Myth 10: There Are Only Four Balanced Scorecard Perspectives
For almost 20 years the four perspectives listed in Kaplan and Norton’s The Balanced Scorecard: Translating Strategy into Action (Financial, Customer, Internal Process, and Learning and Growth) has been consistently reiterated by them.
I recommend that these four perspectives be increased by the inclusion of two more perspectives and that the learning and growth perspective be reworded as innovation and learning (see Exhibit 1). This last change is a very important and recent change in my work as it lifts the profile of innovation which has been emphasized by all the great business writers like Peter Drucker, Jim Collins, and Thomas Peters and Robert Waterman.
Having a separate employee satisfaction perspective emphasizes the importance of measuring the key drivers of employee satisfaction such as the amount and regularity of recognition (e.g., how many recognition events are planned for the next week or two, how much recognition has been made this week, the past two weeks, and this month). It will also support the need for more regular staff satisfaction surveys performed on a rolling sample basis.
The Environment and Community perspective has been managed brilliantly by some leading CEOs helping to create a major asset for the Human Resources team, assisting the organization in becoming an employer of choice. Other benefits include staff learning new skills through doing voluntary work in the community, reducing costs through minimizing waste, creating positive press, and increasing higher staff morale by implementing green initiatives. Leading CEOs intuitively work in this area. They realize that the community is the source of your current and future employees and customers. They see the linkage of initiatives in this area and positive customer perceptions.
Myth 11: Strategy Mapping Is a Vital Requirement
If strategy maps help management make some sense out of their strategy, then, as a working document they must be useful. However, I am concerned with the “simplified” use of cause-and-effect relationships, a major component of strategy mapping (see Exhibit 2). It has led to the demise of many performance measurement initiatives. From these over simplified relationships come the strategic initiatives and the cascading performance measures. Strategy mapping, in the wrong hands, can give birth to a monster.
The cause-and-effect diagrams, of strategic mapping, where initiatives / success factors neatly fit into a balanced scorecard perspective and create one or possibly two cause and effect relationships is full of intellectual thought signifying nothing in many cases. I am sure there are many consultants who can use strategy mapping effectively to help businesses have a better understanding of its likely impact. However, it is a dangerous tool in the wrong hands, particularly if it is the source of all performance measures in the organization.
Myth 12: All Performance Measures Are KPIs
One important difference between the winning KPI approach and the traditional balanced scorecard approach is that in “winning KPIs” there is a definition of what a KPI is. This has a very profound impact on non profit and government agencies. My definition of a KPI includes that a KPI is 24/7, daily or weekly, and is non financial. Many agencies state that they can only realistically measure performance monthly. To this I say read on and I will show you a number of daily measures that your organization should have.
The winning KPIs methodology clearly indicates that KPIs are rare. These KPIs are reported immediately and thus should never find their way into a balanced scorecard that is reported two or three weeks after the month end to the senior management team.
You might like to preorder my new book “Key Performance Indicators For Government And Nonprofit Agencies” the link can be accessed from www.davidparmenter.com