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By GSMIweb on 22-Apr-10 01:57.
Must Your Scorecard be Balanced?© by Arthur M. Schneiderman An edited version of this article appears in strategy + business Background Conventional wisdom mandates that a scorecard contain a balance of: financial and non-financial, lagging (results or retrospective) and leading (process or predictive), externally (customer) and internally (processes) focused, and short-term and long-term metrics. It also demands representation within a prescriptive framework; most often financial, customer, internal, and learning and growth. But is this really necessary? Let's first look at the origins of the "balanced" part of the scorecard.
While Sarbanes-Oxley shook up the world of publicly traded companies and forced them to scramble to achieve compliance, it also played a pivotal role in bringing enterprise risk management (ERM) to the attention of corporate executives. Enterprise risk management, for many companies, has emerged as a value-added continuation of Sarbanes-Oxley compliance and audit efforts. Seventy-six percent of respondents in a recent survey said they either intended to expand SOX compliance into ERM or were in a stage of implementation.1 With the growing interest in ERM that has emerged in recent years, it has not just been seen as an initiative but a key component of corporate strategy. The strategic importance of ERM is mentioned in the Committee of Sponsoring Organizations (COSO) ERM integrated framework definition, which states: "Enterprise risk management is a process, affected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity. . . to provide reasonable assurance regarding the achievement of entity objectives." This definition describes ERM as a part of corporate strategy that is influenced by organizational leadership and put in motion to guide the achievement of organizational goals.
he journey to organizational improvement involves a major investment. Any executive deploying Six Sigma within their organization can describe the plethora of time, effort and money spent in bringing such an initiative to life. There are questions about organizational dynamics to consider: Who will serve as Champions, Master Black Belts, Black Belts and Green Belts? Will they engage in Six Sigma projects on a full-time or part-time basis? How will the selection process work? How will Six Sigma be communicated to management and employees? Will the organization reward employees for improving performance? Who will conduct the training? How will the organization measure success?
Over the past few years, some industry analysts and organizational executives have questioned the effectiveness of the balanced scorecard. The tool, introduced by Robert Kaplan and David Norton in 1992 in an article in the Harvard Business Review, is used to articulate to individual employees the organizational goals and objectives set by management. But some modern critics of the balanced scorecard have gone as far as to proclaim that it no longer possesses the potency to fill this communication function. Others have argued that the effectiveness of the scorecard has been overhyped by software solution providers and consultants who have promised quick fixes to problems associated with strategy execution. After reviewing these arguments and accusations, a logical question arises: Is the balanced scorecard dead?
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