La diferencia entre causa y efecto. El Cuadro de Mando integral de tercera generación.

Yago Amat – Nov 2009

Uno de los errores más comunes en la gestión de empresas es la lucha insensata por atacar y luchar por un indicador que es consecuencia del trabajo y no en sí mismo algo que se pueda transformar en forma directa. La frase “Lo que importa son las ventas y todos a aumentar las ventas como cosacos” esta frase,…cuantas veces la habremos escuchado y cuanto nos hace perder los ánimos al ver que no se logra y que además es una pérdida recursos.

Uno no vende más porque lo desee o por muchas puertas que toque de forma insensata, sino porque tiene una estrategia detrás clara que simplifica el trabajo y que hace más efectivo el proceso comercial.

Se vende porque el mensaje es claro, porque se busca al cliente adecuado y que puede comprar, porque los vendedores son los interlocutores válidos, porque hay una diferencia competitiva real del producto o servicio en contra de la competencia. NO se vende más solo por el hecho de lanzarse al mercado.

EL empresario cuando desea vender más debe entender porque le han comprado los que hoy son sus clientes, hacer el análisis de su competencia y revisar constantemente que el mensaje que lanza al candidato es claro, concreto y le ofrece una ventaja sobre las otras opciones que seguramente están cometiendo o no los mismo errores.

Intentar modificar un indicador que es efecto y no causa en la empresa es como querer cambiar el precio del petróleo por el hecho de solo pensarlo,… así de absurdo. Un indicador, un resultado en la empresa se logra si la causa es alterada y corregida.

La metodología del Balanced Scorecard, permite identificar cuales son estos causantes del crecimiento, y ayuda a definir la forma de mejorar y transformar los resultados que generan.

Para lograr un objetivo es fundamental hacer un estudio de la competencia, saber las necesidades del cliente, validar el mensaje y verificar que es recibido por el mercado como uno desea,… incluso verificar que el mensaje propone un servicio o producto que agrega valor al cliente, sino no tiene caso ni acercarse: desprestigia, cuesta dinero y desmotiva al equipo.

Otra de las piezas fundamentales a definir en este proceso es tener un pleno conocimiento de las habilidades y potencialidades de la empresa y mantener los pies en la tierra cuando uno se acerca al mercado. La grandilocuencia suele verse en el mercado más como ignorancia que como una ventaja. Ser claro, concreto y especializado da más confianza que el abstracto genérico y gran proveedor de servicios y productos. EL comprador no se sentirá confortable de entrar en una tienda en la que se vende de todo sino encuentra una unidad en el mensaje.

Las “tiendas de chinos”, por ejemplo,  venden absolutamente de todo y podría parecer que no hay unidad en su catálogo, está claro que su mensaje es “vendo barato: todo lo que pueda, aunque la calidad sea mala… es barato y ya” Mensajes tan claros como ese dan confianza al cliente y acercan al consumidor cuando tiene una necesidad que la empresa cubre. La parte más difícil de lograr vender más, es identificar la necesidad que se cubre… pues crearla (que es el ideal) a no ser que sea francamente algo genial, (ipod, nespresso,…)

El tiempo perdido en intentar vender algo,  un mercado tan competido y más en tiempos de crisis requiere de reflexión, análisis y estudio antes de saltar al vacío. La metodología del Cuadro de Mando integral es una buena herramienta para identificar cuáles son las tareas previas a realizar antes de definir un crecimiento comercial. Recuerda que si no vendes no es porque el mercado se caiga exclusivamente, sino porque no has sabido reaccionar al cambio ni adaptarte a las necesidades del consumidor.

Los inmobiliarios que hoy sufren tanto lo hacen pues no supieron cambiar en el momento adecuado, buscar alternativas de financiación, e incluso otros mercados. Los que quebraron fue porque pensaban sin conocimiento que el mercado soportaría hasta el infinito. La producción de casas, cosa que hoy vemos como un absurdo. Las empresas que hoy sobreviven son aquellas que tenían una estrategia clara desde el principio y que reconocieron el momento de cambio cuando se daba y no cuando ya se dio, redujeron su nivel de endeudamiento y crearon alternativas para seguir vendiendo apoyando al comprador con técnicas innovadores de financiación. O simplemente no fueron tan arriesgados y reconocieron que su mercado es y siempre ha sido de largo plazo, por lo que las inversiones siempre estuvieron soportadas por la estrategia tanto financiera como comercial.

Hoy las empresas productoras de automóviles innovan constantemente la forma de pelear por los pocos compradores que hay en el mercado. Los que adapten sus precios y la forma de vender serán los que crecerán en estos tiempos. Los que se sienten a ver pasar la crisis perderán la oportunidad. Pues las crisis, que no son más que ajustes temporales del mercado, son momentos de oportunidad para todos, siempre y cuando la estrategia sea clara, concreta consistente e interesante para el consumidor.

Les invitamos a conocer la Práctica del Balanced Scorecard como una alternativa a los tiempos de crisis, pues como saben esto no ha terminado,… aún.

Yago Amat Martínez

Strategy Management

Målstyrning, även känt som Balanced Scorecard (BSC), kan hjälpa en organisation att sätta upp mätbara mål. Valmöjligheterna för målstyrning är många, exempelvis kan du som användare välja vilken typ av hantering du vill använda dig av: månadsvis, kvartalsvis eller annan form av tidsperiod som passar dig bättre.

Balanced Scorecard Methodology
The steps required to introduce and operate a balanced scorecard approach are listed below.

1) Define the elements of the scorecard
First, it is necessary to establish the constituents of the balanced scorecard – the perspectives from which performance requirements will be defined and measured as a basis for improvement. The elements usually include financial, process and customer factors. People factors covering development, motivation, leadership, and so forth, are sometimes substituted for learning and growth.
In the retail network of Halifax plc the four areas are:
    how people are managed;
    how internal processes are managed;
    levels of customer service;
    business performance (sales).
At this stage it is also necessary to define clearly the objectives of the balanced scorecard approach.

2) Identify performance drivers
The second step is to identify the performance drivers for each of the categories – for example, repeating and expanding sales from existing customers, the internal processes at which the company must excel, the needs and wants of customers and the particular people skills the organization needs now and in the future.
Links will need to be established between each of these areas so that they are mutually reinforcing. For example, high levels of customer service in defined areas will lead to better financial performance; customer service levels can be improved by attention to processes such as on-time delivery, and customer care will be enhanced if the right people are selected and given the training to develop the necessary skills.

3) Identify performance measures
The third step is to determine how performance in each of the categories will be measured. In some areas such as finance and customer service it may be quite easy to determine quantitative measures such as sales or levels of service as assessed by surveys, questionnaires and mystery shopping. The measures for the process and change in perspectives may, however, have to focus on the achievement of development programmes to meet defined specifications and to deliver expected results.

4) Communicate
This fourth step is to communicate to all employees what the balanced scorecard is, why it is important, how it will work, the part they will be expected to play and how they and the organization will benefit from it.

5) Operationalize
The fifth step is to operationalize the system. This means developing policies, procedures and processes that ensure that it is applied at all levels in the organization – strategically at the top, tactically in the middle – and as a matter of continuing importance so far as working practices are concerned to all employees.
Operationalization might include the definition of performance requirements in terms of targets and the introduction of new processes, the communication of these requirements, and the development and application of processes for measuring outcomes and taking corrective action when required. At an individual level, performance management processes may be based on the four elements of the scorecard. Objectives and standards of performance and competencies that are aligned to corporate objectives would be agreed for each element and performance reviews would assess progress and lead to agreed improvement and personal development plans.

6) Train
The sixth step is to provide training for everyone in the organization on the operation of the balanced scorecard and on what, on their different levels, they are expected to do about managing and implementing the process.

7) Monitoring, evaluation and review
Finally, the operation of the balanced scorecard should be monitored and its effectiveness evaluated in agreement with its objectives. A review can then take place to decide on where improvements or amendments need to be made and how they will take place.

They’re still using analytic dashboards, but tying the data to strategic goals.

By Doug Henschen

It’s 7 a.m. in San Antonio, Texas, and Rich Marcogliese, chief operating officer of Valero Energy, is holding his usual morning meeting with the plant managers of 16 major refineries throughout the United States and Canada. On the walls of the HQ operations center are a series of monitors centered by a giant screen with a live display of the company’s Refining Dashboard. Whether the executives are in the room or connected remotely, all eyes are trained on the Web-accessible gauges and charts, which are refreshed with the latest data every five minutes.

“They review how each plant and unit is performing compared to the plan,” says Valero CIO Hal Zesch, “and if there is any deviation, the manager explains what’s going on at their plant.”

For Valero, surprisingly little-known for a Fortune 10 (that’s right, one-zero) company with more than $118 billion (with a “b”) in revenue, just one dashboard needle moving from green to red might signal millions of dollars at stake. The point of the dashboard isn’t to call managers out; it’s to give executives timely information so that they can take corrective action.

Valero’s Refining Dashboard is just the sort of cutting-edge decision-support tool that thousands, if not tens of thousands, of companies are now attempting to create. Those companies have embraced the idea that decisions based on fact will consistently beat those based on gut. Business bestsellers including “Competing on Analytics,” “Super Crunchers,” and “The Numerati” have documented that it’s an approach that works. Financial analysts, board members, and even the news media increasingly expect sound, data-backed analyses from top management. And when things go wrong, regulators and, in some cases, even district attorneys follow the numbers to trace bad decisions.

Plenty of obstacles stand in the way of better decision support, from backward-looking metrics and ill-advised goals to antiquated budgeting approaches and technophobic executives. For management teams that can make use of the data–and these days there’s always plenty of data–there are huge opportunities to improve efficiency, develop innovative products, get closer to customers, and outsell competitors.

Start With Goals

Valero rolled out its dashboard in early 2008 at the behest of COO Marcogliese. He had launched a Commitment to Excellence program aimed at improving performance, and he wanted to see real-time data related to plant and equipment reliability, inventory management, safety, and energy consumption.

Whether driven by Total Quality Management (TQM) programs, Balanced Scorecards, or another methodology (more on those later), information-driven companies tend to succeed by establishing clear goals and expectations that are aligned from the top of the organization down to departments and individual employees. When results start coming up short, executives can manage the exceptions along the way rather than hoping for the best and reacting to surprises at the end of a quarter.

 A major focus of Valero’s Commitment to Excellence program is reducing energy consumption, so the company is rolling out separate dashboards that show detailed statistics on power consumption by unit and plant. “Based on the data, managers can share best practices and make changes in operations to reduce energy consumption while maintaining production levels,” CIO Zesch explains. Estimated savings to date: $140 million per year for the seven plants where the dashboards are in use, with expected total savings of $230 million per year once the dashboards are rolled out at all 16 refineries.

The successes have created dashboard-envy within Valero, so IT is working on similar dashboard programs for sales and marketing as well as the strategic sourcing unit.

Focus On The Right Measures

The terms “scorecard” and “dashboard” are often used interchangeably, but there’s an important distinction. Scorecards are all about tracking against defined metrics, and most scorecards are attached to a methodology, such as the Balanced Scorecard or TQM, says Mychelle Mollot, VP of worldwide marketing, analytics, and performance management at IBM. “Top executives have actually laid out a map for where they want to drive the business, and they’ve created metrics that will drive the behavior that will get them there,” Mollot says.

Dashboards display key performance metrics and perhaps green, yellow, and red zones, but they don’t tend to show predefined targets or goals established by management and aligned to strategy.

Whether they call their decision-support tools scorecards or dashboards, only a small percentage of leading companies have actually mapped out enterprise-wide goals with a formal methodology. (The Balanced Scorecard Hall of Fame currently lists only about 120 members, including Best Buy, Hilton, UPS, and Wells Fargo.) Some companies come up with their own methodologies, but the key question is whether it’s a comparative decision-support interface –does it track performance trends relative to predefined goals? A much larger chunk of companies use dashboard-style interfaces that simply monitor the health of the business. “These types of decision-support tools aren’t often attached to a grand methodology or linked down to the bottom of the organization,” Mollot says.

It’s not that monitoring-oriented dashboards can’t be effective. But without high-level business strategizing (as Valero has done), there’s a danger you’ll end up sharing the wrong metrics. Sales stats and financial measures, for instance, can be lagging indicators, and decisions based on this data might miss a looming shortfall that might be obvious in sales pipeline information.

At Elkay Manufacturing, a $1 billion plumbing fixture and cabinetry maker, the CFO has led the company to embrace both the Balanced Scorecard (taught by The Palladium Group) and the Beyond Budgeting/Continuous Planning Framework (promoted by the Beyond Budgeting Round Table). The idea behind continuous planning is to be adaptive, revising plans and forecasts each quarter and always looking out six quarters rather than four.

 Elkay’s stated strategy is to grow profitably, so its sales-related scorecards and dashboards include profit metrics so that salespeople don’t just drive revenue at the expense of the bottom line. Controller John Hrudicka says the company’s decision-support tools have identified initiatives that produced more than $13 million in hard-dollar profit improvements while “helping us transform our culture to a profit mind-set.”

Elkay put most of its decision-support technologies in place over the last two years. It tapped Host Analytics’ software-as-a-service financial performance management system, which it uses for budgeting, planning, reporting, and end-of-quarter financial consolidation. The system also supported the move, completed in September, to 18-month budgeting and planning cycles. Elkay chose Acorn Performance Analyzer software for activity-based costing–analyses that reveal the true cost of delivering products (including manufacturing, distribution, sales and marketing, and warranty claims) as well as the true cost of sustaining customers (including products purchased, discounts applied, and ongoing service and support costs).

