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February, 2004

Making Scorecards Actionable Newsletter # 7/2004

About this time last year Wiley and Sons published our book “Making Scorecards Actionable”. Since then we have been busy presenting the book on conferences, writing articles based on our experiences and, most important, helping organizations implement the recommendations we give in the book.

In September last year we were also happy to see the Swedish publisher Liber release our book in our own mother language. To us, this was truly interesting – to see our original text translated by someone else into our own language.

Among many interesting projects, the largest assignment has been for a British government department, where we participated in developing scorecards and strategy maps for local use. Not only was the scale of the project intriguing to us, but also its focus on HR-related issues. In Scandinavia, many organizations have chosen to introduce a separate employee perspective to acknowledge the employees’ importance. This project has forced us to take a stance on whether a scorecard should have a separate employee perspective or if the employees are necessary subjects in each of the four perspectives. Framing it this way, we indicate our belief: we think the employees are so important that they must be portrayed in every perspective. They should not be kept prisoners in an “employee perspective”. Their contribution in learning and development, in the business processes and when keeping customers satisfied must be shown explicitly in each of these perspectives. Not to mention that the employee costs are substantial in most organizations.

At the end of last year we also left the consulting company we were associated with. This does not affect the way we work with clients, but it has given us more time to research and develop our thinking on how balanced scorecards are used in organizations, and how they should be implemented to assist in realizing the intended strategies.

Since the book was released, and we set up a web site for it, we have published six newsletters; always distributed on the last Wednesday every even month. When we created the newsletter we believed that we would only publish it for one year. Originally, we thought that six newsletters were about what our subscribers would be interested in, but over the months we have been very happy that there is a continuous interest in our Scandinavian approach to scorecards. That is why we have decided to continue to publish this newsletter every second month, containing observations, insights and experiences we have made. We are also very happy that so many of you react on what we write in the newsletters and continue to discuss these issues with us in far reaching e-mail conversations. Please, continue to give us feedback on what you think about the newsletters and about the books.

We hope that you will continue to subscribe to this newsletter and that you will give us feedback on our opinions. Doing that, we would also like to share some thoughts with you on the different uses of scorecards, triggered by two recent licentiate theses from Swedish universities.

In December, Mandar Dabhilkar presented his thesis at the Stockholm Royal Institute of Technology. He studied team-based manufacturing, primarily in three Swedish firms: Sapa, SKF, and ABB. In particular, he was interested in to what extent they managed to provide ‘balanced control’ through scorecards and similar methods. In several cases, it turned out that BSC implementations were not quite what they first promised to be. ABB’s EVITA (cf. our book “Performance Drivers”, 1999) “to a certain extent had come to a halt. The system was only used by some few production teams”. In a survey study, 32% (mostly in the larger firms) stated that they had started to use BSC or similar approaches, but only 43% of these had introduced the model for production teams. Among these nine firms, only three had let teams develop scorecards and metrics as a part of process orientation; the other six seemed to represent what the author describes as “Kaplan & Norton’s approach to mostly reinforce top-down control”.

One of Dabhilkar’s final recommendations is to increase decentralization through improved objectives, performance measurement, more stress on continuous improvement and new wage systems for teams. BSC is one means for this, but:



“[Sustaining continuous improvement capability] through BSC should not be considered unproblematic. SKF managed to do this with major difficulties, by balancing top-down and bottom-up dimensions of management control. In contrast, the BSC implementation only satisfied the needs of management in the case of Sapa Heat Transfer, and only the production teams in the case of ABB Control. This imbalance in the management control system created a lack of commitment among production team members at the former and among the managers at the latter. Thus, both front-line workers and managers have to be committed to BSC, which requires addressing both parties' needs in the implementation and use of the concept. This finding supports previous research claiming a need to design management control systems according to different logic at the management and operational level.”



The title of the thesis is “Mot balanserad styrning i teamorganiserad production” (in translation: “Towards balanced control in team-based production”) and it was published in December 2003.

Somewhat similar conclusions, in a very different industry, can be found in Beata Kollberg’s licentiate thesis from Linköping University “Exploring the Use of Balanced Scorecards in a Swedish Health Care Organization”, also presented late last year:



“The findings indicate that the BSC is not primarily used as a strategic management system that aims to increase the O-¬center' s management control of the departments and units. The BSC is rather used as an information system from which managers receive measurable information about the operational activities that provide the basis for follow-up, planning and developmental activities. Employees use the information system to report measures and in discussions within the units.

In a decentralized organization such as the health care organization studied it may be argued that the scorecards need to be aligned to the over-all strategies in order to ensure that the changes made at the unit level are actually leading to improvements at the strategic level. The use of the BSC in a health care organization is thus a dynamic process that prerequisites employees' participation and adaptations to existing terminology and organizational structure, as well as discussions between people to create a common framework for interpreting measures and goals in the BSC. The findings show that the health care organization studied has potential for developing the BSC to become a strategic management system in the future. The organization may need to start the dialogue between people at different organizational levels in order to create this common foundation.”



We see a similarity between these two studies in the way BSC is seen as a very adaptable tool, which requires conscious decisions about the balance between top-down (strategy implementation) and bottom-up (local participation). One of us argued long ago (Olve [1977], “Multiobjective Budgetary Planning”) that planning and control could be seen as mobilizing organization members’ knowledge in order to agree on a path into the future. We normally expect management to be knowledgable about, or at least assume the burden of risk for making assumptions about, what kind of future the organization should prepare for, and what uniqueness it should strive for. On the other hand, employees all around the organization will know more about its possibilities – from their technical knowledge, and their frequent contacts with customers and co-workers. BSC can be used to create the dialogues to access these different kinds of knowledge, and reach agreement on what should be done.

The two theses reviewed here reinforce our conviction that organizations need to consider carefully how scorecards can be used. We see a great potential in supporting team work at different levels, and in many industries. But before embarking on a project, management should consider the six design issues addressed in our book Making Scorecards Actionable.






MAKING SCORECARDS ACTIONABLE NEWSLETTER is a bi-monthly update on our experiences and opinions on how scorecards and strategy maps can be made actionable – to help organizations realize their intended business strategies. The newsletter is compiled and distributed for free by the authors of the book “Making Scorecards Actionable – Balancing Strategy and Control”. Also make sure to check out www.makingscorecardsactionable.com to get up to date information about our seminars, to evaluate your organization’s BSC skills according to our computerized BSC Analyser and to download presentations from the document archive.
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