Collective Wisdom

Collective Wisdom

My parents' generation used to talk about the 1930s as the time they did it tough. I suspect my generation will look back on the 1990s in a similar vein.

Where once there might have been a stigma to being made redundant it now seems to be as phlegmatically accepted as a parking ticket. It is almost as if in the 1990s we have all been enrolled in some massive corporate form of musical chairs. For me, the disappointing aspect about working in the 1990s is that too often staff are viewed as an expense to be diminished rather than a talent to be harvested. When most products and services are generic it seems strange that so few organisations have understood that their only real differentiator is the ability and attitude of their staff. Instead the focus has been stock price and shareholder value. At last though, the folly of such myopic management methods is now understood. As organisations stumble from crisis to crisis, in a mad panic to keep their share price buoyant, executives are starting to realise that there is another alternative. In particular, there is growing support for the balanced scorecard methodology. This was devised by Kaplan and Norton in 1990 and it contends that organisations need to supplement financial measurements with staffing and customer measurements if they want a full picture of their corporate health.

At its core balanced scorecard requires a corporate vision of what it is the executives want to achieve for their organisation. However, unlike most management styles in the 1990s, the balanced scorecard approach requires that the executive gain the support of the rest of the organisation for these objectives. Therefore the executive need to translate their vision into key performance indicators (KPIs) by which they can monitor progress and reward staff for their contributions to this progress. Once these KPIs have been defined, the balanced scorecard obligates middle management to develop targets to link the outcomes of their activities to the objectives of the corporation.

It also requires the executive to embrace some mechanism where subsequent experiences can influence current strategies.

While the balanced scorecard does recognise the significance of the financial health of an organisation it contends that this is a natural bi-product of how well the company is doing in other things. These include: how well it is serving its customers; how efficient are its processes, and how effective it is in learning from the past.

Clearly, the idea of balanced scorecard is gaining favour. GartnerGroup reckon that by 2002 40 per cent of Fortune 1000 companies will have some form of balanced scorecard in place. However, other research from the Tower Group in the US estimates the average cost of implementing a balanced scorecard at $400,000. As such, it is vital companies avoid common failings with these projects. Research seems to indicate these are: implementing a balanced scorecard without understanding the corporate objectives; the executive paying lip-service to the project and not driving it to success, and a tendency to embrace so many KPIs that the tasks at hand are too confusing. However, done well the balanced scorecard seems a breath of fresh air in the 1990s. Certainly this was the experience of members of the Australian Centre for Management Accounting Development, (ACMAD). In presentations to the ACMAD members earlier this year three quite diverse organisations reported on the progress of their balanced scorecard projects. All faced a variety of external threats and all had entrenched cultures that were resistant to change. Nonetheless, all reported how the scorecard had enabled the company to link business plans and performance measures and to facilitate cultural change. It seems organisations at the tail-end of the 1990s are starting to recognise the importance of properly motivating staff. If this takes hold then the first decade of the new millennium could well provide a much more satisfying working environment.

Peter Hind is the manager of User Programs, which includes InTEP, at IDC Australia

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