Elkay already had both Oracle (PeopleSoft) and SAP ERP systems in place as well as an Oracle data warehouse. For decision support, Oracle Business Intelligence Enterprise Edition pulls information from all of these systems to deliver multilevel scorecards and dashboards. “It starts with the corporate scorecard and it rolls down from there to the divisions and all the way down to individual-employee goals that affect bonuses at the end of the year,” Bauer says. Bottom-up feedback, he says, is gathered during quarterly strategy reviews.

Foster A Data-Driven Culture

Few companies have worked as hard or as long at data-driven decision-making as Johnson & Johnson. In the 1980s, J&J embraced TQM and Phil Crosby’s Zero Defects approach. In the ’90s it moved on to Malcolm Baldrige-type criteria for performance excellence. Early in this decade, J&J focused on process excellence, and by mid-decade it had embraced powerful improvement tools including Six Sigma, Lean, Value-Stream Mapping, and Design Excellence. What most of these approaches have in common is an iterative process of assessing opportunities, developing goals, implementing improvements, and then monitoring their success with the aid of decision-support tools. Indeed, fact-based decision-making is now “part of the culture at J&J,” says Karl Schmidt, VP of business improvement, who leads a nine-person internal management consulting group.

J&J is decentralized, so there’s no single, overarching corporate dashboard. There are separate dashboards–or in some cases, balanced scorecards–within the pharmaceutical, consumer, and medical device and diagnostics product divisions and the dozens of companies in each of those groups. The key performance indicators include a mix of financial metrics (revenue, net income, cash flow); customer metrics (satisfaction, loyalty, market share); internal process metrics (product development, manufacturing efficiency, fulfillment); and employee measures (engagement, satisfaction).

As late as 2006, J&J estimated that all the top-line and bottom-line improvements rolled up across the company totaled more than $1 billion a year in “value creation,” Schmidt says. But more recently, those improvements haven’t been enough to insulate J&J from what he describes as “brutal economic conditions.” Early this month, J&J announced a restructuring that will cut up to 7,000 of its 117,000 employees worldwide. Restructuring is rife across the pharmaceutical industry, and Schmidt says having good decision-support tools is more important than ever.

“It comes down to fact-based decision making,” he says. “In tough economic times, you want the best available data and analysis to make better decisions.”

Cater To The Audience

Maine Medical Center created a dashboard this year to help it win reaccreditation as a Magnet-Designated Hospital for nursing, an elite distinction. The dashboard delivers eight key metrics on patient safety and satisfaction by hospital operating unit, so that nurses, nurse directors, and administrators can log on and check personal performance, unit performance, and rollups for the entire hospital.

But Maine Medical’s deployment underscores the decision-support truism that some executives are more savvy than others when it comes to using these tools. “I walked into the chief nursing officer’s office one day, and she had about 50 paper printouts of dashboard views wallpapering an entire wall,” says Doug Salvador, the center’s associate chief medical officer. “It’s nice that she valued the information that much, but I had to show her that she could always access historical views.”

Over the last three years, the medical center has used SAS Institute’s balanced scorecard software to codify patient-care quality and safety strategies as well as supporting goals and measures. Most goals are delivered though performance-improvement dashboards, which seem to be getting the job done. Maine Medical has been named to the U.S. News and World Report Best Hospitals list three times (for gynecology, orthopedics, and heart care), and its Cancer Institute in Scarborough, Maine, was selected this year as one of five model cancer programs in the United States by the Association of Community Cancer Centers.

Salvador says his group spends most of its time asking front-line caregivers how they can improve reports, scorecards, and dashboards, but the team is also “picking off” once tech-averse executives by making their decision-support tools more useful to them. In the past, the chiefs of surgery and medicine barely used the decision-support tools, he says, “but they now have access to physician-specific scorecards with performance data that they need when it’s time to re-credential doctors within their departments. They used to get e-mailed reports that weren’t very complete. Now they’re getting more data, and it’s presented in a more useful format.”

Look To The Internet

Some of the most decision-support-savvy executives can be found in e-commerce. For example, Patrick Byrne, CEO of Overstock.com, is said to use dashboards to help set his daily schedule. If the problem of the day is gross profit margins, that will drive who he calls in for a discussion. “If you get invited into a meeting with that kind of metrics-oriented CEO, you better have your hands on the data, including the detail at the next level down,” says David Schrader, director of strategy and marketing at Teradata, the vendor behind Overstock’s data warehousing environment.

Overstock can roll up its profit and loss statement every two hours, “which is absolutely world class,” Schrader says. That capability gives executives accurate, up-to-date insight into the financial results they can expect, and it also drives operational decisions such as spot buys of TV advertising.

Whether a company is an e-commerce powerhouse or not, digital marketing channels like e-mail, social media, and online advertising networks are increasingly important. Thus, top executives should be watching forward-looking, upstream measures such as Web site performance, Web-driven lead generation, and sales pipeline information. Here, again, you must be careful to select the right metrics.

“A lot of people are measuring the wrong thing, like how many people came in the door,” Schrader says. “What you really want to measure is how many people came in the door and became qualified leads.”

And once prospects become customers, you’ll want to know if they are good or bad customers. That’s where analyses such as activity-based costing and customer segmentation come in. Lessons learned should come full circle and be reapplied to lead-generation campaigns and marketing offers.

Tell A Story With The Data

Considering all the IT systems now in place, the growing dominance of Internet-based marketing, and the intensely digital nature of services-based industries, there’s no doubt that data-driven decision making is the way forward. But the key questions are, how prepared are these organizations to synthesize and share key performance indicators, and how prepared are executives to draw insight from information?

CIO surveys, software sales stats, and business bestsellers point to surging interest in business intelligence and business analytics. Villanova University’s School of Business recently responded by changing its curriculum with data-centric decision making in mind. For example, it added an undergrad course on analytics and risk assessment, and it updated the statistics courses required at both the undergrad and MBA levels to be more practical and applied.

The curriculum changes were guided in part by extensive interviews with a group of 16 business leaders (including Schmidt of Johnson & Johnson). The resulting “Current State of Analytics in the Corporation” report says nearly as much about tech skills as it does about executive decision support: The sweet spot for new hires continues to be that elusive combination of technical and business know-how and the ability to “tell a story” with data.

The idea of Leading and Lagging Indicators was highlighted when Kaplan and Norton first described the Balanced Scorecard. Since then, many organisations have recognised the need to identify not only a balanced set of objectives and measurements, but also an appropriate mix of Lead and Lag measurements (Indicators). Simplistically, Leading Indicators should give you an early warning, or forecast, of what’s likely to happen in the future and Lagging Indicators will enable you to evaluate performance after the event.

We have been impressed with the simplicity and power of OpenStrategies’ approach to strategic planning and their under-pinning PRUB-thinking. The approach is particularly relevant to multi-agency planning situations such as exist in criminal justice, healthcare and local authority settings. We think it can also be used to help develop a balanced set of Leading and Lagging Indicators.

Download the full article PRUB Lead-Lag.

Read more articles about our approach to Performance Management.

(Cadangan Kajian)

Gerilyansyah Basrindu

(2008)

Sistem Pengurusan Prestasi : Menggunakan Indikator Prestasi Kunci dengan kerangka kerja Balanced adalah merupakan suatu upaya pengintegrasian Pengurusan Prestasi  dengan menggunakan pengukuran kinerja organisasi ( Key Performance Indicators)  berdasarkan kerangka kerja  balanced scorecard yang sebelumnya dikembangkan oleh Prof. Norton dan Kaplan.

Penyelidikan dilakukan di PDAM Bandarmasih, Banjarmasin, Indonesia ( case study ) sebuah syarikat yang bergerak di bidang penyediaan air bersih kepada masyarakat  bandar Banjarmasin yang berpenduduk 612.697 rang ( data 2005).  Syarikat memiliki 330 karyawan,  asset Rp 291.944.768.925,-, dan profit Rp. 4.246.892.000,- ( 2006), dan Rp. 183.622.073,-  ( 2007).

Pengurusan Prestasi  diperlukan untuk memastikan apakah prestasi yang diperoleh sudah sesuai dengan sasaran strategik yang telah ditetapkan dalam Perencanaan Strategik.

Latar Belakang Masalah Penyelidikan melihat pentingnya Pengurusan Prestasi  untuk memperbaiki prestasi  suatu organisasi.  Pengurusan Prestasi dilakukan sebagai penterjemahan dari  Perencanaan Strategik yang bersifat jangka panjang.  Akan tetapi Pengurusan Prestasi dilakukan sebagai usaha untuk memastikan apakah prestasi organisasi yang  telah dicapai sudah sesuai dengan perencanaan strategic ( visi, misi, strategi ) yang ditetapkan. Kaplan dan Norton ( 1996 :  5 ); Yuwono  (2002: 14 ); Gasversz (2002 : 2; 2007: 24 ) dan Niven ( 2007 : 16-18 )     mengemukakan bahwa ” rata-rata dari 10 syarikat, hanya satu yang berhasil mengeksekusi strateginya, atau dengan kata lain  9 dari 10 syarikat gagal menjalankan strateginya. Adapun penyebab utama dari kegagalan dalam menjalankan sistem pengurusan prestasi syarikat tersebut adalah : 1). Halangan Visi ( Vision Barrier ); 2). Halangan Sumber Manusia ( People Barrier ), 3). Halangan Operasi ( Resource Barrier); dan 4)  Halangan Pembelajaran. Balanced Scorecard dapat menjadi jembatan dalam mengatasi berbagai halangan tersebut.

Terdapat beberapa metode pendekatan atau alat atau kerangka kerja yang dapat dipergunakan dalam Pengurusan Prestasi . Salah satu metode pendekatan Pengurusan Prestasi  yang populer saat ini dan banyak dipergunakan adalah kerangka kerja Balanced Scorecard, yang oleh Havard Business Riview dinyatakan sebagai salah satu dari  75 ide yang berpengaruh. Balanced Scorecard adalah sebuah metode pendekatan alat dari Pengurusan Prestasi yang menyajikan kerangka kerja konseptual untuk menterjemahkan visi, misi, dan strategi / peta strategi  menjadi sekumpulan indikator kinerja (– KPI Key Performance Indikator)  yang terbagi diantara empat perspektif, yaitu : (1) Keuangan( Financial); (2) Pelanggan( Customer) ; (3) Proses bisnis internal ( Internal Business Process); serta (4) Pembelajaran dan Pertumbuhan( Learning and Growth). Pengukuran dengan metode Balanced Scorecard dilakukan dengan merujuk kepada Rencana Strategis, sehingga dapat digunakan untuk menilai kesesuaiannya dengan Rencana Strategis  Dengan Balanced Scorecard suatu organisasi dapat memantau : (1) Prestasi saat ini dari perspektif Keuangan, Pelanggan, Proses Bisnis Interbal, serta Pembelajaran dan Pertumbuhan (2) Upaya untuk memperbaiki proses, motivasi, dan pendidikan karyawan serta upaya peningkatan kemampuan pembelajaran dan pertumbuhan.

Belum diketahui dengan pasti permasalahan apa saja yang  dihadapi oleh PDAM Bandarmasih. Namun, pada saat ini permalasahan yang nampak terpublikasikan  adalah terjadinya penurunan drastic nilai dan tingkat keuntungan (profit) dari Rp. 4.246.892.000,- ( 2006) menjadi Rp. 183.622.072,- ( 2007), berarti terjadi penurunan drastic sebesar 2.312%.

Tujuan Penyelidikan ini adalah : 1). Untuk mengetahui apakah yang menjadi latar belakang ( pemacu perubahan ) sehingga PDAM Bandarmasih menggunakan Key Performance Indicators dengan kerangka kerja Balanced Scorecard? 2).  Untuk mengetahui bagaimana proses penyusunan KPI dengan Kerangka Kerja Balanced Scorecard dipersiapkan oleh PDAM Bandarmasih ? 3).  Untuk mengetahui bagaimanakah  proses imlementasi KPI dengan kerangka Kerja Balanced Scorecard yang dijalankan oleh PDAM Bandarmasih? 4).  Untuk mengetahui bagaimanakah  proses evaluasi prestasi berdasarkan KPI dengan kerangka kerja Balanced Scorecard pada PDAM Bandarmasih?  5).  Untuk mengetahui bagaimanakah   peningkatan hasil  prestasi PDAM Bandarmasih setelah menggunakan kerangka kerja  Balanced Scorecard ( tahun 2006, 2007, dan 2008),  6).  Untuk mengetahui apa sajakah yang dihadapi oleh PDAM Bandarmasih dalam menerapkan KPI  dengan kerangka kerja  Balanced Scorecard?7).  Untuk mengetahui bagaimanakah  proses koreksi / perbaikan yang dilakukan oleh PDAM Bandarmasih setelah dilakukan proses evaluasi berdasarkan KPI dengan kerangka kerja Balanced Scorecard

Supervisor : PROF. MADYA DR. HARTINI AHMAD

O site About.com publicou um ótimo artigo sobre Logística Inteligente, dando uma introdução ao tema. A seguir está um resumo do artigo (misturado com minhas ideias) para quem tem dificuldade com o inglês ou não quer ler o texto completo…

Pode-se considerar como logística inteligente aquela que tem as seguintes características: é movida por uma visão do futuro, se adapta bem às mudanças no ambiente, responde rapidamente às necessidades do cliente, e é sensível às pressões de custos do mercado.

Os 4 pilares da Logística Inteligente

1. Inteligência no Planejamento e Execução

A estratégia da operação logística de uma empresa deve estar totalmente associada à estratégia corporativa da organização. Os objetivos e indicadores logísticos devem ser desdobrados a partir dos objetivos que foram definidos nos aspectos financeiros e de cliente da empresa. Além disso, deve-se traçar um plano de treinamento e desenvolvimento que seja coerente com os objetivos definidos para os processos logísticos. Para quem está associando isto com o Balanced Scorecard… é isso mesmo que quero transmitir. A visão e definição da atuação logística deve abordar os níveis de planejamento estratégico, tático e operacional.

