Hardly a person is around when Shoeless Joe Jackson testified to a grand jury in 1920 about his infamous role in the Black Sox Scandal where eight White Sox players conspired to throw the World Series. The episode seemed like such a betrayal by Joe about the thing he most believed in, baseball.
Such was the feeling I got when I read Arvind Hickman’s article, Norton: Balance Scorecard must adapt to remain relevant. In the article, Hickman reports that the co-founder of the Balanced Scorecard, David Norton, professed that the management tool is becoming more obsolete every day though 70% of companies in the world reportedly use it.
He stated that all performance management systems must evolve in order to be relevant for the next 10 to 20 years. I find his viewpoint intriguing since many strategists use balance scorecard to implement their strategies that go out 10 to 20 years. So, in that sense, the strategy may not be wrong, the tactics may not be wrong, but the tools to measure the right metrics may be wrong. He stated that there were five major changes:
- Managing human capital will become a greater issue. Norton said for example, don’t look at employee turnover, but the cause and effect of why employees are turning over. This will help develop a strategy to address the core issue. I would think that a good COO would examine a high turnover looking at employee training, working conditions, wage levels, etc. The metric would just be the flair.
- The network economy. This term really speaks to a part of the company’s supply chain, i.e. the growing interdependence companies have with internal and external suppliers. Norton claimed that the last generation examined only the legal boundaries within an organization when developing their strategies. Today, outsourcing and joint ventures require a broader view in strategy. Maybe this may be the way performance measurement systems look at things, but normally I recall most businesses looking at the whole supply chain which includes outside stakeholders.
- Transparency. This point really addresses our government and non-profit sectors. Their performance management systems must adapt to this strategy.
- The new role of the corporation. Corporations today are expected to recognise their impact on the economy, society, and the environment. Can management systems address these? Maybe a strategy that sets a horizon and measures society’s opinion though surveys. An interesting challenge for any company.
- Risk. Norton claims that organizations are becoming more risk adverse. He bases his opinion on the last ten years. I don’t think that is an adequate assessment. He could have said the same thing from 1930 to 1940. An economic downturn of ten years is not a large enough population to change a strategy of 20 years. This is not to say that we shouldn’t look at risks, but that has it really changed? Were those who were not addressing risk just developing a poor strategic plan?
Performance measurement, regardless of the system or software must evolve like business does. This is why good strategies are cyclical. You must reevaluate and tweak.