Balanced Scorecard Adoption – Why Companies Don’t Like To Be Measured

The world appears to be waking up to the need of rapid and multidimensional performance assessment and rapid feedback mechanisms.

We are starting to see a whole slew of phone applications that help people track the food they eat, the miles they walk, the time they use to engage in various activities.

Measurement is becoming the need of the modern psyche. More importantly, many of these measurement tools provide guidelines, benchmarks.

The problem of measuring a company

For example, our diet programs might be able to make suggestions like based on your height and weight and your lifestyle, you should be consuming X of calories, and they should consist of combination of the following food groups. Now, these suggestions are not yet fully refined or have been universally tested, but nevertheless, they provide recommendation that enable us to have a much better idea rather than our likely performance without these recommendations.

What’s more, many of these programs allow us to share this information with our friends, since transparency will likely help us stay motivated.

This has resulted in more than one friendly competition among my friends, and they were all better off for it. After all they all were able to do more pushups, run faster and farther, and eat healthier as a result.

Yet, in a business context, it appears that measurement is just now becoming common place. Don’t get me wrong, measuring business performance predates Frederick Taylor, but a comprehensive measurement system that would allow feedback and provide guidelines and recommendations based on best practices has not yet been developed.

I can hear the arguments already. Business management is more complex, there is no one size fits all formula, the way we do our business is unique. And I have one thing to say to that, it is bunch of baloney.

If business is more complex than a human being, and that’s a big if, we would need to have more measurement and guidelines, rather than less to help us navigate it appropriately.

Yes all businesses are different, but so are all humans. Just like a diet that is appropriate for someone preparing for a marathon would kill a two year old baby, so in business context, though we can find guidelines that are appropriate to the business’s stage of development, it’s goals and abilities.

Let’s face it, the reasons you are in business are not unique, there are only a small variety of options and they likely include making money and changing the world to some degree. Moreover, even your business practices are likely not too different from everyone else, otherwise your business would either fail or be growing so rapidly that you would not be able to take the time to read this article.

The reason we are not looking at measurement in business in this way appears to be for a very different reason, it is a matter of personal pride.

While we are ready to acknowledge that a dietitian or a trainer can give us guidelines for managing our body that are much better than what we would create if we just arbitrarily picked our guidelines based on our own perspective, it is not so with managing a business.

How could somebody outside our organization possibly know what might be the guidelines or direction for our management? Yet, the parallel is clear, if we know where you are and have a general idea of where you want to get to, the way you do it might be unique, but there are some fundamental measurements that you absolutely must hit in order to get to your goal and not allow it to blow up your business in the process.

This means that our Scorecard Key Performance Indicators should not be random or arbitrary, the targets should not be arbitrary either. Within the indicators we also need to account for common cause variation and separate it from special cause variation. But more importantly, we need to have clear trigger points.

  • If I am eating 3,000 calories a day and burning 2,500 calories, it’s not that relevant if the actual numbers 3,100 and 2,400. Clearly, unless my goal is to gain weight, the action should be to reduce calorie intake or to increase calorie consumption.

What is relevant is that there is a trigger to spring in to management action. The parallel should exist in the Balanced Scorecard design for the organization. We need indicators that become trigger points for action and it is not that relevant if they are perfect, it is more relevant that they cause us to make good decisions.

There is another reason in business that we do not seem to make our decisions based on measurement. Frankly, as a civilization we have not learned to measure things like sentiment precisely and yet we have not learned to make decisions using imprecise data. So the measurement inversion sets in, we measure things that we can measure precisely, yet it is the other imprecise things that commonly act as the input, rather than output variables and it is they that need precise measurement.

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Oleg Tumarkin, Juris Doctor, Master of Business Administration, Certified Six Sigma Black Belt, Practitioner of Theory of Inventive Problem Solving (TRIZ) is an Adjunct Professor of Business at Concordia University of Wisconsin.

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