O planejamento estratégico envolve o desenho da rede logística em termos de fábricas, armazéns, centros de distribuição, planejamento de capacidade (em função da demanda do cliente), e localização de parceiros e fornecedores. Este planejamento normalmente pode ser feito para uma visão de 6 meses a 5 anos. No entanto, na prática é importante realizar uma revisão constante da estratégia em função das mudanças no ambiente.

O planejamento tático define como usar os recursos disponíveis para otimizar o atendimento ao cliente com o menor custo possível. Deve também prever mudanças no cenário (demanda, fornecimento ou capacidade da rede) para responder melhor a elas.

O planejamento operacional gera planos realistas de inventário e movimentação de materiais, em função das restrições do sistema. Também define soluções para variações que afetem as operações do dia-a-dia (quebra de equipamentos, discrepância de inventário, pedidos cancelados, etc.).

2. Visibilidade

A visibilidade envolve conhecer a demanda do cliente, a rastreabilidade do inventário e do material em movimento a qualquer momento, e sistemas de alerta para quando algo se desvia do planejado. Isto permite um balanceamento adequado entre oferta e demanda, reduzindo custos e melhorando a qualidade do serviço.

As ferramentas-chave para a visibilidade são:

- rastreabilidade dentro da organização com sistemas de monitoramento de eventos

- rastreabilidade nos parceiros da cadeia de suprimento recebendo mensagens por EDI, XML ou WEB

- centros de integração que melhorem a visibilidade entre sistemas heterogêneos em múltiplas organizações

- deteção de exceções e alertas que indiquem quando a situação do sistema se desvie dos indicadores e fluxogramas definidos

3. Colaboração

A colaboração está fortemente entrelaçada com a visibilidade, e se refere à integração de recursos, informações e sistemas através da cadeia de suprimento. Podemos definir os seguintes níveis de colaboração:

- no primeiro nível, se realiza uma automação de transações através de comunicação eletrônica automática, reduzindo tempos, custos e erros humanos.

- no segundo nível, os dados de demanda, inventário e cronogramas são compartilhados, permitindo que os parceiros da cadeia de suprimento façam um planejamento melhor de suas atividades e processos.

- a colaboração real ocorre quando os parceiros realizam uma reengenharia dos processos e integração de sistemas que gera uma rede de colaboração rápida que responde de forma ágil às mudanças no ambiente.

4. Dados Analíticos

Medições e indicadores são críticos para a logística inteligente. Eles permitem um monitoramento em tempo real (ou quase-real) através de painéis, relatórios, score cards, ou consultas que levam a decisões melhores, orientação a objetivos, inteligência nas cadeias de suprimento e a um desempenho superior da rede.

A metodologia 6-sigma também pode ser usada na melhoria da qualidade dos processos logísticos.

Fonte: Autor, Luiz Paiva

It is time to consider a new Balanced Scorecard perspective.  The new perspective is focused on clean energy and the carbon footprint of a company.  The new perspective can be titled with any number of names including carbon footprint, green energy, or the environmental perspective.  As the green movement evolves, the reality of a world with limited resources presents an opportunity to create a perspective dedicated to this challenge. Organizations are being required by federal and local law or mandated to change the way business handles environmental concerns. 

Business can no longer operate in a vacuum concerning the overall impact on the environment. We are no longer Sampson facing Goliath as individuals facing environmental concerns.  We must work in concert with each other as a society to save resources and use energy in a manner that conserves.  Each business needs to operate being mindful of the environment much as Noah did when he saved the animals.  We are bound by decisions that have consequences across society.  Companies need to act in concert and measure progress in order to maximize and support public policy around environmental impact.  A focused through an environmental perspective would help to measure the actions of organizations.

A Balanced Scorecard environmental perspective would highlight the importance of these issues on business operations.  By monitoring, everything from carbon footprint to paper recycling, organizations have a vehicle to communicate environmental issues through the holistic manner of the Balanced Scorecard.  When incorporated into the Balanced Scorecard the perspective becomes a high-level visible measurement of the importance of the environment to the organization.   The news is full of stories about environmental change and organizations that help prevent negative change from affecting our world.  If this were measured at a company level, each business could include a discussion focused on the environmental impact of business decision.

Encouraging organizations to incorporate an aggressive and progressive response to environmental issues will become evident with an environmental perspective.  I would challenge Balanced Scorecard practitioners to focus more closely on the impact, of environmental concerns and business operations.  The Balanced Scorecard is an excellent management tool to manage environmental responsibility.

En la búsqueda del software ideal para la gestión y control de la empresa, y sobre todo orientado a la medición de la estrategia, hemos encontrado, gracias a la recomendación de un experto en análisis financiero, un sistema de control basado en la metodología del Balanced Scorecard, o el llamado Cuadro de Mando Integral. Este sistema, tras una fuerte consultoría estratégica que identifique no solo los objetivos estratégicos y tácticos de la empresa, permite al empresario medir, controlar y dirigir su empresa de una forma diferente. La cabina de control (cockpit en inglés) es un interfaz gráfico de comunicación y recordatorio de objetivos estratégicos enfrentado con los Ratios Esenciales de la empresa (KPI- Key Performance indicators) que reflejan el estado de situación de la empresa.

Pero no como convencionalmente los financieros lo ha comunicado, con un lenguaje orientado al balance y al control de las “masas patrimoniales” o a las mediciones financieras que por costumbre definen el rendimiento y valoración de la empresa (liquidez, solvencia, acidez) todas esas variables que parecen más bien estados de la masa y menos estado de la empresa. Los KPI de la estrategia transmiten información y no sólo un dato. Indican cercanía al objetivo, la conducta del valor a medir, y su comportamiento frente al objetivo. Decir que la facturación de la empresa es de 3.1416 no dice más que el hecho de que la paridad de la moneda entre el yen y el austral es de algún “numerajo” que no pienso calcular. Sin embargo, si decirnos que el año anterior se logró un 25% de crecimiento y que el objetivo de este año es de un 15% de aumento de lo anticipado, pues llegamos a la conclusión de que algo está pasando. Sin embargo no todos los ratios son de tipo comparativo o de tipo acumulativo.

De forma más convencional, pueden estar orientados a una expectativa o al deseo del empresario, o pueden ser a una simple comparación de estimado del mercado o de la competencia.

De esta forma, el ratio, al final, transmite y recuerda la estrategia al empresario y valora la efectividad en la ejecución del plan de acción o de la táctica. Pero,… y siempre hay un “pero”, con un Excel a mano, creatividad y mucho tiempo libre, los financieros encuentran medidas tan complejas, a través de la composición de datos, llevando al tablero de control a una confusa mezcla de gráficos, colorines, relojitos, termómetros y nombres en inglés de cosas que al final el empresario no puede controlar.

El KPI además de que debe de ser elocuente, debe reflejar la estrategia en forma cuantitativa: debe reflejar con qué parte de la empresa le agrega valor (cliente, empresa, empresario o sociedad) y sobre todo debe de ser un dato modificable a través de las decisiones.

Es bonito poner en un cuadro de mando el valor del euro como referencia para la toma de decisiones, y su comportamiento en el tiempo, sacado de Bloomberg. Sin embargo, su representación no deja de ser un dato, y no información, y menos un elemento del cuadro de mando.. pues como su nombre lo dice, el cuadro de mando o tablero de control, implican cambio a través de la decisión. Supongamos que al hacer el CMI identificamos un dato vital que refleja el tiempo de decisión de un cliente para comprar un producto o servicio, como dato promedio en el tiempo. Si el empresario no tiene un contacto con el cliente y no puede influir en la modificar la conducta del cliente de alguna forma… el dato carecen de importancia o es más bien informativo, pero no mide la estrategia.

La información contenida en el CMI refleja la estrategia del empresario y deben siempre ser datos que puedan ser afectados por decisiones del mismo, de lo contrario sólo serán un acumulativo de buenas o malas noticias, donde nada podemos hacer.

Yago Amat.

Kittiya Yongvanich, Ramkhamhaeng University, Bangkok, Thailand

James Guthrie, Discipline of Accounting, The University of Sydney, Sydney, Australia

Acknowledgements

The authors appreciate the comments of the University of Sydney research team, including Fiona Crawford and Sara Haddad, and acknowledge two referees for their helpful comments. This research was funded by the Commission on Higher Education and the Thailand Research Fund, whose support is gratefully acknowledged.

Abstract

Purpose – The purpose of this paper is to provide a descriptive analysis of Balanced Scorecard (BSC) usage among companies on the Thai stock exchange; and to assess the performance effects of this BSC use.
Design/methodology/approach – Sample organisations were surveyed through a questionnaire and the results used to examine whether the extent and manner of BSC use are significantly associated with satisfaction with financial performance and whether higher types of BSC usage result in higher satisfaction with financial performance.
Findings – Around 33 per cent of companies that had implemented the BSC did not employ cause-and-effect relationships. The study found no significant association between types of BSC usage and company size. There were no significant differences in satisfaction and perceived benefits gained from using different types of BSC. Also, the extent of BSC use is not significantly different between different types of BSC usage. Further, the extent and manner of BSC use are not significantly associated with all performance variables.
Research limitations/implications – Owing to the small sample size, the results from the study make generalisation difficult. Future research may replicate the study using a larger sample size, testing financial performance implications with stock returns.
Originality/value – The paper examines whether BSC use actually results in the claimed benefits and positive performance effects.

Journal: Pacific Accounting Review, Volume: 21, Number: 2, Year: 2009, pp: 132-149

1. Introduction

Since its introduction in 1992, the Balanced Scorecard (BSC) has increasingly attracted interest among practitioners and academics. A variety of benefits, both non-financial and financial, are claimed to result from BSC use. For example, Kaplan and Norton (1996a) stated that the BSC can be used to: clarify and gain consensus about strategy; communicate strategy throughout the organisation; align departmental and personal goals to the strategy; link strategic objectives to long-term targets and annual budgets; identify and align strategic initiatives; perform periodic and systematic strategic reviews; and obtain feedback to learn about and improve strategy. Furthermore, these benefits are expected to ultimately result in improved financial outcomes. Several surveys report that the BSC is widely used in large companies in the USA and throughout Europe (Speckbacher et al., 2003; Marr, 2001; Silk, 1998; Williams, 2001). Despite widespread adoption of the BSC, little research has been done on the implementation and performance effects of the BSC concept (Davis and Albright, 2004, p. 136; Ittner and Larcker, 1998, pp. 205, 221; Malmi, 2001, p. 208; Neely et al., 2004).

Generally, implementation of new management technologies does not always achieve the claimed benefits. For example, Ittner et al.’s (1997) study of a BSC compensation system in retail branch banks found no evidence that the scorecard approach enhanced branch managers’ understanding of business goals, plans for meeting these goals, or connections between the managers’ job and business objectives. Ittner et al. (2000) did not find evidence that a large bank’s BSC promoted increased strategic awareness. Malina and Selto (2001) indicated that more empirical evidence would be useful as most of the BSC literature is either normative prescription or uncritical reports of BSC “successes”. Further, those examining performance effects reported mixed results. Therefore, it is important to investigate whether BSC use actually results in the claimed benefits and positive performance effects.

The performance effects examined in this study include both self-reported satisfaction and actual financial performance. The BSC effect on satisfaction was examined in this study in order to compare results with prior studies that examined the BSC effect on satisfaction. However, self-reported satisfaction may not represent actual impacts of the BSC on financial performance. Therefore, this paper also investigates the BSC effect on actual financial performance. Findings in prior research have suggested that the extent and manner of BSC use may have different effects on company performance (see Hoque and James, 2000; Ittner et al., 2003; Malmi, 2001; Speckbacher et al., 2003). Most of the prior research examined is only one of two dimensions of BSC use; an exception is Braam and Nijssen (2004).

This study, therefore, examined the extent and manner of BSC usage among companies listed on the Stock Exchange of Thailand (SET) and the performance effects of this usage. Specifically, the objectives of the study were twofold:

1. to provide a descriptive analysis of the extent and manner of BSC usage among SET-listed companies; and
2. to assess the performance effects of the BSC use.

In order to achieve the first objective, the study developed a framework for classifying BSC usage into three different types, and this was used to examine the spread, implementation, extent and manner of BSC use in the sample companies, as well as expected benefits, perceived benefits gained, and satisfaction using a larger sample. To achieve the second objective, the study examined whether the extent and manner of BSC use are significantly associated with satisfaction or financial performance and whether higher types of BSC usage (the BSC usage that is consistent with Kaplan and Norton (1996a, 2001a) results in higher satisfaction or financial performance. Investigating BSC usage in Thailand is interesting because, so far, there is little published evidence on BSC usage in Thailand or in developing countries internationally. Additionally, even though the sample was comprised of listed companies, the sizes of the companies are relatively small compared to listed companies in developed nations. Therefore, this study provides evidence on BSC usage and performance implications among companies that are relatively smaller than those examined in prior research.

This study makes the following four contributions:

1. it proposes a framework for examination of different types of BSC usage in practice;
2. it provides a descriptive analysis of BSC implementation among SET-listed companies;
3. it assesses relationships between different types of BSC usage and performance variables, that is, satisfaction and financial performance; and
4. it adds to the body of knowledge in this area by improving the BSC instrument used in prior studies (e.g. Hoque and James, 2000; Speckbacher et al., 2003).

This paper proceeds as follows. Section two reviews related prior research and develops a classification of BSC uses and hypotheses. Section three describes the methodology of this study discussing data collection and measurements of variables. Section four provides a discussion of the results. The final section offers some concluding remarks and ideas for possible future research directions.

