisfaction as a way to incent management to think and act in a more balanced way.

However, the recent downturn in the economy has sent us into a tail spin. We seem to be caught in a time warp heading back to the industrial revolution where driving profit at all costs is the focus.  Enterprise Risk Management is the new focus, but the perspective is one of fear, and not opportunity.  The question on  may leaders' minds is what are the risks that will disable our ability to generate profit?  And because we tend to think we are in a race, and maybe we are, the answers are short term.  Cut costs. Reduce overhead.  Streamline.  Think about it - how many new products or innovative ideas have hit the market place in the last five years? Trust me, the focus has been on restructuring and merging, and not on making new products and services.  Instead, businesses have been merging and converging to generate "economies of scale" which is just another way of saying doing more with less.

This is a problem because it begs the question. How much profit is enough? The anwer is there is never enough money at the end of the day. So, we continue to drive to this impossible goal of "profitablity" without really knowing how much is enough. Worse yet, this leads to less focus on good people practices and satisfied clients.

I have witnessed the effects of this phenomenon and I have to say, it's not good.  People and process are considered overhead - otherwise known as cost.  Therefore, in the absence of increasing revenue through creativity, innnovation and meeting customer needs, there is only one response. To decrease costs.  Granted, creativity is difficult and it's easier to cut costs.  But this line of thinking leads to unemployment, decreased confidence of the consumer, decreased spending for social programs, and increased paranoia overall.  People stop spending money. They batten down the hatches and prepare for the worst. 

In this environment, people become disposable. Good sense goes out the window.  And why? Because leaders are not being held accountable for the total picture.  They are short sighted, focusing on today and not considering the impacts of the decisions that are made.

It is a known fact that happy and secure employees are productive.  Productive people tend to have good leaders.  Good leaders tend to inspire good ideas from good people.  And good people can find creative ways to getting things done.  And when good people put their minds to it, collectively, the result is an insanely successful organization.

So, if you are reading this, Kaplan and Norton, it's time to step up the efforts to bring this awareness back to the minds of our leaders so we don't get comfortable back in the 1900's again. I would be happy to help.

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