As my great philosopher Winnie the Pooh says, “If you do not know where you are going, you will not know if you get there.”
With the beginning of a New Year, it is only natural to reflect and check our own GPS. Are we there yet? Or, if Winnie the Pooh is not listening, where exactly are we going? This holds for individuals, for business and non-business entities alike.
The balanced scorecard (BSC) framework, broadly popularized in the 90s by Kaplan and Norton, is a platform to evaluate performance from financial and nonfinancial perspectives; it is an organizational GPS to help understand and evaluate performance of an entire organization, of a unit, vendor or an individual. You can evaluate only what you can measure – this reminds me of my efficiency guru, Winnie the Pooh.
There are four dimensions for evaluation in the original BSC methodology. For each, three to five measurements are identified for tracking.
Here are some examples:
FINANCIAL: ROI, ROC, revenue and profit margins
CUSTOMER: customer retention and growth, customer satisfaction and brand awareness
INTERNAL BUSINESS PROCESSES: measures of efficiency and effectiveness; and infrastructure
LEARNING AND GROWTH: innovation; patents, improvements and new offerings
This BSC framework has been widely adopted by business, nonprofit organizations, schools, governments, military, and just about any other entity that claims to have a goal. The success of the BSC lies in its simplicity. Many organizations are still practicing BSC in its original form.
However, our world gets everything but simpler. More than twenty years after Kaplan and Norton’s publication of “The Balanced Scorecard – Measures that Drive Performance”, we find ourselves in a flatter world, with unprecedented flow of goods and people among nations. We find ourselves exchanging extraordinary amount of information and knowledge, legally, semi-legally and illegally. All of the above unleashes real and material changes in personal and economic relations, in geo-politics and local politics. Frequently, we find ourselves with the first generation performance GPS – a four-dimensional BSC while dealing with employee mass suicides, climate anomalies such as Arctic Vortex and natural disasters such as tsunamis – all of which are having a material effect but are not being registered by our performance GPS or Balanced Scorecards.
Those of us who practice performance evaluation with our GPS raise the question: are the four dimensions of BSC truly capturing the complexities of times we live in? Although some global organizations have added such perspectives as Global Citizenship, or Environmental Sustainability to their performance navigation systems, performance surveys demonstrate that the majority of global companies, which practice BSC, still use the original four dimensional for the assessment.
In the GSC community, we know that social consequences of business activities matter a great deal. They matter to a business entity, when it comes to talent acquisition or to loyalty in crisis situation. They matter to a local community when education empowers women, who constitute more than fifty percent of the workforce. This in turn allows them to support their households. They matter to indigenous people, when they are given opportunities to participate in economic activities. Let’s ask again: are these social parameters reflected in our elegant performance evaluation GPS methodologies? Rarely.
One of the reasons why social responsibility and sustainability have not achieved their permanent place in BSC is the challenge of measuring social impact or impact of social programs. Over the last three decades, real progress was made with developing and incorporating metrics for environment into business performance GPS: greenhouse gases, water consumption, emissions taxes, recyclable and organic trash, etc. We are not quite there yet when it comes to measuring social impact.
As we are entering 2014, I encourage the GSC community to undertake the initiative to review and audit current performance evaluation platforms through the lenses of the complex world we live in today. It is our responsibility to assure that the BSC with their KPI measures reflect the impact and consequences of our activities on local communities, on schools, and on the environment. It is our charter to stimulate this discussion.
As my GPS strategy guru, Winnie the Pooh, whispers into my ear: you are where you told your GPS to take you, but is it where you want to be? Where you should be?
Let’s put Social Responsibility/Global Citizenship into our organizational BRC in 2014.