2. Literature review and hypotheses development

The initial development of the BSC simply comprised key performance indicators (KPI), i.e. a set of financial and non-financial measures for tracking short-term and long-term performance (Kaplan and Norton, 1992; Kaplan and Norton, 1996a). In 1996, the BSC was developed beyond the early “KPI version” to a strategy communication and implementation tool with an emphasis on linking strategy to operations via cause-and-effect relationships between “perspectives” and “measures” (Kaplan and Norton, 1996b). More recently it has been described as a management strategy, with an emphasis on its roles in driving change (Kaplan and Norton, 2001a). The focus of the earlier BSC literature was on how to implement the BSC and lessons learnt. Specifically, those studies looked to implementation processes with primary focuses on the architecture of BSC design and implementation guidelines (e.g. Ahn, 2001; Butler et al., 1997; Letza, 1996; Lohman et al., 2004; Papalexandris et al., 2004; Papalexandris et al., 2005) and the experience of implementation (e.g. Ahn, 2001; Kaplan and Norton, 2001b, 2001c; Malmi, 2001; Mooraj et al., 1999; Papalexandris et al., 2004). The conceptual development has led to various interpretations and uses of BSCs (Braam and Nijssen, 2004). The methodological approaches in these case studies of BSC implementation vary significantly in the sequence, content and number of implementation steps and phases (Papalexandris et al., 2005). Furthermore, Chenhall (2005) indicated that evidence on the adoption of strategic performance measurement, particularly the BSC, has been mainly anecdotal with little survey work to confirm the adoption and effects on desired organizational outcomes. Prior studies have called for more research on the implementation and performance effects of the BSC (Braam and Nijssen, 2004; Ittner and Larcker, 1998; 2001; Ittner et al., 2003; Malina and Selto, 2001).

Recently, the focus of the literature has moved away from implementation processes (as there is now evidence that the BSC has been adopted widely), to the benefits resulting from BSC implementation, particularly impacts on financial performance. However, prior studies examining the financial performance effects of the BSC reported mixed findings, which may be the result of different measurements of performance and the type of BSC usage employed (Braam and Nijssen, 2004). Self-reported satisfaction with the BSC, perceived organisational performance, and actual accounting and stock market performance are performance variables used variously in prior research examining performance effects of the BSC.

Hoque and James (2000) and Ittner et al. (2003) examined the association between the type of BSC usage and performance. Hoque and James (2000) measured BSC usage by the extent to which measures in the four perspectives of the BSC were used to assess the organisation’s performance. Ittner et al. (2003) coded BSC usage as yes or no, using a six-point scale, where 1=not considered, 2=implemented and abandoned, 3=considering, 4=implementing now, 5=used, 6=used extensively. Further work also shows that there is variation in the way the BSC is interpreted and used (Braam and Nijssen, 2004; Speckbacher et al., 2003). Notably, different implementation and usages of the BSC may have different effects on company performance (Malmi, 2001; Speckbacher et al., 2003). Further, Sandt et al. (2001) have suggested that future research should analyse different forms the BSC may take and examine their impact on managers’ satisfaction and performance. Some other studies (e.g. Davis and Albright, 2004; Malina and Selto, 2001; Malmi, 2001; Speckbacher et al., 2003) have considered the ways in which the BSC was used in their examination of BSC usage and its effect. Speckbacher et al. (2003) are notable for their proposed typology to analyse BSC usage and their analysis of spread, implementation, and benefits of the different types of BSC usage in German-speaking countries using a mail survey. However, they did not examine performance implications of each type of BSC used.

Based on the review above, we argue that it would be insufficient to consider either the extent or the manner of BSC use in assessing performance effects of the BSC, as both may affect performance. BSC usage should be measured along two dimensions – the extent and the manner of BSC use. Most prior research has examined only one of the two dimensions of BSC use, with the exception of Braam and Nijssen (2004). This study, therefore, investigates impacts of both the extent and manner of BSC use when examining performance effects of BSC usage. This study develops a classification of BSC usage and employs it in examining spread, implementation, the extent and manner of BSC use, expected benefits, user’s experiences, and satisfaction. In addition to providing a descriptive analysis of the implementation of the BSC in Thailand, this study also analyses the performance effects of the extent and manner of the BSC use. Additionally, and consistent with Ittner et al. (2003), performance was measured by both self-reported measurement satisfaction and actual financial outcomes (accounting returns).

Traditional financial measures and performance measurement practices have been seen to be inadequate for guiding decision making and evaluating firm performance for decades (e.g. General Electric in 1950 and the French Tableaux de Bord) (Banker et al., 2004; Canibano et al., 1999; DISR, 2001, p. 11; Ittner and Larcker, 1998; Kaplan and Norton, 2001b, 2001c; Leadbeater, 1999, p. 17; Malina and Selto, 2001). Since the early 1980s, various authors have called for greater reliance on non-financial measures for both decision making and performance evaluation (e.g. Dixon et al., 1990; Edvinsson and Malone, 1997; Johnson and Kaplan, 1987; Kaplan and Norton, 1992). To date, findings of research on economic benefits from the use of a diverse set of performance measures remain mixed (Ittner et al., 2003). Lingle and Schiemann (1996) and Hoque and James (2000) are studies that examined the relationship between the use of a diverse set of performance measures and their organisational performance implications. Both studies found positive organisational performance implications from the use of a diverse set of performance measures. However, others argue that the use of a diverse set of performance measures can have a negative effect on performance (e.g. Heneman et al., 1999; Schick et al., 1990). Choosing, analysing, and acting on the wrong non-financial measures can misdirect investment and worsen financial performance (Ittner and Larcker, 2003). The BSC provides managers with a structure for understanding business and its many interrelationships, which leads to improved decision making and problem solving (Kaplan and Norton, 1992, p. 79). The use of BSC should, therefore, help managers analyse more appropriated financial measures. Also, the BSC can provide the basis for setting local initiatives and promoting knowledge and learning and make strategy everyone’s everyday job (Kaplan and Norton, 2001a). Therefore, it is logical that the use of BSC should improve financial performance.

However, some prior research has shown that the BSC may have positive impacts (e.g. Davis and Albright, 2004; Hoque and James, 2000; Malina and Selto, 2001; Malmi, 2001) while Ittner et al. (2003) found that BSC usage was associated with higher measurement system satisfaction, but not with economic performance. Successful BSC use requires the ownership and active involvement of the executive, which would result in emotional commitment to the strategy, to the scorecard as a communications device, and to the management processes (Kaplan and Norton, 2001a). Higher executives’ commitment should lead employees to embrace and use the BSC to a greater extent. This implies that the level of BSC success varies according to the commitment and thereby extent of BSC use. Based on these normative arguments and mixed findings in prior research, a greater extent of BSC use is expected to result in a higher level of satisfaction with the BSC and financial performance. It is hypothesised that:

H1. Organisational performance is positively associated with the extent to which the firm uses the BSC.

This study modifies Speckbacher et al.’s (2003) classification of three main types of BSC usage to highlight the distinction between single-loop and double-loop feedback processes (Argyris, 1977, 1991, 1993, 1994; Argyris and Schön, 1996). Accordingly the study distinguishes between: Type I BSC: a multi-dimensional framework for strategic performance measurement that combines financial and non-financial measures; Type II BSC: a Type I BSC that additionally describes strategy by using cause-and-effect relationships and also implements strategy by defining objectives, action plans, results and perhaps connecting incentives with BSC; and Type III BSC: a Type II BSC that also provides strategic feedback about whether the planned strategy is still appropriate in light of recent developments.

Hypotheses regarding performance implications of each of the BSC types are developed as follows. Type I BSC is expected to have a positive effect on performance but to a lesser extent than other types of BSC use. To the extent that they can be used as tools for communicating and implementing strategy, BSC Types II and III should have greater positive performance effects than Type I BSC. Type III BSC provides capacity for learning about the viability and validity of strategy (Kaplan and Norton, 1996a), and should result in more effective strategy than other types of BSC. Therefore, Type II BSC should have greater positive performance effects than Type I BSC, while Type III BSC should have greater positive performance effects than Type II BSC. Therefore, it is hypothesised that:

H2. Type II BSC will have a greater positive impact on organisational performance than type I BSC.

H3. Type III BSC will have a greater positive impact on organisational performance than type II BSC.

3. Research methods

This study examines BSC usage in Thailand among SET-listed companies using a mailed survey. This section comprises data collection, which discusses the sample selection, questionnaire development and survey procedure, and measurement of variables used.

Data collection

The sample companies were all SET-listed companies that have traded in the SET over the past three years. A survey package was mailed out to top management in February 2007. The survey package included a questionnaire with a personalised cover letter and a postage-paid, self-addressed envelope. The full questionnaire was developed[1] based on those used in prior research. The questionnaire was pilot tested with 50 Master of Business Administration students. Some changes were made to refine the design and clarify the meaning of some words. The personalised letter requested the addressee to participate in the survey by answering the questionnaire himself/herself or for another competent person to answer the questionnaire. Respondents were assured that their anonymity would be preserved. The procedure was undertaken to increase the response rate and the accuracy of the survey responses. A follow-up package was sent four weeks later.

Measurement of variables

This study assessed the performance implications of BSC usage by examining whether the extent and manner of BSC use were associated with:

• managers’ satisfaction with the BSC; and
• publicly available information on the company’s accounting return.

Stock market returns were not used in this study as they are deemed to reflect factors other than intrinsic value of the firms, particularly in such a small market in developing countries.

Extent of BSC use

The extent of BSC use was measured by asking respondents to what extent they agreed with each of the following questions:

1. Are senior executives actively involved in formulating objectives, measures, and targets on the scorecards and the cause-and-effect linkages on the strategy map?
2. Were the scorecards disseminated throughout the organization?
3. How did the scorecards provide the basis for setting local initiatives and promoting knowledge and learning?

Scales on these questions ranged from 1 (disagree strongly) to 5 (agree strongly). It is argued that the greater respondents agreed with those statements, the more the organisation was using the information on the scorecards. The extent of BSC use represents the average response to these three questions.

Types of BSC usage

The type of BSC usage was measured by asking respondents which of the following components existed in their company’s scorecards: strategic objectives or strategic measures; cause-and-effect relationships; targets or action plans; linkage with reward systems; linkage between strategy and the budgeting process, analytic and information systems; and a process for learning and adapting the strategy. The BSC that had only financial and non-financial measures grouped to perspectives was classified as Type I BSC. Prior research (e.g. Atkinson et al., 1997; Hoque and James, 2000; Norreklit, 2000) considered cause-and-effect relationships as a defining characteristic of the BSC (Speckbacher et al., 2003); and the BSC would be subsequently linked to reward systems and budgeting processes (Kaplan and Norton, 1996a, 2001a). Therefore, the Type I BSC that also employed the cause-and-effect relationships were classified as Type II BSC. Type II BSC may also contain strategic objectives and strategic measures, target or action plans or linkage with reward systems and budgeting processes. These are all elements of management processes that constitute a single-loop feedback process. Since analytic and information systems and processes for learning and adapting strategy are structures for double-loop learning, the Type II BSC that also had linkages between strategy and analytic and information systems, or processes for learning and adapting the strategy were classified as Type III BSC. These criteria are summarised in Table I.

Satisfaction

The satisfaction measure was included to allow comparisons of the results to other studies assessing performance implications using satisfaction as a dependent variable (e.g. Sandt et al., 2001; Ittner et al., 2003). Three questions were used to measure a company’s satisfaction with the BSC:

1. how well the BSC meets expectations (1=has not met expectations to 5=exceeded expectations);
2. how well the BSC compares to the respondent’s concept of an ‘ideal’ system (1=not at all ideal to 5=very close to ideal); and
3. overall satisfaction with the BSC (1=not at all satisfied to 5=completely satisfied).

These three questions were derived and modified from three questions used to measure a company’s satisfaction with its measurement system in Ittner et al. (2003). The satisfaction construct represents the average response to these three questions.

Actual financial performance

This study also assessed performance effects using actual financial performance. Actual financial performance was measured by sales growth over a three-year period, return on assets and net profit margin. The data were obtained from SETSMART, the SET database. These variables were consistent with the strategic themes for the financial perspective outlined in Kaplan and Norton (1996a). The accounting performance measures were measured contemporaneously with the date of the survey. They covered the period 2004-2006.

Exogenous factors

Consistent with Ittner et al. (2003), to control for other exogenous factors that affected changes in financial performance, an index representing the median performance of other companies in the same sector was included in the model. Other variables included in the model to control for other potential factors that can affect accounting return were size and growth opportunities. Size was measured by the log of assets (denoted SIZE) and the ratio of the book value of assets to the market value of equity (denoted BTOM), an inverse measure of growth opportunities in the models.

The models used to test the hypotheses in this study are as follows: Equation 1 where:

T0 =a dummy variable used in identifying types of BSC usage;

T1 =a dummy variable used in identifying types of BSC usage;

Extent =extent of BSC use;

SLGrowth3 =annualised sales growth over a three-year period;

SECSLGrowth3 =the median annualized sales growth of other companies in the same sector;

ROA =return on assets;

SECROA =the median return on assets of other companies in the same sector;

NPMargin =net profit margin;

SECNPMargin =the median net profit margin of other companies in the same sector;

SIZE =the log of assets; and

BTOM =the ratio of the book to market value of equity (an inverse measure of growth opportunities)

SATISF =satisfaction.

In total, 80 of the 362 questionnaires sent out in the first mailing were returned. A second mailing resulted in a further 46 returned questionnaires. The response rate, therefore, was 34.8 per cent. Three of the 126 respondents failed to complete the full questionnaire. The adjusted usable response rate, therefore, is 34 per cent.

