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When I saw a that an academic journal, the “The Journal of Accounting & Organizational Change”  (Volume 8 issue 4, Published: 2012) was doing a whole series of articles on the Balanced Scorecard at 20, and including Bob Kaplan’s thoughts as well, I though they might be really interesting.  I was right, but not at all for the reasons I was expecting.

I will be frank with you: I worked for Norton & Kaplan for over 4 years and so saw many of the early developments and the approach mature into a strategic management process.  So this would prove interesting I thought.

The articles are all available via the Emerald site.  http://www.emeraldinsight.com/about/news/info-pack-bsc20.htm?  A special issue of this journal described as:

On the twentieth anniversary of the Balanced Scorecard, Journal of Accounting & Organizational Change is publishing a special issue featuring a series of commentaries on the Balanced Scorecard and a review article by Robert S. Kaplan, who co-created the Balanced Scorecard with David Norton in 1992.

To celebrate this anniversary, we are offering free access to this special issue and to a selection of the ten most cited articles related to the Balanced Scorecard and published in Emerald journals.

Now, unusually you can access this journal free access  from 2 November until 16 November 2012.  The page on this link will give you a username & password to access and download the  articles.

Let me save you some time and reading

At first glance I thought the five articles would be insightful, covering such topics as:

  • The politics of the balanced scorecard,
  • The rise of the balanced scorecard,
  • The balanced scorecard: subjects, concept and objects – a commentary,
  • The causal relationships between performance drivers and outcomes: Reinforcing balanced scorecards’ implementation through system dynamics models, and
  • Balancing the scorecard through academic accounting research: opportunity lost?

Fortunately I choose to first read Professor Bob Kaplan’s commentary on the commentaries. I am glad I did.

Rarely have I read such a dissection of a set of articles in a way that completely humiliates the writers: and they deserve it.  Kaplan, is very polite, but between the polite academic niceties, pulls no punches.

Kaplan’s analysis of the commentaries

Let us have a look at some of the things Bob Kaplan says.  First he politely says how pleased and honoured he is to be invited to comment.  He then provides some history and background:

He explains that the first balanced scorecard (BSC) article was published in the Harvard Business Review (HBR)  (Kaplan and Norton, 1992).  How that summarised a 1990 research project into twenty companies, to explore new approaches to performance management in companies whose primary source of value came from intangible, not financial or physical assets. How since then he and David Norton have published “a couple of dozen” more articles in HBR and other management journals and five Harvard Business School Press books (The Balanced SCorecard, The Strategy Focused organization, Strategy Maps, Alignment and The execution Premium.

How the emphasis changed from performance management to strategy execution.

He then explains how very quickly, their  work with early adopters between 1992 and 1995, helped them realise that the balanced scorecard was really…

“the foundation of an entirely new system for strategy management and execution.”.  

Also that “Strategy execution has been the focus of our work for the past 16 years, and indeed had already been featured in the second half of the original balanced scorecard book”.

Personally, I think he does the first book a dis-service.  It is clear they are talking about strategy execution quite early, (even in the preface) but I will defer to Bob on this for now.  This sounds like he is describing history, but wait for it.  Bob is cleverly setting the context for some entertainment as he then moves onto his commentary on the commentaries.

Bob Kaplan’s view of the articles.

He then goes for the jugular (and this is where the entertainment starts):

“Four of the five commentaries in this volume of the JAOC addressed the original (1992) performance measurement aspect of our work and hardly at all the strategy execution focus of the past 16 years”

Yes folks, twenty years on and this bunch of academics are still looking at papers that were first written in 1992, ignoring all the work, development, consultancy engagements, five books, and hundreds of case studies that explain how the  approach helps managed strategy execution!

I am disappointed, but why am I not surprised.  Because you see this all over the internet.  People looking at the early papers and thinking that is what the approach is, measures in perspectives).  Ignoring all the strategy execution work that sits alongside the whole management system.

It gets better… Bob Continues…

“None of the authors (one small exception) described any personal experiences they had with actual enterprises, private or public, implementing the Balanced Scorecard.”

Yes folks, not one of these has every tried implementing a balanced scorecard in an organisation!  (OK one has done some work on one organisation.  However, and I read the article to save you doing it, he went directly for measurement!  he seems to have ignored mission, purpose, strategy, objectives and strategy maps completely.)  Bob explains that this is flawed as well…

“Salterio describes a consulting assignment to help an organization’s management team become familiar with balanced scorecard ideas. He started the workshop by having them describe existing performance measures. My recommendation would have been to start by asking them to describe mission and strategy and develop (with a clean slate) the measures they use to describe their strategy. Then they could collect the existing measures and them to the metrics they had accumulated without an explicit expression of their strategy”

However what does come out of this paper is Bob Kaplan’s observations on “rolling up metrics across different types of organisation.  So that “multi-unit” organisations would be expected to have similar measures, whereas a conglomerate would be expected to have measures in each unit appropriate to that unit’s needs and probably only a few common financial measures.   Of course this is not startling – but it is not obvious to many so worth restating here.  Of course rolling up objectives across these two types of organisation also gets some interesting results.

