The power of balance.

EXECUTIVE SUMMARY

Using a balanced-whether it's implemented in a single department or companywide-results in better equilibrium among organizational goals that can be as varied as revenue and safety. An easy way to start the balanced scorecard process is to build a Consensus-driven summary matrix that everyone can understand and buy into.

Using a balanced scorecard--whether it's implemented in a single department or companywide--results in better equilibrium among organizational goals that can be as varied as revenue and safety. An easy way to start the balanced scorecard process is to build a consensus-driven summary matrix that everyone can understand and buy into.

I began using a balanced scorecard approach almost 15 years ago following the publication of Robert Kaplan and David Norton's Harvard Business Review articles on the topic and my boss Don's recognition that such an approach would help drive our plant's performance improvement. We had limited success with that first approach, but as I spent time learning more about the topic and experimenting in that company and others with various versions of the tool, I have refined my approach to using balanced scorecards into one that is simple to use and capable of producing consistent results.

This article will allow you to benefit from my experience, to explore the logic behind and need for balanced scorecards, and to do some experimentation yourself using the implementation steps I will share. Most important, this article is intended to help you actually use this tool to make a difference in your work group, plant, or company. Many people understand the concepts behind the balanced scorecard philosophy but fewer have realized true success in using them. It is one thing to say that we need to maintain a consistent focus on all key areas of performance, and it is another to actually measure and behave in a manner each day that maintains and drives consistency.

Like any other performance improvement tool or initiative, balanced scorecards have to become part of the team's, plant's, or organization's culture if their use is expected to produce results. We can plaster the walls with colorful scorecards and expound on the need for them in our plant meetings, but if we make decisions that favor efficiency over quality or if we recognize people for contributions that emphasize through-put at the expense of safety, we compromise the potential for scorecard success. Our conversations and daily behaviors must reflect the same amount of balance that we show on visual displays and tout in meetings.

A need for balance

All systems require balance for them to perform optimally Nature understands this, but human beings struggle with it more than embrace it. Weather systems maintain balance through the actions of high and low pressure systems. The human body maintains its equilibrium through the myriad enzymes, hormones, complementary systems, and communication processes that exist in it. Ecosystems maintain balance through the food chain and the cooperative nature of nature itself. Human beings, however, disrupt the balance of these systems and others for short-term gain, just as they disrupt the inherent balance an organization would have if they were more strategic and focused in their daily management efforts.

From an organizational perspective, sports teams seem to understand this need for balance to a much greater degree that other businesses. It is ironic that while we are a nation (and some would argue, a world) that is very sports-focused, we fail to translate the same level of balance we expect from sports teams into the workplaces (where we talk about sports on a daily basis). For example, most sports fans know that a football team cannot be successful without some measure of strength in its offense, defense, and special teams. These same fans realize the stupidity of suggesting that an offense run the ball on every play--they have to maintain some form of balance between passing and running. At work, however, these same people often emphasize efficiency goals to a much greater degree than they do quality or safety goals, even though they say that all three are important. What types of balance (or lack thereof) do you witness in your facility?

It is important to note that you can get success from a production or service system in the short term without maintaining a balanced approach to performance management and improvement, just as a baseball team can be successful for a game or two, or even the occasional season, if they have a relatively weak team batting average or a less-than-stellar pitching staff. Sustained levels of performance excellence can come only from a balanced system--one in which all key areas of performance are measured and reviewed regularly, emphasized to a significant degree, and supported in a balanced manner when resource allocation decisions are made.

How do you determine the degree to which balance exists in your team? The answer is pretty simple: Listen to the conversations people have and the arguments that are used to evaluate and make decisions. Most organizations profess safety as a top priority. That said, I have seen more often than I would like to admit decisions being made that put people at risk for the sake of keeping a production line running or delay making a needed safety improvement to have enough capital to purchase a faster wrapping machine. I have observed the time devoted to safety topics in plant meetings and compared it to the number of minutes spent expounding on the need to make sure that all customer orders get completed this month. I have watched peers called on the carpet for raising concerns about plant noise levels while others are recognized for breaking a new throughput record even though they had to work shorthanded and bend a few safety and quality rules to do so.

Like a forest, a business unit has its own equilibrium points already in place. Unfortunately, an organization's performance emphasis may not be what it needs to achieve its stated strategic goals or to help it ensure sustained levels of high performance over time. Balanced scorecards can help resolve such issues; at a minimum, they can help identify the lack of balanced management and measurement approaches that exist, allowing you to decide if you want to address them or not. What areas of performance are emphasized the most in your plant? Does each department place the same level of importance on the same performance areas? Do some facilities in your company pay more attention to quality, safety, and morale than others do? Where might your team be out of balance?

Set up the process

As I stated previously, my first attempt at using balanced scorecards was pretty weak. In essence, this approach consisted of making sure that all of our plant's performance reports looked at all key areas of importance and that we reviewed each performance area in a consistent manner in performance review meetings. While you can gain some benefits from making such basic adjustments, there are more foundational changes that can provide better leverage for improvement. When I left the candy plant where I first began using scorecards to become a director of quality at a trucking company I knew that balanced scorecards would be a key tool in my performance improvement toolbox. I also realized that some improvements in the approach I was currently using would be needed.

I overcompensated with this second implementation experiment, but that taught me some things about what is really needed to make a scorecard approach work and what tools have more impact than others. By trying to build a recognition tool into the scorecard process I introduced to terminal and operations managers, I had made balanced performance measurement and improvement a little too complicated and confusing. I also discovered, however, how powerful completing a simple matrix in a group setting could be.

The balanced scorecard summary shown in Figure 1 is perhaps the most powerful tool in the balanced scorecard arsenal. Like any tool, it can be completed by an individual, a leadership team, or all leaders. Its power becomes most evident when it is completed in a group where consensus is required--where no one strongly objects to what is being placed in the boxes. While an individual manager could fill out the table and e-mail it to other managers stating "These are your new measures," much greater levels of understanding and commitment are gained when all affected managers can participate (ideally face to face) in building the matrix.

We started using this tool at the trucking company because some of our leaders, both at the middle- and upper-management levels, were emphasizing efficiency at the expense of customer service in particular, and safety to a lesser degree. Our mission statement clearly indicated that service was a key strategic intent, and we had the data to show that excellent service would lead to greater sales revenue and market share. But still, we were struggling to get each of our 20-plus terminals, let alone the members of our leadership team, to let go of our cultural tendency to focus on headcount and efficiency and instead strive for superior service each day. In the span of three short hours at a semi-annual management team meeting, I learned the power of the scorecard summary matrix and helped lead the group toward a balanced performance focus that endures today

Forge ahead

The first step in setting up a balanced approach to keeping score involves defining key performance areas. In Figure 1, these areas appear as column headings across the top of the table. While most organizations have the same basic set of key performance areas, a lot of organizational clarity can be gained by defining and reaching consensus on them as a group. For cost centers, these performance areas tend to be those of safety, quality, people, and cost. For profit centers, a revenue growth category is added.

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