To test for the existence of a possible non-response bias[2], Mann-Whitney tests for two independent samples were undertaken by assessing first and second mailing returns. No statistically significant differences in the median scores on company size measuring total assets and respondents’ self-rated BSC understanding score between the first and second mailing returns were noted, suggesting the absence of a non-response bias. Around 40 per cent of responding companies had more than 1,000 employees, with three companies leaving the question unanswered and the remaining companies having less than 1,000 employees. The majority of respondents worked in the area of general management, human resources management, and finance or accounting. Most of them had worked with the company for at least two years, with around 9.8 per cent of all respondents working in the company for less than two years.

5. Results

State of implementation

From Table II, approximately 17 per cent of the sample companies decided not to implement the BSC. The three most cited reasons for deciding not to implement were other comparable tools already in use; no essential advantages expected; and expected benefit is too unsure. Around 29 per cent were in the process of studying the BSC and no concrete steps had been taken. A total of 13 percent had already taken the first step to introducing the BSC or had already started a first BSC project. Around 40 per cent had implemented the BSC either in individual business units or for the entire company. Finally, two companies, or less than 2 per cent of the sample companies, had implemented and abandoned the BSC, citing reasons such as other comparable tools were in use; a lack of support from management and foreign parent company; and information systems unable to support the BSC.

Content

Of the 49 companies that had implemented the BSC, either in individual business units or extensively for the entire company, 41 companies started implementing the BSC after 2002. The remaining eight companies implemented the BSC between 1996 and 2001. No companies implemented it before 1996. These 49 companies were asked about their scorecards in detail.

Characteristics

To identify what type of BSC was used by the sample companies, this study also asked about how the most advanced scorecard had been used in each company. From Table III it can be observed that the BSC had been used among the sample companies primarily to identify strategic objectives and measures; to determine targets and action plans; and as a link to the organisation’s reward system.

Five companies did not identify strategic objectives or strategic measures. This differs from Speckbacher et al.’s (2003) results, in which all BSC analysed contained either strategic measures or strategic objectives. Two of the five companies stated their reasons for this as not having a clear enough strategic plan to derive strategic objectives or strategic measures, and that the BSC is used at employee level for human resources management purposes. Interestingly, although the BSC literature has indicated that cause-and-effect relationships were a defining characteristic of the BSC concept (Hoque and James, 2000; Kaplan and Norton, 1996a; 2001a; Norreklit, 2000; Malmi, 2001), not all companies in the sample which had claimed to use the BSC had established them. In fact, 16 companies had not employed the cause-and-effect relationships. Most of those that had not established cause-and-effect relationships (i.e. Type I BSC) had been using the BSC for more than two years[3]. The reasons for this provided by two companies were: that they were in the initial stages of using the BSC; and that they found it difficult and time-consuming to establish cause-and-effect relationships. This adds to the findings that there is little use of the cause-and-effect relationships in practice (see also, Ittner et al., 2003; Malina and Selto, 2001; Malmi, 2001; Speckbacher et al., 2003).

Only one company did not use targets and action plans, and no reason for this was provided. Two companies provided reasons for not linking the BSC to the organisation’s reward system: there was no statistical data; and the information system could not support it. Reasons for not linking the BSC to the budgeting process and not using the BSC as the bases for evaluating potential investment were: there was no new investment; and they were in the initial stages of using the BSC. For the rest, the reasons provided for not having them were: they were not ready to do it but planned to do so in the future; and they were in the initial stages of using the BSC.

From the characteristics of the BSC used in the sample companies surveyed, their scorecards can be classified using the criteria specified earlier. The results are summarised in Table IV.

As indicated in Table IV, 16 companies or around 33 per cent of those claiming to have used the BSC were classified as Type I BSC. Of the remaining 33 companies, only five companies did not have either an analytic and information system designed to support strategy review or a process for learning and adapting the strategy. That is, the majority of the responding companies had used the BSC in a way consistent with Kaplan and Norton (1996a, 1996b, 2001a).

A test of whether the types of BSC used are associated with company size, measured by total assets, was conducted using the Kruskal-Wallis test. No significant results were found. This is consistent with Speckbacher et al. (2003), who also found no significant support for the hypothesis that size discriminates between different BSC types.

Expected benefits

The BSC literature claims a variety of benefits of BSC implementation (Speckbacher et al., 2003). The questionnaire used in this study contained a list of benefits claimed by Kaplan and Norton (1996a, 2001a). As with Speckbacher et al. (2003), respondents were asked:

• to select all relevant benefits expected; and
• to tick the three most important benefits expected.

There was also an option to name additional benefits not contained in the list. The results are shown in Table V.

From Table V, all the benefits of the BSC claimed by Kaplan and Norton (1996a, 2001a) were rated as relevant expected benefits to be gained from the implementation of the BSC by most of the sample companies. Only communicating strategy and focusing resources on strategy were rated as expected benefits to a lesser extent. All the benefits of BSC claimed by Kaplan and Norton (1996a, 2001a) were rated as expected to be gained from the implementation of the BSC by most of the sample companies, with improved alignment of departmental and personal goals to the strategy ranking the highest. Only communicating strategy and focusing resources on strategy were rated to a lesser extent. Other benefits specified were creating a culture for learning; improved relationships between management and employees; and employees became more active and systematically set priorities for their work.

Satisfaction

Satisfaction was measured using the three questions used in Ittner et al. (2003, p. 726). Actual responses to all three questions ranged from 2 to 5. Mean scores and standard deviation are reported in Table VI.

A test of whether the satisfaction scores from different types of BSC were significantly different from one another was carried out using the Kruskal-Wallis test. No significant results were found.

Extent of BSC use within the company

The extent of BSC use within the company was measured by three questions. The means and standard deviation of each question are shown in Table VII. A test of whether the extent of use is significantly different between different types of BSC using the Kruskal-Wallis test was conducted. No significant difference was found.

Performance test

The following sub-section reports on the testing for the three hypotheses and results shown in Tables VIII and IX. The following regression models were run to test the relationship between the dependent and independent variables as stated in H1, H2, and H3. The results are shown in Table VIII: Equation 2 Tests of multicolinearity via tolerance and variance inflation factor (VIF) indicate that multicolinearity does not pose a problem in interpreting these results. The extent and manner of BSC use are not significantly associated with satisfaction and all financial performance variables. Taken as a whole, these results do not support the hypothesis that the use of the BSC, regardless of the manner and extent of BSC used, impacts satisfaction and financial performance.

Performance tests in companies that have used the BSC for at least four years

The preceding tests were conducted on all data received. No distinction was made between those received from companies that had been using the BSC for some time and those who had recently implemented the BSC. If it takes some time before the financial impacts of using the BSC can be observed, inclusion of data received from those that had recently implemented the BSC may have understated the financial impact. Consistently, it is also more interesting to perform the test using satisfaction measures obtained from those companies that had been using the BSC for some time. The preceding performance tests were repeated using 27 companies that had been using the BSC for at least four years. Performance tests on companies that had been using the BSC for at least four years also yielded similar results. The results are shown in Table IX.

From Table IX, the results from performance tests conducted on the sub-sample of companies using the BSC for at least four years were similar to those using the entire sample. The extent and manner of BSC use were not significantly associated with satisfaction and all performance variables, except that a significant association between Type I BSC and sales growth over a three-year period was found. Taken as a whole, these results also do not support the hypothesis that the use of the BSC, regardless of the manner and the extent of BSC use, impacts satisfaction and financial performance.

6. Conclusions and limitations

Examining the manner and extent of BSC use, this study provides evidence on BSC usage and performance effects among listed companies in Thailand. It surveyed top management of all SET-listed companies about the BSC practices in their companies. Completed questionnaires were returned from 123 companies, yielding a response rate of around 34 per cent. Of these companies, 15 and 34 companies respectively had implemented the BSC in individual business units and extensively for entire companies.

The results of this study indicate that most companies in Thailand have used the BSC to obtain the benefits Kaplan and Norton (1996a, 2001a) suggested. Although cause-and-effect relationships were deemed to be a defining characteristic of the BSC concept in the BSC literature (Hoque and James, 2000; Kaplan and Norton, 1996a; 2001a; Norreklit, 2000, Malmi, 2001), around 33 per cent of companies that had implemented the BSC did not employ cause-and-effect relationships. Consistent with Speckbacher et al. (2003), this study found no significant association between types of BSC usage and company size.

All the benefits of BSC claimed by Kaplan and Norton (1996a; 2001a) were rated as benefits expected to be gained from the implementation of the BSC by most of the sample companies. Only communicating strategy and focusing resources on strategy were rated to a lesser extent. When asked about the three most important benefits expected to be gained from the implementation of the BSC, the companies ranked improved alignment of departmental and personal goals to the strategy the highest. Analysis of the relationship between the following variables: perceived benefits gained; satisfaction; and the extent of BSC use and types of BSC usage was conducted. The results show that there are no significant differences in perceived benefits gained and satisfaction from using different types of BSC. Also, the extent of BSC use was not significantly different between different types of BSC usage.

Performance tests conducted on the entire sample and sub-sample of companies that had used the BSC for at least four years showed that the extent and manner of BSC use are not significantly associated with all performance variables. It is therefore likely that superior performance results from a variety of factors. Therefore, implementation of the BSC does not automatically result in superior financial performance. The results of this study highlight the importance of other factors and they can be investigated using field research. The BSC may simply be a tool for organising data for analysis, but its differences lies in, although is not limited to, good management skills that make great use of data provided in the single- and double-loop feedback processes. However, owing to its small sample size, generalising the results in this study must be exercised with care. Future research may replicate this study using a larger sample and test financial performance implications with stock returns.

Equation 1

Equation 2

Table IClassification of BSC

Table IIState of BSC implementation

Table IIICharacteristics

Table IVBSC types

Table VBenefits expected to be gained from using the BSC

Table VISatisfaction

Table VIIExtent of BSC use within the company

Table VIIIAssociation between performance and the extent and types of BSC use

Table IXAssociation between performance and the extent and types of BSC use in the sub-sample of companies using the BSC for at least four years

Notes

1. Available from the authors.

2. Non-response bias results from those individuals who chose not to participate in the mail survey having very different profiles from those who responded (

   Malhotra and Peterson, 2006).

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Further Reading

Chenhall, R.H., Langfield-Smith, K. (1998), "The relationship between strategic priorities, management techniques and management accounting: an empirical investigation using a systems approach", Accounting, Organizations and Society, Vol. 23 No.3, pp.243-64.

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Kaplan, R.S. (1983), "Measuring manufacturing performance: a new challenge for managerial accounting research", The Accounting Review, Vol. 58 pp.686-705.

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Corresponding author

James Guthrie can be contacted at: j.guthrie@econ.usyd.edu.au

BMS is not a term for another best practice. There are two points to be clarified. First, BMS is not a registered trademark such as 6 Sigma, TQM, ISO or Balanced Scorecard. It is a general term like QMS. Second, Balanced Scorecard, ironically, can be classified as a primitive example of a BMS operating system. See outline below.

BMS is a high level management system evolved from QMS through a natural selection process; the role of the quality function has evolved from control of product to specification, to process control and reduction of variation, to development and implementation of a process based QMS (designed to achieve and sustain continual improvement and customer satisfaction), to a BMS with a scope extending beyond product/service quality to entreprise excellence. “An entreprise in this context may be described as an entity, which is comprised of resources organized into functions and processes and employs technology (a combination of product and process technology), to provide goods or services of value to the customer.”

This evolution should directly engage all entreprise functions and processes in the BMS, including human resource management, sales and marketing, project management, design and process engineering, supply chain management, strategic planning and data processing, with the quality function serving a facilitative role. The QMS/BMS requires methods of process control, problem solving and quantitative analysis be effectively applied to these processes and functional areas.

“While the resources (people, equipment, facilities and energy) engaged in these processes may be organized into arbitrarily designated functions or departments for administrative purposes, the BMS approach recognizes all these elements exist for a sole purpose; to support, provision and enhance the value generating processes.” A recapitulation:

• Quality, as a management system objective, is entreprise excellence
• All functions and processes should be engaged in the controlling and improving processes
• All resources across the functions should be engaged in the value generating processes

The next questions are ‘How then can a good shared level of understanding be achieved and sustained across the functions and processes?’ and ‘How can the quality function facilitate?’. (… to be continued)

How true! However Professor Drucker forgot to tell people that the “It” part was as important as the “Measure”.

What I have observed is that organizations are so mesmerised by the concept of Key Performance Indicators (KPIs) that they forget what it is that they are measuring – the Key Result Areas or Outputs. Top management talks about the importance of measurement and identifying KPIs, but doesn’t actually identify the specific areas of accountability of their various business units and of individuals. The ‘tail wags the dog’.

For goodness sake, work out what needs to be measured first (KRAs), and then work out how it will be measured (KPIs). If you fixate on KPIs then you will end up focusing on short-term results to get the targets met and miss the importance of having a longer-term focus for the health of the organization. The New Zealand Government fell into the trap of fixating on KPIs in the late ‘80s and only realised that they were concentrating on measuring the effectiveness of delivering Outputs rather than delivering Outcomes to the people. In the private sector a manager will fixate on targets and forget that Customer Relationship will be adversely impacted if a salesperson goes for short-term sales at the expense of Customer Satisfaction. The Balanced Scorecard is just that, “Balanced” and people conveniently forget that in their drive for results.

OK, so the first thing is get your KRAs – your Outputs – identified before you try and work out the measures, but when you do get to measures there are five important things to remember. Call them the Best Practice of setting KPIs. They are:

 Focus on a Results Orientation
Draft your KPIs to give a greater focus on products, outcomes & results Vs. procedures & activities.

