Building a Balanced Scorecard

[ccochran]

Hello, all:

I was asked to write something on how to build a balanced scorecard. Since I've never been too satisfied by the approaches I've seen to developing metrics around the balanced scorecard, I jumped at the opportunity. Five different tools are used in conjuction with the article, and they're all attached here. I think this will run in the Sept or Oct issue of Quality Digest. Let me know what you think about the article and tools.

Craig

[ccochran]

...And here's the tool for prioritizing/trimming the measures that come out of each functional work group (see attached). I could only attach 5 files to the original post.

Craig

[ccochran]

Yesterday I held a Quality Network Meeting in Dalton, GA, with "Building a Balanced Scorecard" as the topic. We had a great turnout and a lot of good interaction. For anybody who is interested, I've attached the presentation. Feel free to use it as you see fit.

Craig

[Jim Wynne]

Originally Posted by ccochran

Hello, all:

I was asked to write something on how to build a balanced scorecard. Since I've never been too satisfied by the approaches I've seen to developing metrics around the balanced scorecard, I jumped at the opportunity. Five different tools are used in conjuction with the article, and they're all attached here. I think this will run in the Sept or Oct issue of Quality Digest. Let me know what you think about the article and tools.

Craig

With due respect, I think the Balanced Scorecard idea is nothing more than MBO dressed up in an ill-fitting new suit in hopes that it can be slipped past the gatekeepers unnoticed.

[ccochran]

Goals, metrics, and/or objectives are a fact of life. They are basic communication tools. Without some sort of objective in mind, the organization doesn't have a rudder. That said, there are right ways and wrong ways to apply objectives. Using them as a stick to knock people over the heads (a la MBO), is not the right way. The balanced scorecard is one of the better ways to develop metrics. In my world, measurables are simply a way of telling somebody what's important to the organization's success and telling them how to contribute to that success. Not a bad idea, huh?

Craig

[Jim Wynne]

Originally Posted by ccochran

Goals, metrics, and/or objectives are a fact of life. They are basic communication tools. Without some sort of objective in mind, the organization doesn't have a rudder. That said, there are right ways and wrong ways to apply objectives. Using them as a stick to knock people over the heads (a la MBO), is not the right way. The balanced scorecard is one of the better ways to develop metrics. In my world, measurables are simply a way of telling somebody what's important to the organization's success and telling them how to contribute to that success. Not a bad idea, huh?

Craig

But there's nothing inherent in BSC that prevents metrics from A) being unreasonably specified, and B) used as a weapon of mass destruction. Sounds like MBO, huh? The reason that MBO was eventually discredited was not that anyone felt that objectives, per se, were a bad idea. The problem was in putting identification of objectives in the hands of people who aren't qualified to do it. And the population includes so many of those people that there's no reason to believe that BSC will be any more successful. What's changed that makes MBO--which is what BSC is--more likely to succeed?

[ccochran]

You're right; the success of anything is in smart application of the tools. Good tools in the hands of not-so-smart people? Watch out.

The uniqueness of BSC is in the structure of the metrics, not in the deployment. So, an organization could still deploy the objectives incorrectly and make lots of other bad decisions. Diversifying objectives away from strictly financial metrics is the main point of BSC. In fact, the entire book, The Balanced Scorecard, could be boiled down to about 3-4 pages.

Here's an interesting analogy that you might enjoy. I go in lots of facilities that use control charts incorrectly. Either the operators don't know how to react to the points, or they've drawn spec limits on the charts instead of control limits, or the process has shifted and they continue to use old limits, or the charts have simply become ugly and expensive wall paper. I would say a majority of plants I visit incorrectly use control charts. It would be easy for me to say, "Control charts are bad because people don't know how to use them." That's ridiculous, though. Control charts are just management tools--like millions of other tools, including objectives--that have to be used correctly.

I'll refrain from launching my anti-control chart campaign for now...

Craig

[Jim Wynne]

Originally Posted by ccochran

You're right; the success of anything is in smart application of the tools. Good tools in the hands of not-so-smart people? Watch out.

The uniqueness of BSC is in the structure of the metrics, not in the deployment. So, an organization could still deploy the objectives incorrectly and make lots of other bad decisions. Diversifying objectives away from strictly financial metrics is the main point of BSC. In fact, the entire book, The Balanced Scorecard, could be boiled down to about 3-4 pages.

Here's an interesting analogy that you might enjoy. I go in lots of facilities that use control charts incorrectly. Either the operators don't know how to react to the points, or they've drawn spec limits on the charts instead of control limits, or the process has shifted and they continue to use old limits, or the charts have simply become ugly and expensive wall paper. I would say a majority of plants I visit incorrectly use control charts. It would be easy for me to say, "Control charts are bad because people don't know how to use them." That's ridiculous, though. Control charts are just management tools--like millions of other tools, including objectives--that have to be used correctly.

I'll refrain from launching my anti-control chart campaign for now...

Craig

I can't argue with the theoretical goodness of a motherhood statement. I have had experiences similar to yours when it comes to control charts and statistical applications in general. I'd go so far as to say that the majority of people using control charts don't understand what they're doing. Does that make control charts bad? Of course not, and I'm not saying that BSC or even MBO is bad. But if a company doesn't want to go to the trouble of finding and hiring people who are smart enough to implement smart strategies, there's no point in claiming the emperor ain't naked. There's an awful lot of time and money squandered on SPC programs (and management consultants) that don't produce useful results beyond satisfying a customer's demand to see charts at the machines.
Part of the reason that American manufacturing is in that southbound handbasket is all of these ridiculous charades. American manufacturing wants to go to heaven, but it doesn't want to die first.