When Kaplan and Norton published their ideas for a “Balanced Scorecard” in articles 20 years ago and followed this up in 1996 with their book “The Balanced Scorecard” they started a trend in organisations throughout the world, the success of which they could only have dreamt of at the time. Now it seems no management team wishing to project itself as being at the forefront of management thinking can afford to be without one. The Kaplan and Norton scorecard consisting of four perspectives is so extensively used that it is now generally known as “The Balanced Scorecard” or BSC for short.
Now whilst we can thank Kaplan and Norton for stimulating and promoting the concept of a balanced set of performance measures as distinct from one focusing almost exclusively on one area, for example finance, their Scorecard is no friend of those organisations seeking to focus upon the needs and expectations of all their stakeholders. For the Kaplan and Norton BSC is fundamentally driven by the predominantly and abiding USA business view that the sole or substantially significant purpose of any enterprise is to make money. In so far as Kaplan and Norton explicitly focus on stakeholders in “the” BSC, it is on customers, those who buy the products and services that generate money for the organisation. Other stakeholders are largely overlooked or at best indirectly and somewhat obliquely referred to.
So what’s the answer for those seeking to pursue a stakeholder focused approach in order to become organisationally excellent? The answer is quite simple really. Adopt a Stakeholder Value focused Balanced Scorecard that focuses on goals, targets and measures – both outcomes and indicators – based upon the needs and expectations of all key stakeholder groups. By linking these goals and measures to a set of integrated strategies, processes and capabilities, an excellent Performance Management approach becomes available that will help these organisations make great strides towards Organisational Excellence. Are these Stakeholder Value focused Balanced Scorecards available? Yes they are, although they have been largely ignored or simply not noticed by many organisations in the rush to become yet another ‘Kaplan and Norton’ BSC adopter. Interested in learning more? I’d be delighted to hear from you. Drop me an email and I’ll get in touch.
Does the sight of “KPI’s” fill you with dread? It does me! Not because the concept of “KPI’s”, or Key Performance Indicators to give them their full name, is wrong. To the contrary the concept is fine. But like so many other things in business an excellent concept can quickly be turned into a nightmare through misunderstandings, poor applications and so forth. So much has been made of “KPI’s”, (there’s hardly a single management book or article that does not refer to them in some way or another these days), that no organisation feels it’s complete unless it has them. But like rabbits they seem to multiply and multiply, and like rabbits they do not always leave nice evidence of their presence behind them!
So what’s the problem? Well let’s begin by looking at a couple of the words in the name.
Now I don’t know about you but the word “Key” suggests to me the most important. And by extension this generally means few. Yet I’ve come across organisations that have 10’s, and sometimes even 100’s of so called Key Performance Indicators. The boss of one organisation asked me to help him with some matters concerning governance. Whilst looking at the regular items on the monthly board agenda I noticed “Review of KPI’s”. I asked him how many of these KPI’s they had. Somewhat sheepishly he showed me the monthly board report. There were over 150 KPI’s listed! Yet when I asked him, he admitted that to his certain knowledge the board had only ever taken action on about 12 of these. Many of the remaining indicators were only produced for the board report and had no other use. Needless to say the number of “KPI’s” in that organisation was dramatically reduced over the months following our conversation.
Now let’s consider “Indicator“. The first thing to say is that an “Indicator” is NOT an outcome. An indicator is a measure of something the organisation can manage, like output. So for example, no organisation can manage profit, (an outcome), but it can measure as indicators, and manage the things that contribute to the profit outcome, such as income, expenses and so forth. So with the definition of Organisational Excellence in mind – see earlier posts – the extent to which our stakeholders consider that we are meeting or exceeding their expectations is an outcome, (we cannot manage it), but if we know, understand and measure as indicators the things that contribute to their perceptions, then we can manage these so as to achieve the desired outcome. Yet in many organisations output and outcome are muddled up and all are measured by what the organisation calls “KPI’s”.
So, let’s keep KPI’s but let’s also make sure they are truly “Key”, and are “Indicators”, not outcomes!
Happy “KPI’ing”….there in true American style I have created a new verb out of a noun!