 Ensure Validity & Reliability
Increase the use of Multi-raters + Multi-methodologies (Qualitative + Quantitative) so that when you come to assess performance against an Output (KRA) you have a ‘balanced’ perspective
 Set Lag + Lead Indicators
Set KPIs to move towards those that allow you to highlight problems while there is still time to take corrective action and to re-align initiatives to plans.
 Be Cost Efficient in your Measurement
Do away with glamorous indicators that involve more expenditure in time and dollars to gather the information, than the benefits received. Keep the number of indicators to a manageable level, the minimum rather than a bucket full!
 Make a Strong Linkage between Performance Achievement , Compensation, and Career Advancement
Make sure that the KPIs that you set measure contribution to the overall corporate strategic goals and objectives and business unit goals and objectives. Don’t set KPIs that are irrelevant because you want people to focus on achieving things that really matter and what they will be rewarded for, tangibly or intangibly. Individuals who perform well should be rewarded according to the contribution that they make to the effective delivery of the Outputs of the organisation.

The issue of performance measurement in both the private and public sectors has gained more importance in recent years, but those responsible for ensuring that what is measured and how it should be measured have taken their “eye off the ball” and allowed irrelevancies to creep in or, they may be so enamoured of the number of KPIs that they have forgotten that it is what is measured – the actual quality and quantity and timeliness of the Output/Product/Service that is delivered to the customer – that is important, and usually very few measures are needed to give this information.

For information on measurement in government and the private sector follow the links:

www.bt.com.bn/en/home-news/2009/10/02/consultancy-agency-aids-achieving-vision-2035
www.bt.com.bn/en/home-news/2009/10/02/changes-cannot-be-achieved-overnight

Contact me at alanbarker@scsasiapacific.com

This article addresses the shortcomings in balanced scorecard models through the integration of perspectives, metrics, and terminology.

The last twenty years have witnessed both an increased sophistication and application of measurement systems within organizations. One of the earliest of these new models was developed by Lynch and Cross, at Wang Corporation in the mid 1980s. Faced with the reality that traditional standard cost-based measurement models could reverse, even eradicate, the improvements gained from new management methods such as just-in-time manufacturing, Lynch and Cross set out on a path to develop a new approach to performance management – the “balanced scorecard.”1

In its early stages of development, the emphasis of the balanced scorecard approach was on integrating financial and nonfinancial measurements.2 Specifically, the concern focused on the need to have the financial metrics provide the same “signal” of performance as the nonfinancial metrics. If cycle time for a product was reduced, reducing the total labor hours required to meet a monthly production target, it was important that the accounting system not issue an “unfavorable” absorption variance. The result of Lynch and Cross’ work was the recognition that the continuous improvement model would require a shift away from engineered standards to those based on a rolling average of actual performance and incorporating trend reporting.3

By 1996, when Kaplan and Norton introduced their version of the balanced scorecard,4 there was recognition across the field that new management systems required new measurement methods and mentalities. This is where the agreement stopped. For while some models, such as that proposed by Kaplan and Norton, emphasized the need to tie measurements to a well-developed strategy resulting in a “top down” model of measurement and control, Lynch and Cross and others argued for the need to use a “bottom-up” methodology. To these experts, the goal was to create measurements that reflected strategy but emphasized operational performance.

Whether “top-down” or “bottom-up” in nature, these initiatives proved lacking in several ways:

* The models often proved to be a poor fit for small and service organizations. In the former case, the fatal flaw in the balanced scorecard (BSC) approach was the explicit reliance on a well-developed corporate strategy for successful implementation. There is significant empirical proof that a defined strategy is not a given for a small business.5

* They failed to explicitly incorporate value creation in their system of metrics. While the customer domain was recognized as important, no direct external measure of the firm’s performance in the customer’s eyes was incorporated.

* They failed to explicitly define their linkages to other key concepts in performance measurement, such as critical success factors (CSFs) and key performance indicators (KPIs). This oversight unnecessarily created a perception that the BSC was unique, or divorced from, these prior concepts.6

* They did not explicitly tie in performance rewards to the overall measurement model. Since it has long been recognized that “you get what you measure and reward,” this oversight created unsustainable models that often fell into disuse as soon as the “Hawthorne effect” evaporated.

In the pages that follow these shortcomings in the BSC models will be addressed through the integration of perspectives, metrics, and terminology.

The language of measurement

Measurements have played a vital role in the development of controls systems since the early work by Anthony and others. In 1964, in a seminal work in management control, edited by Bonini et al., it was noted that:7

Every organization is a control system. Each has a direction and objectives, whether explicit or implied.8

In fact, many articles in Bonini’s edition made and remade the point that, by definition, to use the term “organization” implies some form of management control, whether the focus is results, action, or personnel-based.9 Peter Drucker’s article in this same monograph is perhaps the most memorable. He carefully unfolds an argument, which, simply stated, notes that more “controls” do not equate to more “control.” Noting the disparity in meaning, he comments:10

Controls deal with facts, that is, the events of the past. Control deals with expectations, that is, with the future. Controls are analytical and operational, concerned with what was and what is. Control is normative, concerned with what ought to be, with significance rather than meaning.

Continuing with this logic, Drucker suggests that there are four characteristics of controls in business organizations:11

1. In business. ..measurement. ..is subjective and necessity-biased. It changes both the event and the observer if it does not altogether create his perceptions.

2. Because controls have such an impact it is vitally important that we select the right ones. To enable controls to give right vision and to become the ground for effective action, the measurements must also be appropriate.

3. Business is an institution of society. It exists to contribute to economy, society, and individual. In consequence, results in business exist only on the outside – in economy, in society, and with the customer. It is the customer only who creates a “profit.” Everything inside business only creates costs. ..Results are always entrepreneurial.

4. Finally… (B)usiness is the only system we know which has both quantifiable and non-quantifiable results and events, each equally important.

What do these principles suggest for the design of an effective control system? First and foremost it is critical to consider the behavioral impact of controls. Measurements that do not include some form of incentive to reinforce their importance become “invisible” – they fail to generate action in a reliable, sustainable way. Additionally, what is measured changes events – measurements shift attention to certain aspects of performance, overlooking others.

The entire focus of any balanced scorecard model (BSM) is to ensure that a wide range of events and outcomes are captured in ways useful to decision makers. That being said, an important question arises. ..which decision maker? And, equally important, must this decision maker be intimately familiar with a supposed organizational strategy in order to succeed? The answer to the first question helps us sort the BSMs into subgroups; the answer to the second question suggests that strategy may be as simple as the will of an organization and its members to survive to fight one more day.

Exhibit 1 Measurement Models

As suggested by Exhibit 1 , the extant literature on balanced scorecards can be viewed from a simple two-by-two decision perspective. Specifically, the models can be sorted based on whether they focus on external or internal indicators of success as well as whether they emphasize topdown or bottom-up decision loci.

It is also interesting to overlay some of the traditional language of control on these various models. The Norton-Kaplan model, for example, correlates most closely to the traditional concept of “critical success factors.” Rooted in strategy, CSFs target the critical dimensions of performance as defined by the firm’s strategy. Unfortunately, the same CSFs can often leave the customer perspective out of the equation, relying instead on internally defined market metrics that may or may not capture the valuecreation process. Similarly, Lynch and Cross’s balanced scorecard, which is one of the earliest such models,12 emphasizes internally defined metrics of performance but relies heavily on a “bottomup” or process focus in defining its measurements and their relationships.

As attention shifts to the external environment and its definition of success, we encounter both the traditional world of shareholder value measurements and the modern focus on externally driven performance. The DuPont economic valueadded (EVA) and market value-added (MVA) models of performance measurement place their emphasis on the factors that affect external stakeholders’ wealth. They are, by definition, topdown in nature as they deal with the gestalt, or the entirety of organizational performance as boiled down into a few key financial metrics. In sharp contrast, the modern world of lean management and process improvement, as embodied in the CAM-I Integrated Performance Management models, place the customer inside the organization in terms of calling the shots and defining success.

Exhibit 2 Comprehensive Performance Management System (CPMS)

Four measurement models, four unique perspectives on the concept of “success,” and four forms of control, seeming in juxtaposition and contrast rather than blending into one unified whole. If there are four unique models, then a manager must decide which set of assumptions and methods most adequately capture his or her world of work – which will most likely lead to sustainable superior performance. Each model and each proponent will forcefully argue that their approach will result in success, leaving the practitioner with little more to go on than sales pitches and “gut-fact”… entrepreneurial instinct and common sense.

Integrating perspectives: one model – many users

Are the various control models actually mutually exclusive, or can they be reduced to one unified model that keeps management’s eyes and those of the workers who create the value that customers expect on the same prize? As suggested by Exhibit 2, these seemingly different models of control can, in reality, be reduced to one overarching model. Building on the work of Lynch and Cross (1991) as well as the model developed by CAM-I, this integrated model combines traditional and modern perspectives on control, both top-down and bottom-up metrics, the internal versus external stakeholder perspective, and the relationship of locus of control (organizational role) with the types of incentives that companies have found to be most useful in creating sustainable performance improvements. It incorporates and remedies all of the identified weaknesses of each model and provides a comprehensive model of performance management that can be adapted to meet the needs of every organization.

Walking through the key components of the model, the traditional emphasis on vision, mission, strategy, critical success factors (CSF), and key performance indicators (KPI) can be found on the left side of the diagram. Each row of measurement detail incorporates a different level of analysis. Inserted between these traditional measurement constructs are references to Lynch/ Cross and Kaplan/ Norton models. Lynch and Cross built their model at the KPI level, emphasizing process improvements and metrics that would resonate with operational employees. Their four key dimensions of performance were quality, productivity, delivery, and cost. The diagram expands these 1980s-based concepts to include more recent work in customer- and market-value added measurements.

Kaplan and Norton emphasize metrics at the CSF level. With a clear linkage to strategy, it is easy to see that their concern is with providing a top-down set of metrics that can be deployed by top management to guide middle management decisions and actions, where their four dimensions of performance are innovation/growth, customer, financial, and operational. Once again, the external stakeholder perspective is ignored, creating a critical weakness in the competitive arena. If Drucker is right, this is a fatal flaw in that the only place an organization exists is “on the outside.” The model in Exhibit 2 adds value creation to the CSFs, by definition creating a linkage to external stakeholders.

On the right side of the diagram the emphasis shifts away from abstract measurement concepts to the organizational structure and related incentive systems. As illustrated, the integrated model can be broken into three “chunks” or subgroups, those controlled by top management, those under the purview of middle management, and those that only operational managers and employees can affect. As was the case in traditional models, these three divisions neatly coincide with strategy, critical success factors, and key performance indicators.

Added to the measurement and structure logic is a reflection of the most effective forms of incentives. As noted by Stonich:13

…(in many control systems) the necessary performance measurement and reward system that completes the control cycle is often missing… These measurements and rewards should reflect the firm’s strategy, but this is not enough, the system must also be consistent with or specifically designed to help modify certain of the firm’s internal characteristics.

In other words, the systems must be designed to ensure continual growth, innovation, and improvement. This need is reflected in Exhibit 2 by adding a growth objective in addition to the marketing and financial objectives that underlie the CAM-I Integrated Performance Measurement system. Arrow, writing one of his many seminal pieces on management and control systems in 1964, goes on to note:14

Control in the large is concerned with organizational issues and transfer pricing… Control in the small is a question of incentives… rewards should be determined by the amount of gain to the company and nothing else, otherwise it creates an incentive for distortion.

Based on the early works of the pioneers in organizational control, a failure to include incentives that complete the “control loop” can lead to dysfunctional consequences and poor performance. At the bottom of the organization, these incentives and metrics are best incorporated in a gain-sharing program where workers receive a bonus based on the overall improvement in process performance. By sharing in the gain, line workers are far less likely to become disenchanted with lean or six sigma initiatives.

As one works up the corporate ladder to middle management, it becomes important to capture key elements of the work performed by these individuals: 1) they need to be continuously improving their own skills, 2) they have to be able to effectively work with individuals from across the organization, and 3) they have to be reminded that only when the organization “wins” do they truly meet their goals. By delineating the key metrics used to make the translations between financial and operational goals, the comprehensive model in Exhibit 2 helps eliminate the need for the “omniscient” hinge manager who has in the past been critical to the linkage of strategic to operational goals.15 By tying incentives to corporate performance, at least some part of the middle manager’s compensation should become “pay at risk.”

Finally, at the top level of the organization, the emphasis shifts away from internal operations to attaining strategic objectives and meeting external stakeholder expectations. It is now critical that a major proportion of the executive’s compensation consist of “pay at risk” if Arrow’s concerns with control in the small organization are to be addressed. Recent events in the economy, such as the bankruptcies and bailouts of major financial and manufacturing organizations drive home the need to link top managers’ pay to the actual performance of the firm. How can a bonus be justified if the company paying it is about to fail? Closing the control loop at the top level of the organization has to explicitly include external stakeholder needs if it is to be effective.

Control in the very small: the case of small business

The Comprehensive Performance Management System (CPMS) is a complex model but one that can be easily translated into a more focused, less complex structure. Since Drucker has noted that all results are, by definition, entrepreneurial in nature,16 it is very important to consider the last item on the list of weaknesses identified in the beginning of this article: addressing the needs of small business.

One easy way to describe the translation of the model from large to small organizations would be to simply collapse the middle and top layers of the diagram, thereby recognizing that one individual, or a very small team of individuals, are dealing with all of these issues. It is the essence of effective entrepreneurialism that one individual develops a vision, a mode to reach that vision (strategies), and sets operational objectives for their employees. But if the model exists, why do small businesses consistently appear to lack the very rudiments of formal control? This is the point at which it is important to recognize the fact that controls can be described in terms of results, action, or personnel.

