John Kay the economist posted an article about the value Balanced Scorecard in business.
In life, and business, we should judge ourselves by a balanced scorecard. Among the management fads and fashions of the last twenty years, the balanced score card is one that survives, and deserves to survive. The principle is that the performance of a business is judged, not by any single metric – the bottom line – but by a wide range of indicators related to a company’s distinctive capabilities, the source of its competitive advantage, its relationships with its stakeholders.
Sums it up for me really. I came across this whilst looking for articles on John’s new book, Obliquity, and how important it is to focus on the business rather than just chasing profits and shareholder value.
He continued (and bear in mind this was 2003 when M&S were going through some problems):
For Marks & Spencer, whose competitive advantage rested on what I have called its architecture – the structure of its relationships with suppliers and employees – and on its brand and reputation, the components of its balanced scorecard would have placed appropriately more emphasis on people, and on the way people outside the company perceived it. We can see how these kinds of assessment could have restrained, perhaps even prevented, the calamities that befell these businesses. They relate the metrics of performance to the competitive strengths of the corporation.
How a well designed balanced scorecard would restrain and perhaps even prevented the calamities that befell this business. In other words, by having a wider focus you end up with a better performance. The single focus and objective can actually be destructive. A broader view, across perspectives, can help an organisation concentrate on its competitive strengths rather than (merely) its financial results.
I was particularly struck by his conclusion 4:
We make a mistake when we look for purpose in a business organisation which is distinct from the functions that business organisation discharges. Companies do not exist solely to generate shareholder value, but it cannot be their objective to promote the public good: they have neither legitimacy or competence to pursue that goal. The purpose and function of companies is to produce, in their own distinctive fields of competence, the goods and services we want, as individuals and as a society.
Let me just repeat that last sentence, because it goes to the heart of strategy map design. “The purpose and function of companies is to produce, in their distinctive field of competence, the goods and services that we want as individuals and as a society.”
So…. What are the central competencies that you have to learn and grow and develop as an organisation, to deliver the your goods and services for the good of the individuals you serve in our society?
That is the learning and growth question, and one of strategy positioning that must be reflected in your strategy map
You can read John Kay’s full article which is from a lecture to the Department of trade and industry in 2003.