Sunday, April 27, 2008

My Management System

Some people say it’s too complex, some people say it’s out of date, but I am still a true believer of the Balanced Scorecard, BSC. But it must be properly used which requires that you understand that

Balanced Scorecard is a management system
(not just a measurement system)

Just like you use a heart rate monitor to manage your performance during your exercise, not just to measure your heart rate!

Being properly built and used BSC enables organizations to clarify their vision and strategy and translate them into action. It also provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.

I built the Balanced Scorecard to our organization according to the ideas of Paul R. Niven. In his books he covers BSC as a whole – from why you should have BSC, how to build one, how to train and implement it and ultimately how to use it as a management system.

In their original concept Kaplan and Norton state that “ultimately, causal paths from all the measures on a scorecard should be linked to financial objectives.” This unfortunately leads the focus to a measurement system. On their recent Harvard Business Review article they have simplified the measurement concept and create a link to operations plan – finally making it a true management system.

Still everything is being pushed upward towards the financial perspective.
You need to work hard on the customer perspective to push upwards.
You need to work hard on the process perspective to push upwards.
And you need to work hard on the learning perspective to push upwards – if you have included any real learning measures.

I turn the perspectives upside down.

Everything starts from Learning and floats downwards effortlessly. Leading to improved performance in every perspective including (but not only) the financial perspective. My Manager’s Toolbox mission is Lifelong Learning. For me learning naturally comes first.

While writing this post, I have been reading two books, which also emphasize learning. First was Elegant Solution by Matthew E. May. He has written an excellent book about Toyota’s innovation system which is built on learning: “Learning and innovation go hand in hand, but learning comes first.”

The second book I was reading is a small pocket book Zen Lessons which my wife gave me one morning while I was going for a business trip – thanks love! As I was reading it at the airplane, I was encouraged when I found the lesson 2 of this 1000 year old wisdom being about Study and Learning: “Accumulate learning by study, understand what you learn by questioning.”

So I think we can egree that everything really starts from learning. And as always I end my post with some questions to help you understand my point.

Do you have a proper management system in place?

Does it provide internal and external feedback?

How big part do financial measures play on the system?

How much do you emphasize the learning perspective – individually or at your organization?


Timo said...

Thanks Samuli for the great post. I have developed BSC systems for start-ups and we are applying BSC in our own company as well. I have found it a good practice to read scorecards from right to left, starting from learning/development that is. So it is easy for me to agree with your point that financials are actually resulting from other actions.