When most individuals speak of control, they are thinking of formal results controls or the highly specified procedures that make up action controls. In small business, however, this level of formality is seldom needed. The informal control system, shaped by the personality and drive of the entrepreneur, is all that is needed as long as there is mutual trust and respect. By definition, personnel control is implicit and informal, but that does not diminish in any way its power to shape behavior. In a small business, the only metrics needed by the entrepreneur are the key performance indicators that most clearly reflect the basic health and functioning of the organization. KPIs help the entrepreneur clearly define goals for the organization and provide the means to use the gain-sharing incentive systems that have proven so powerful in motivating operational performance.

Control in the small organization consequently becomes one and the same with an effective operational control system with complementary incentives to help individual workers make the decisions and take the actions that will lead to sustainable growth for the organization. Control in the small organization is one of perspective, not purpose, existence, not explicitness.

The service organization

The final, and increasingly major, organizational segment is the service organization. Exhibit 3 provides an example of the CPMS that is under development at the US Coast Guard. The purpose of the Coast Guard is that of all organizations – to serve external stakeholders. It differs, clearly, in that the work it performs takes place in the public arena and is both response- and mission-based. Its primary objectives are to sustain high levels of performance readiness and flawless mission deployment. Where a manufacturing company might focus on productivity and efficiency, the primary goals of the Coast Guard are effectiveness (lives saved) and fiscal responsibility – they attempt to do the most they can with the resources provided by the public. Recent events such as Hurricane Katrina suggest that it is an organization that excels at its primary missions.

Exhibit 3 US Coast Guard Performance Management – An Integrated View

That being said, where is the role for incentives in the Coast Guard model? It is in this area that response organizations differ from other entities. For the most part, individuals in these services know and pursue organizational objectives and goals because they are one and the same with their own personal morals. Add to this fact the very strong culture and interpersonal network that constantly reinforces the “right” behavior and you get an organization that runs not with formal controls but informal, personnel-based incentives. Unique yet typical of response organizations, if the CPMS appears to fit this setting it should logically be able to be adapted to any setting.

Communicating control

The objective of this discussion has been to address the four weaknesses of existing performance measurement systems by developing a comprehensive system that explicitly incorporates the many concerns of existing models and management systems to create one model of control that can be adapted to any organization, large or small, manufacturing or service-oriented. One final issue requires attention. Specifically, should such systems be “bottom-up” or “top-down” in nature?

To answer this final question it is important to think through the dynamics and purpose of control systems. Control systems exist first and foremost to direct behavior, secondly to evaluate and reward the results of these actions. Hence while all action needs to be directed to some end, the second element of control systems provides the answer to this controversial issue. Specifically, John Dearden notes that:17

Management control is a process by which a manager ascertains that his subordinates are efficiently and effectively accomplishing the organization’s objectives. ..Time span is the length of time that will elapse before a superior can evaluate the discretion used by a subordinate… Different jobs have different time spans. ..the longer the time span the more important the job.

Thinking through this comment, it becomes clear that control must be “bottom up” if it is to properly incorporate the “time span” of control. Only by adding this last dimension to the discussion can a final answer be obtained – control exists to direct behavior. Behavior is directed both through the establishment of performance expectations and the feedback that is given on actual performance. Performance measurement as control is present-oriented and upward-integrating. Without some vision of where performance is leading, any measure and any output is equally defensible. When planning is done, which is future-oriented, these organizational concerns must be addressed. As suggested by Drucker:18

“Controls” in a social institution. ..are both goal setting and value setting. They are not objective. ..They are of necessity moral. The only way to avoid this is to flood the executive with so many “controls” that the entire system becomes meaningless, becomes mere noise.

Using a top-down planning approach and a bottom-up control system helps unravel the final knot that has always existed in control systems – the control paradox. If individuals set their own goals (e.g., perform the planning activity) they will necessarily be focused not only on tomorrow’s plan but also on today’s capability – they have an incentive to low-ball their goals. If goals are set with some input but not directly by an individual it is possible to sidestep the paradox created when an individual is expected to truthfully report potential performance when doing so may lead to downstream performance shortfalls. Performance measures for planning purposes start at the top while measurements for control must, by definition, start from the bottom of the organization.

Interestingly, the development of this synthetic performance management model emphasizes the “old” writings of the pioneers of control – the final message implicit in this discussion: pioneers are often the ones who have to deal with both the short-term and long-term implications of their viewpoints and suggestions. The wisdom and experience they bring to a topic is never out of date. Rejecting anything “old” as useless indicates not only overconfidence, but also recklessness. Integrating past and current perspectives means more than bridging the gaps. It means spanning the life of the underlying theories and practices to ensure that learning moves forward, not backward. It means seeking out the most elegant of designs, ones that integrate theory with reality and realistically separate planning from control.

[Sidebar]

MEASUREMENTS THAT DO NOT INCLUDE SOME FORM OF INCENTIVE TO REINFORCE THEIR IMPORTANCE BECOME “INVISIBLE.”

[Sidebar]

CONTROL SYSTEMS MUST BE DESIGNED TO ENSURE CONTINUAL GROWTH, INNOVATION,AND IMPROVEMENT.

CONTROL IN THE SMALL ORGANIZATION IS ONE OF PERSPECTIVE, NOT PURPOSE. EXISTENCE, NOT EXPLICITNESS.

[Footnote]

NOTES

1 Lynch, R. and K. Cross, Measure Up! Yardsticks for Continuous Improvement, Cambridge, MA: Basil Blackwell, Inc., 1991.

2 McNair, C. J., R. Lynch and K. Cross, “Do Financial and Nonfinancial Measures Have to Agree?” Management Accounting, Nov. 1990: 28-36.

3 McNair, CJ. and W. Mosconi, “Measuring Performance in an Advanced Manufacturing Environment,” Management Accounting, July, 1987.

4 Kaplan, R. S. and D. P. Norton, The Balanced Scorecard, Boston: Harvard Business School Press, 1996.

5 Watts, T., V. Baard, and CJ. McNair, “Performance Models for Sustainable Small Business: A Literature Review,” Working paper, 2009.

6 McNair, CJ, Practices and Techniques: Tools and Techniques for Implementing Integrated Performance Management Systems, Statement Number 4DD, May 15, 1998, Montvale, NJ: Institute of Management Accountants.

7 Bonini, C, R. Jaedicke and H. Wagner, eds., Management Controls; New Directions in Basic Research, New York: McGraw Hill Book Company, 1964.

8 Roberts, E., “Industrial Dynamics and the Design of Management Control Systems,” in Bonini, et al., pg. 102.

9 Merchant, K., Control in Business Organizations, Boston: Pitman Publishing Company, 1985.

10 Drucker, P., “Controls, Control and Management/’Bonini, et. al., 1964, pg. 286.

11 ibid, pp. 288-294.

12Lynch, R. and K. Cross, Measure UpI Yardsticks for Continuous Improvement, Cambridge, MA: Basil Blackwell, Inc., 1991.

13 Stonich, P., “The Performance Measurement and Reward System: Critical to Strategic Management,” in Readings in Cost Accounting, Budgeting and Control, 7th edition, W. Thomas, editor, Cincinnati, OH: Southwestern Publishing, 1988, pp. 468-469.

14Arrow, K., “Research in Management Controls: A Critical Synthesis,” in C Bonini, R. Jaedicke and H. Wagner, eds., Management Controls: New Directions in Basic Research, New York: McGraw Hill Book Company, 1964, pg. 325.

15Euski, K., M.J. Lebas, and CJ. McNair, “Performance Management in an International Setting,” Management Accounting Research, 1993, Vol. 4, No. 4, pp. 275-299.

16Drucker, P., op cit., pg. 292.

17Dearden, J., “Time-Span in Management Control,” in Readings in Cost Accounting, Budgeting and Control, 7th edition, W. Thomas, editor, Cincinnati, OH: Southwestern Publishing, 1988, pp. 370-371.

18Drucker, R, op cit., pp. 289.

[Author Affiliation]

DR. CJ. MCNAIR has completed numerous studies of emerging management and accounting practices, authored eight books and many articles on these topics, and worked with leading companies to identify and implement new cost management systems since 1987. Over the past six years, Dr. McNair has extended her work into the area of strategic cost management. Dr. McNair has developed a model and methodology that defines and develops cost management from the “outside-in.” The resulting Customer Value Management System (CVMS) has been researched, implemented, and tested in the U.S., Canada, and Europe.

DR. TED WATTS isa Senior Lecturer in Management Accounting in the School of Accounting & Finance at the University of Wollongong, Australia. He has published widely in management accounting and related journals. His research interests include strategic cost management, capacity management, value creation, and beba ? i oral issues in management accounting. He can be contacted at tedw@uow.edu.au

The balanced scorecard is supposed to provide leaders realtime information for the management of tactics that support their strategies. But how well does an organizational implementation of the balanced scorecard actually accomplish this? Likewise, is the balanced scorecard even the best measurement approach for an organization to follow?

With the balanced scorecard and other scorecard approaches, organization-chart functions can be tracked against goals using various tabular or graphical formats or a red-yellow-green scorecard. These scorecards, however, often evolve into a meet-the-numbers game, irrespective of consequences to the enterprise as a whole. This numbers game often results in counterproductive initiatives, 24/7 firefighting, the blame game up and down the line, and the proliferation of fanciful stories about why goals weren’t met.

Figure 1. Integrate enterprise excellence process

Organizations often show raw-number scorecards with no trend lines and only track how well the latest scorecard response is doing compared to a goal, which often has questionable origin. In general, organizational scorecards fail to distinguish between common-cause and specialcause variability, which can lead to much firefighting and no true remediation of systemic problems.

The scorecard might be using a single index for factors that should be tracked separately. Conversely, there can be metrics overload, with so many factors being measured that what’s truly meaningful is buried in a sea of numbers.

Scorecards and data systems might be in place, but people are working from experience and intuition rather than blending analytics with innovation when creating strategies. Suboptimization improvement projects often report savings with little or no gain to the enterprise as a whole.

In some organizations, redyellow-green scorecards show rapid-fire changes back and forth among the colors without any recognizable trend toward the green. Often, nobody seems concerned about this – who has the time with so many metrics and goals throughout the organization?

A major problem with traditional scorecards is that they provide a picture of the past but do not give insight into the future. In these scorecards, focus is given to the process outputs or the Ys in the relationship Y = f (X), which are lagging performance measures. Little systematic attention, if any, is given to causal-event analyses for insight into what could be done to improve the process so the future process scorecard performance will be better. The way to make long-lasting improvements is through process changes and the management of the Xs that affect the Y of the process.

New approach

The balanced scorecard keeps evolving. Now, an even newer approach is taking hold. Rather than try to make a better link from strategy to the scorecard, businesses are creating strategies that flow from scorecard metrics. An integrated enterprise excellence process to accomplish this is illustrated in Figure 1.

Witihin this new enterprise process define, measure, analyze, improve and control (E-DMAIC) approach scorecards are created (step two in the figure) to align with the overall business value chain process needs. After analyzing the enterprise (step three), specific, measurable, actionable, relevant and time-based (SMART) goals are determined (step four). Strategies are then created (step five), which lead to the establishment of goals for 30,000-foot-level operation metrics (step six) .

The 30,000-foot-level metric owner understands that the only way long-lasting improvements can be made to metrics is through process improvement. This pull-for-project creation (step seven) leads to an aligned targeted effort that benefits the enterprise as a whole (step eight) and is long lasting (step nine).

This new scorecard creation and improvement execution system not only can lead to fewer metrics, but also can provide more valuable information and far better results.

With this system, everyone in the organization has all the information needed for the enterprise to move closer to meeting the three Rs of business: Everyone is doing the right things right at the right time.

Every metric has an owner, and the measurement’s performance can be a part of the manager’s performance plan. Sometimes, the manager might learn that no improvement efforts are needed. The manager needs only to maintain the current 30,000-footlevel of performance – a welcome relief from the activity-oriented conclusion drawn from traditional scorecards.

In the analyze phase of E-DMAIC, analytics help facilitate the creation of overall SMART financial improvement goals and strategies to help achieve them. By integrating analytics with innovation, an organization identifies and then gives focus to improvements that yield the most benefit to the business as a whole.

Meaningful measurement goals can now be established and cascaded with alignment throughout the organization. This system creates a measurement-improvement-need pull of lean Six Sigma, design for Six Sigma and other improvement projects. This is in contrast to the traditional push-for-project-creation system under most lean Six Sigma deployments, such as “let’s vote on which projects the Black Belt and Green Belt practitioners should be working on.”

Meaningful measures are tracked over time at multiple levels throughout the business. Aligned metrics are established throughout the organization at the 30,000-foot, 20,000-foot and 10,000-foot levels so the organizational chart is subservient to the value chain metric needs. These key process output high-level Y metrics of the organization are tracked using infrequent subgroup sampling, while key process inputs to processes that need control are monitored and adjusted at the 50-foot level with frequent sampling.

The future

For scorecards to achieve their true goal-oriented potential, greater attention must be given to their integration with the enterprise’s overall operational value chain process. If care is not exercised, a scorecard can steer the enterprise off the road.

[Author Affiliation]

By Forrest W. Breyfogle III, Smarter Solutions Inc.

[Author Affiliation]

FORREST BREYFOGLE III is founder and CEO of Smarter Solutions Inc. in Austin, TX. He earned a master’s degree in mechanical engineering from the University of Texas-Austin. Breyfogle is the author of Implementing Six Sigma, for which he received the Crosby Medal, and The Integrated Enterprise Excellence System, a fourvolume book series. He is an ASQ fellow.

Forrest W Breyfogle III. ASQ Six Sigma Forum Magazine. Milwaukee: Aug 2008. Vol. 7, Iss. 4; pg. 39, 2 pgs

por André Araujo

“Métricas para Inovação” será o tema de uma das interessantíssimas sessões de debate da edição deste ano do Open Innovation Seminar. Assunto atual e recorrente na literatura de inovação, são numerosos os relatos de casos de métricas insuficientes, de funcionamento inadequado, que não têm uso prático; em suma, não é exagero dizer que se observa que a maioria das firmas não possui métricas que possam auxiliar efetivamente na gestão da inovação. No Brasil, o cenário é ainda mais caótico: muitas empresas simplesmente não adotam métricas de inovação nos seus sistemas gerenciais.

