Myth 7: The Balanced Scorecard Was First Off the Blocks

Hoshin Kanri business methodology, a balanced approach to performance management and measurement was around well before the balanced scorecard. It has been argued that the balanced scorecard originated from the adaptation from Hoshin Kanri.

As I understand it, translated, Hoshin Kanri means a business methodology for direction and alignment. This approach was developed in a complex Japanese multinational where it is necessary to achieve an organization-wide collaborative effort in key areas.

One tenet behind Hoshin Kanri is that all employees should incorporate into their daily routines a contribution to the key corporate objectives. In other words, staff members need to be made aware of the critical success factors and then prioritize their daily activities to maximize their positive contribution in these areas.

In the traditional form of Hoshin Kanri, there is a grouping of four perspectives. It is no surprise that the balanced scorecard perspectives are mirror images (see Exhibit 1). An informative paper and worth reading on the comparing Hoshin Kanri and the balanced scorecard has been written by Witcher and Chaui.

Exhibit 1 Similarities between Hoshin Kanri and Balanced Scorecard Perspectives

  • Hoshin Kanri

  • Balanced scorecard
  • Quality objectives and measures
  • Customer focus
  • Cost objectives and measures
  • Financial
  • Delivery objectives and measures
  • Internal process
  • Education objectives and measures
  • Learning and growth

 

Myth 8: Measures Fit Neatly into One Balance Scorecard Perspective

One dilemma for many users of the balanced scorecard is where to report the measure. Taking one KPI called “late planes in the sky” should the performance measure be reported as a customer, financial, or an internal process measure? In fact in this example it affects all six perspectives as shown in Exhibit 2.

 

Exhibit 2.4: How late planes impacts most if not all the six perspectives

Perspectives

Financial

Customer satisfaction

Staff satisfaction

Learning & growth

Internal process

Environment & community

late planes in the sky over 2 hours late

possible

 

Myth 9: Balance Scorecard Can Report Progress to Both Management and the Board

One certainly needs to show the government or Board the state of progress. However, it is important that governance information is shown rather than management information. The measures that should be reported to the Board are key result indicators.

We need to ensure the ”management focused” performance measures (KPIs, result indicators, and performance indicators) are only reported to management and staff.

 

It would be worth reading Barry J. Witcher and Vinh Sum Chau, “Balanced Scorecard and Hoshin Kanri: Dynamic Capabilities for Managing Strategic Fit,” University of East Anglia UK, Management Decision, Vol 45, no. 3 (2007): 518–538.

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

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