What can be done so that the Balanced Scorecard becomes the main organizational feedback system and it measures the things that allow the company to safely take off, land, fly and navigate through its difficulties and opportunities, regardless of the outside weather conditions?
I am reminded of a story from the beginning of the 20th century where the reality of the plane use has changed with faster engines, higher altitudes and a conversion to the closed rather than open pilot’s seat, but the pilots continued to do the same thing they have been used to doing – relying on the topography to orient themselves. In fact, if they were not sure where they were, they would swoop down to look at the names of the train stations and thus orient themselves. In order to break them off this habit and to get them to rely on their controls, in exasperation the commanding officers literally commanded the soldiers to travel to the various train stations and change up the signage if they heard an airplane approaching. The exercise worked. The pilots finally got the message, they cannot rely on the signs on the ground to navigate, they have to rely on the controls in the airplane. This mental shift has done more for the development of the aviation than much of the technological change that came before and after that shift.
This has become so fundamental to flying that before a pilot can get a license to fly bigger planes, they have to pass a controls exam and have a number of controls only flight miles. Sometimes the pilots still make mistakes, either because they do not trust their controls or the controls malfunction. Quite a few deadly crashes are attributed to either of these problems. However, we continue to fly relying on controls and work on improving the controls and making them more redundant and this propels aviation forward.
Business world has not made and is not really ready to make a similar leap. No matter how much the speed of business has increased, no matter how much higher our businesses can fly, no matter how closed off the cockpits of our business are from the outside we still orient ourselves by getting down to the land, slowing down, looking out of the window and trying to read the signs. Needless to say, this is no way to move forward.
Historically, the main organizational feedback mechanism has been the income statement (or it’s predictive cousin, the budget). However, this does not work in the long term for a rapidly changing business, since the easiest way to meet the budget is to sacrifice the future in order to do so. It used to work. It worked OK in the environment that is largely static, where not much changes, even such a limited feedback tool was enough. But as competition gets aggressive, as speeds and flexibility increase, we are forced to look at a much broader picture and we fail to do so with the traditional financial only indicators.
In 1992 Norton and Kaplan, in presenting the Balanced Scorecard, formalized the thought that we need to look at multiple voices that came from Total Quality Management model which in turn was influenced from Toyoda, who no doubt was indirectly influenced by Andrew Carnegie’s Wealth of Nations. Yet, 18 years later the adoption of this tool has been sporadic and rarely company-wide.
And the only solution to this, in my mind, is a more streamlined, system that can be implemented much more readily that the traditional Balanced Scorecard. A system in which management is trained and certified. A system that is testable and verifiable, repeatable and replicate-able. A universal system of Business measurement that can be implemented in any kind of a business and used by anyone to provide consistently better feedback than is available by use of the financial statements alone, or relying primarily on intuition.
Just as the airplane can only be flown by a simultaneous attention to gauges that use different systems of measurement (fuel gauge, altimeter, attitude indicator, air speed indicator, magnetic compass, heading indicator, turn indicator, vertical speed indicator, course deviation indicator, radio magnetic indicator) that are fairly standard no matter the airplane, the need for business indicators that provides information in a similar fashion is even more crucial since unlike flying we cannot do without it.
This tool is the Excellence Matrix (E-M8) which is being developed right now by Futureworks in collaboration with Bucket Brigade and AKS-Labs. The challenges are many, since in business we do not even have the terminology or universally agreed upon units of measurement that define the variable that we must monitor, but a 100 years ago the airplanes faced the same challenge and they overcame it. Thus, we need to commit to doing the same in the realm of business.
Would you like to be a part of this research or one of the companies that becomes a test bed for these new tools? If so, get in touch with the good folks at Aks-labs or with myself directly and we will figure out what are the opportunities for collaboration.
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Oleg Tumarkin, Juris Doctor, Master of Business Administration, Certified Six Sigma Black Belt is an Adjunct Professor of Business at Lakeland College and Concordia University of Wisconsin. His firm, FutureWorks, in partnership with Bucket Brigade and AKS-Labs provides business coaching and Balanced Scorecard implementations. His life’s passion is the development of a universal business measurement and management system that would cause management in to the realm of a repeatable, replicable, yet humane and flexible science.
oleg_tumarkin Articles, Balanced Scorecard Theory balanced scorecard, BSC, bsc designer, BSC implementation, dashboard, E-M8
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