Para ilustrar a complexidade do assunto, tomemos de início dois levantamentos realizados recentemente por grandes consultorias internacionais de gestão: o “McKinsey Global Survey Results: Assessing innovation metrics”, conduzido em outubro de 2008 e o “Measuring Innovation 2009, The need for action – A BCG Senior Management Survey”, realizado já neste ano. Enquanto o primeiro conclui que as empresas estão, de maneira geral, satisfeitas com o uso de métricas para avaliar seu portfólio de inovação, o segundo afirma, contrariamente ao primeiro, que a minoria dos executivos entrevistados se diz satisfeita com as práticas adotadas por sua empresa para medir inovação. Conclusões conflitantes que demonstram a falta de consenso mesmo entre os principais executivos, quando o assunto é métricas.

Um artigo publicado em 2006 (Innovation Management Measurement: A Review) na International Journal of Management Reviews, de autoria de Adams, Bessant e Phelps, tenta esclarecer o tema, sistematizando boa parte do que já foi estudado acerca de métricas de inovação. Os autores criam um framework, com sete dimensões, e encaixam os indicadores já propostos em cada uma destas, que são: inputs, gerenciamento de conhecimento, estratégia de inovação, cultura e estrutura organizacional, gerenciamento de portfólio, gerenciamento de projeto e comercialização.

Entretanto, sistemas de medição de inovação nas empresas freqüentemente tomam formas mais simples, o que é preferível, visto que a complexidade não favorece a compreensão por parte dos funcionários, nem a praticidade de uso no dia-a-dia da companhia. Com efeito, métricas que demandam muitos recursos para serem avaliadas provavelmente não serão tão úteis a ponto de a empresa se permitir despender todo este esforço. Talvez um dos poucos consensos em se tratando de métricas seja que estas devem ser simples, fáceis de disseminar pela empresa.

Desta forma, um esquema comumente utilizado compreende três categorias de métricas de inovação: input, processos e output. A lógica desta divisão é a de medir recursos alocados para atividades de inovação, a eficácia dos processos inovativos e os resultados que daí decorrem. Se a firma previr recursos escassos para inovação, estará fadada a colher resultados pouco expressivos, o que também ocorrerá se seus processos não funcionarem adequadamente. Ou seja, este framework simples prevê indicadores que permitem avaliar, de forma geral, os fatores necessários para o bom funcionamento do processo de inovação e os resultados gerados como conseqüência.

Há muitas outras opções de frameworks que podem ser utilizados. Um que não se pode deixar de citar é o Balanced Scorecard, que, apesar de não ser focado em inovação também prevê indicadores que avaliam o desempenho destas iniciativas da empresa, alinhando-se à estratégia da firma.

O desafio converge não para saber qual framework é melhor, mas para investigar qual é mais apropriado para cada empresa. Companhias com atuações bastante distintas provavelmente apresentarão variações significativas de um bom sistema de métricas. Da mesma forma, esquemas personalizados para cada empresa serão certamente mais eficientes que a simples replicação de alguma metodologia, por levar em conta as particularidades do ambiente que se está analisando.

Interessante na sessão que ocorrerá no Open Innovation Seminar será observar como empresas inovadoras estão lidando com métricas, quais avanços foram observados. Quais frameworks são utilizados? Constataram-se resultados práticos interessantes com a implementação das métricas? As métricas são efetivamente utilizadas para alinhar incentivos e compensações a elas? Houve extensa comunicação para a empresa das métricas adotadas? Essas e outras perguntas serão interessantes para o debate.

We’ve used the “Four Box” change model as a means of helping senior managers assess their readiness to adopt performance management approaches such as the Balanced Scorecard. It provides a way to engage with senior teams and to have practical discussions about their role in successful implementation and in recognising some of the implications of adopting a Balanced Scorecard approach.  It can be used to raise awareness and to prevent potential implementation problems.

4 Box Change Model

The Readiness Assessment model (in the full article) only covers the first three components (Pressure, Vision, Capacity) because “Actionable First Steps” can then become the elements of your implementation plan.  You will also need to build in recognition and reinforcement, to ensure the Balanced Scorecard is used effectively and drives the right behaviour.
As with many change initiatives, implementing a Balanced Scorecard is not “technically” difficult, particularly if you have user-friendly software tools to support it.  The challenges are almost always “cultural” and it’s not necessarily “resistance” to change.  Often, the issues will be due to lack of executive ownership, poor understanding of BS principles and inadequate skills (at all levels).  No surprises there then!

Download the full article “Are you ready for a Balanced Scorecard?“

Secara sustainability, penggunaan BSC adalah untuk mengukur penerapan strategi berkelanjutan di suatu organisasi dengan memperhatikan unsur lingkungan dan sosial selain ekonomi dalam setiap pertimbangan bisnis yang dilakukan. Sustainability (kemampuan untuk bertahan / berkelanjutan) untuk Toyota, misalnya, disebutkan bahwa kemampuan untuk merakit dan mengembangkan produk dalam cara yang mengurangi penghabisan sumber daya alam seperti material mentah, dan melakukannya dengan cara menguntungkan (profit), digunakan untuk (1) menterjemahkan strategi-strategi sustainabilitas perusahaan menjadi aksi  dan (2) mengintegrasikan sustainabilitas perusahaan lebih baik kedalam sistem manajemen intinya (KPMG, 2000).

Selama ini, keberlanjutan secara lingkungan dan sosial tetap terpisah dari strategi bisnis inti tradisional dan sistem manajemen yang berdasarkan semata menuju indikator kinerja finansial. Satu alasan, mengapa begitu sulit untuk berhubungan dengan sustainabilitas perusahaan terletak pada kelebaran konsep itu sendiri. Kurangnya definisi apa batasannya yang dimaksud isu-isu sosial itu sendiri menjadi hambatan terbentuknya SBSC. Aspek sosial seringkali dipandang sebagai aspek lingkungan lebih lunak karena itu lebih sulit dihitung (Epstein, 2001). Adapun beberapa langkah awal dalam mengimplementasikan BSC: (Zingales et.al., 2002), adalah sebagai berikut:

1. Memperjelas visi dan strategi perusahan

2. Mengembangkan sasaran strategis:

-       mengidentifikasi proses bisnis yang ada dimana sustainabilitas dapat menambah nilai dan memperbaiki kinerja

-       menentukan bagaimana program lingkungan yang ada mendukung sasaran sustainabilitas dalam perspektif pelanggan dan finansial

-       belajar bagaimana sustainabilitas dapat menggantikan proses dan produk untuk memenuhi kebutuhan pelanggan

-       mengerti bagaimana mengantisipasi dan mempengaruhi kebutuhan pelanggan masa depan terkait praktek berkelanjutan.

3. Meluncurkan inisitiatif strategi lintas bisnis dan

4. Membimbing setiap SBU mengembangkan strateginya masing-masing, konsisten dengan yang dimiliki perusahaan

Umumnya BSC dimasukkan dalam kerangka manajemen strategik. Manajemen strategik adalah pola pengelolaan strategi organisasi jangka pendek dan panjang. Terdiri dari 4 langkah utama dalam menciptakan masa depan organisasi:

1. Perencanaan jangka panjang (long-range profit planning), terdiri dari:

- perumusan strategi

- perencanaan strategi

- penyusunan program

2. Perencanaan laba jangka pendek (short range profit planning)

3. Implementasi

4. Pemantauan

Konsep BSC merubah fokus perspektif perencanaan dari sekedar pada fokus finansial anggaran tahunan dan berjangka pendek, menjadi perspektif perencanaan komprehensif yang mencakup aspek finansial, bisnis internal, dan pembelajaran/ pertumbuhan. Selengkapnya seperti pada tabel berikut.

 Tabel. Keunggulan BSC dibanding konsep manajemen tradisional

“One person with passion is better than forty people merely interested” – E.M. Forester

Passion is an amazing emotion that unlocks incredible ability.  People with passion refuse to give up and can overcome huge obstacles to turn intent into accomplishment.  Passion can transform one person’s convictions in to a mass movement.  Campus Crusade for Christ is a perfect example of that.

Passion, creativity, and initiative are gifts that people choose to give or withhold day by day and moment by moment.  Engaging these gifts requires managing less not more.  It means less directives, less checking up, and less bureaucracy. The more constricting the oversight, the less passionate people are going to be about their work and the less creativity and initiative they will give.

Inspiring people to give generously of their talents requires that they be entrusted with the mission and equipped with the tools, training, and systems to be successful.  To succeed we must let go of the managerial paradigms of the industrial age and embrace new ways of leading that engage passion, creativity, and initiative.  For example, most people are unlikely to get excited about a task that has been assigned to them versus one they choose for themselves.  So why do we still assign tasks?  Sure the work still needs to get done, but a highly committed team should be entrusted to communicate and voluntarily select tasks that accomplish the service levels, goals, and mission of the organization.

What do you think?  Which environment would you most likely flourish in: one with high levels of managerial oversight or one where people are entrusted and equipped?  What thoughts do you have about how the scope of people’s freedom should be broadened by managing less and entrusting more, without sacrificing service levels and accomplishments?

Inspired by Gary Hamel in The Future of Management

Empat Kartu Yang Menjadi Fokus BSC

Dewasa ini, terkait dengan usaha penyusunan strategi bisnis, metode Balanced Scorecard (BSC) mendapatkan perhatian yang spesifik. Balanced Scorecard terdiri dari 2 suku kata yaitu kartu nilai (scorecard) dan balanced (berimbang). Maksudnya adalah kartu nilai untuk mengukur kinerja personil yang dibandingkan dengan kinerja yang direncanakan, serta dapat digunakan sebagai evaluasi. Serta berimbang (balanced) artinya kinerja personil diukur secara berimbang dari dua aspek: keuangan dan non-keuangan, jangka pendek dan jangka panjang, intern dan ekstern. Karena itu jika kartu skor personil digunakan untuk merencanakan skor yang hendak diwujudkan di masa depan, personil tersebut harus memperhitungkan keseimbangan antara pencapaian kinerja keuangan dan non-keuangan, kinerja jangka pendek dan jangka panjang, serta antara kinerja bersifat internal dan kinerja eksternal (fokus komprehensif). Oleh karena itu, BSC merupakan alat untuk mengukur strategi secara komprehensif dengan pola manajemen strategis (Mulyadi, 2001), sekaligus menjadi perangkat manajemen kontemporer yang digunakan untuk meningkatkan kemampuan organisasi dalam melipatgandakan kinerja keuangan. Pada awal 1992, Robert Kaplan dan David Norton mempublikasikan dalam Harvard Business Review metode pengukuran mereka: ‘The Balanced Scorecard – Measures ThatDrive Performance’. BSC adalah alat yang menyediakan pada para manajer pengukuran komprehensif bagaimana organisasi mencapai kemajuan lewat sasaran-sasaran strategisnya. Metoda ini menjelaskan bagaimana aset intangible dimobilisasi dan dikombinasikan dengan aset intangible dan tangible untuk menciptakan proposisi nilai pelanggan yang berbeda dan hasil finansial yang lebih unggul (Kaplan dan Norton, 2001). ..a set of measures that gives top managers a fast but comprehensive view of the business….includes financial measures that tell the results of action already taken …complements the financial measures with operational measures on customer satisfaction, internal processes, and the organization’s innovation and improvement activities, operational measures that are the drives of future financial performance. (Kaplan and Norton ) Dengan demikian, Norton dan Kaplan menempatkan BSC sebagai alat bagi organisasi (termasuk yang berasal dari sektor publik dan non-profit) untuk mengelola kebutuhan pemegang saham relevannya. Lebih jauh mereka menyarankan BSC sebagai alat untuk memperbaiki aliran informasi dan komunikasi antara top eksekutif dan manajemen menengah dalam perusahaan. BSC ingin memperbaiki sistem konvensional pengontrolan dan akuntansi dengan memperkenalkan fakta lebih kualitatif dan non-finansial. Pertimbangan sasaran finansial serupa dengan sistem tradisional manajemen dan akuntansi. Satu perbaikan penting dari BSC terletak pada fokusnya mendorong nilai bagi profitabilitas masa depan perusahaan. Perspektif pasar bertujuan mengidentifikasi segmen pelanggan dan pasar relevan yang berkontribusi pada sasaran finansial. Dalam istilah manajemen barbasis pasar dari perusahaan, dimensi ini membuat mampu mencapai proses-proses dan produk internal yang sejalur dengan keperluan pasar. Dalam dimensi internal processes, perusahaan harus mengidentifikasi dan menstrukturkan secara efisien proses-proses pendorong nilai internal yang vital terkait dengan sasaran pelanggan dan pemegang saham. Perspektif organizational development akhirnya mencoba menggambarkan semua aspek terkait dengan staf dan organisasional yang vital pada proses reengineering organisasi.

How can you use the Balanced Scorecard framework to help identify measurements for projects and improvement activities?

We are asked regularly to help Project Sponsors, Managers and teams with their approach to measurement of improvement and benefits.  For some reason people seem to find it hard to decide what they need to measure.  The basic principle for choosing measurements is:

• First, decide what you’re trying to achieve, then decide what you need to measure

This article is not about how to design or use a Balanced Scorecard, but it discusses how the framework can be used as a basis for deciding what to measure, for example when you are setting up a project.  The approach is equally applicable to problem solving, improvement and innovation projects.  Furthermore, the principles can be really helpful when thinking through and identifying possible benefits that might result from a project.

Download the full article Identifying Measurements with a Balanced Scorecard