Top down vs bottom up strategy and balanced scorecard design

In the next commentary Bob picks up on the top down vs bottom up discussion.  Of course the academics criticises the approach for being top down.  Bob Kaplan responds…

“Some have expressed concern that the balanced scorecard is a “top-down” approach in which senior executives set the objectives in the strategy map and the measures on the associated balanced scorecard for those lower in the organizational hierarchy.

But the strategy map and scorecard communicate the outcomes to be accomplished, allowing innovation at middle and lower levels of the organization to find new and different ways to achieve the targeted performance.  In this way, the enterprise strategy map and scorecard provides clear objectives which, in turn, creates a higher degree of empowerment to lower levels of management and employees, encouraging them to do their jobs differently and better to drive overall organizational performance.  (my emphasis)

In this , strategy formulation and communication is top down, whilst implementation is definitely bottom up. (there is a typo at this point as it actually says “Bottoms up” – Bottoms-up strategy is a great phrase).

So despite what I hear so often as a criticism, Bob Kaplan is making it clear that the  approach is bottom-up as well as top down.  Of course it is, that is how you get engagement.  I can’t think of a piece of client work, in 40 projects, where it has been purely top down.    Most executives realised they don’t have all the answers and development is iterative.

Suppliers and the balanced scorecard

Next he kills off the criticism that suppliers are excluded:

“Suppliers appear on the scorecard only when they create a source of differentiation in the strategy”

Nice and clear.  You put them on when they make a difference.  Of course manage suppliers, and have scorecards between you and them, BUT only include them on your strategy map and scorecard when they are a point of differentiation, or there is an excessive performance gap in that area and you need to substantially build up your capability.

Social, environmental and regulatory aspects of balanced scorecard.

On social and environment l issues, again he makes it clear the approach clearly includes them, as they emphasises in Strategy Maps (Book 3, 2004.)

“Companies do have the option, but not the compulsion, to incorporate societal and regulatory objectives on their strategy maps”

The one interesting point that comes out is when they look at the links between systems dynamics and the balanced scorecard models.  here he concludes:

“Despite the recent interest in business analytics, and the extraordinary quantities of data now available from corporate ERP systems, systems dynamics remains an untapped opportunity for research and practice.”

I could go on, but there is little to be learnt from these articles, excepts Bob Kaplan’s commentary   So do not be disappointed if you come across this after 16th Nov and they require payment.  Don’t bother.  With the exception of Bob Kaplan’s commentary, these articles are disappointed and of little value.

Conclusion

Bob Kaplan is very polite, but clear.  I think he is genuinely disappointed that the journal could not have collected together five better articles that were more relevant to the balanced scorecard twenty years on, that this naive and simplistic collection.

As Bob Kaplan says, if he and David Norton had been interested in the academic stuff, they would have put their first article in an academic journal.  They did not.  They put it in HBR so it would get a wide reading from practitioners, managers, executives.

It is clear that the balanced scorecard quickly moved on from a performance management and measurement system to a strategy management system.  This happened by 1995.  I know because I remember browsing the servers and looking at old projects when I arrived in Dec 1995.

The ensuing 15-16 years have seen further developments, so that by 2008, Kaplan and Norton have seen their approach as having an “Execution Premium”.

Likewise , we have developed “the Excitant Fourth generation Balanced Scorecard” approach, which

  1. To suit the dynamic changing environment, supports strategy as a continuous learning process
  2. To support how we work and manage today, supports new business models, integrates risk management and CSR.
  3. To handle how executives really manage, using left and right brained leadership, we look at both the culture and discipline of performance.
  4. To support the substantial behavioural change that accompanies most strategy execution, we include specific techniques to help change deeply embedded learnt behaviours in an organisation
You can read about our “Fourth Generation Balanced Scorecard“.  If these enhancements are a surprise, perhaps, “Strategy Mapping for Learning organisations” which came out end 2011, will help.  David Norton wrote the  foreword, with a highly complementary endorsement, so that will help you as well.
And if you want some help designing and implementing a strategic balanced scorecards that helps you manage and execute your strategy, don’t go to an academic: Come to a balanced scorecard consultancy with real experience of delivering over 40 balanced scorecard engagements .  Like us.