Unfreezing Your Balanced Scorecard
One of the basic tenets of change management is that over time people and institutions tend to become ‘frozen’ in their ways of doing things. Frozen in the way they think about customers and markets, about which products and services to provide, and in how they treat each other (their culture), among many others. Of course, it happens in our personal lives too – when was the last time you changed the toothpaste you use or took a different route to work?
This frigid thinking can impact your use of the Balanced Scorecard, a phenomenon I believe is on the rise due to the Scorecard’s popularity and, by business tool standards, enviable tenure. Here is a case in point. Recently I’ve been speaking with a company that adopted the Balanced Scorecard over ten years ago, and have been using it faithfully ever since. The organization turned to the tool in an effort to assist them in executing a new customer-driven strategy, one that required substantial changes to their processes, investments in new technologies, and of course updated skill sets in their employee base. Like thousands of other organizations they found the Scorecard to be invaluable in paving the way to successfully unlocking the value of their strategy, and as noted above, they’ve been devoted advocates since that time.
Fast-forward ten years and the world is a different place, replete with changes that have impacted companies around the globe, including this one. Somewhere along the line, their customer-focused strategy gave way to a new commitment to cost leadership, an economic reality in a market that was moving quickly towards commodification. What they neglected to do was substantially change the Scorecard’s core elements to be consistent with their new direction. So, while they’ve remained committed to the Scorecard, its benefits have waned over the past few years and managers are openly voicing their doubts about the tool’s ongoing efficacy.
This is a company that clearly needs to ‘unfreeze.’ The Scorecard they instituted years ago is no longer a proper representation of the organization’s strategy and there is little wonder that managers, hungry for every strategic advantage good information provides, have lost faith in the tool. To continue benefiting from the framework they’ll have to carefully reconsider how it fits with their new strategy, and how its core elements must be updated in order to reflect current realities. This, of course, may be painful because it will undoubtedly mean selecting new objectives, measures, targets, and initiatives, and in an even more painful step, possibly unhinging mature links between the Scorecard and vital organizational processes such as budgeting, compensation, and employee reviews. However, if the Scorecard is to continue producing benefits, this has to be done.
Occasionally I’ll hear dire predictions about the future of the Balanced Scorecard. “It’s an old model whose time has come and gone” people will say, “It’s so 1997” they’ll cry. But I believe, as I’m sure you do as well, the fundamental principles that underlie the Scorecard framework are indeed timeless and it will continue to guide the strategy execution efforts of enlightened companies for decades to come. We simply need to constantly assess our use of the framework and ensure it reflects the world in which we live and work, avoiding the trap of frozen thinking.
Now if you’ll excuse me, I have to go toothpaste shopping.