Anyone who entered the world of management within the last 20 years will have come across something called the ‘balanced scorecard’ and might even have felt its cold, damp hand on their shoulder.  Those of us who have been in management for more than 20 years saw how cruelly exposed traditional approaches to financial management, auditing and performance management were when faced with the pressures of rapid globalisation.  So we knew the foundations of management had to fundamentally change.  The main problem with change being forced though is that you tend to fall back on what you know best rather than think differently, outside of the box.  Business had become addicted to measurement and decided that the only way forward was even more measurement and this time around the balanced scorecard appeared to offer more intelligent measurement.

The history of scorecards actually goes back much further than you might realise (at least to the 1950’s) and early attempts included the notion of a ‘dashboard’ of measures; just as a pilot needs a whole array of instruments to fly a plane. The eventual popularisers of this new game were of course Kaplan and Norton (‘Putting the balanced scorecard to work’ Harvard Business Review, Sept-Oct 1993) but eventually even they realised that more measurement wasn’t the answer.  Instead of re-thinking the design of their measurement machine though they compounded their crime by bolting on an ugly, ridiculously complex and totally unnecessary gadget called the “strategy alignment map” (the one thing you could not fault Kaplan and Norton for was their alchemic ability at turning goose eggs into gold).

So why is the balanced scorecard concept still so popular today?  Obviously some of  those who use it say it works – without realising that they are not actually using a balanced scorecard (* see below).  My guess is that it allows managers to look intelligent while behaving simplistically; that’s a very clever trick to pull off.  They keep believing that as long as they follow their own set of ‘balanced’ measures they must be doing something right.  This is exactly the opposite of what it was designed for – to get managers to use their brains and think things through more holistically rather than mechanistically – to create long term value rather than short term profit and long term value requires a long term HR strategy; and appropriate measures to match.

We hear the phrase ‘human capital’ used very glibly these days (except in this series of course) as though we are all mature managers now and understand how to get the best out of this most problematic resource.  Kaplan and Norton’s nod to the problem of people management revealed itself in their ‘innovation and growth’ box of measures. Yet Norton himself confessed, in a foreword to ‘The HR Scorecard’ (another Harvard ‘golden egg’ by Huselid, Becker and Ulrich, 2001) that it is always this ‘people measures’ box that companies find the most difficult -

“ … the worst grades are reserved for their understanding of strategies for developing human capital.  There is little consensus, little creativity, and no real framework for thinking about the subject.  Worse yet, we have seen little improvement in this over the past eight years.”

Of course he didn’t offer any solution during those 8 years to the very problem that he and Kaplan had set for their clients.  If he took another look today he would find the situation has not improved and his endorsement of the ‘HR Scorecard’ proved to be yet another empty promise.  So the performance management ‘experts’ (sic), who still promote the balanced scorecard, dashboards and prisms have yet to provide the right ticks in their own boxes. *This means that after nearly twenty years there has never actually been a balanced scorecard – only a three-quarters, unbalanced version.

The real irony here is that the ‘people box’ has to be the most important ingredient in all performance measurement and management systems, so human capital measurement and reporting is the only genuine innovation to have arrived on the scene in the last 50 years.  But because HCM is about human beings, who don’t always want to be measured or made accountable, and would rather play the system than make it work – it will never succumb to a simplistic, tick box mentality.

So, in summary, the balanced scorecard -

• Doesn’t balance – and doesn’t acknowledge that value management comes from the whole system working well, not just its component parts
• Emphasises the need for innovation and growth (and therefore organisational learning) but doesn’t offer any way of capitalising on the latent, creative and innovative behaviour of human capital and
• Tries to deconstruct what creates value but, in doing so, often destroys it (you try putting deconstructed mayonnaise on your burger and see how you like it)

But apart from that it’s a really great idea.

For personal development linked to this topic visit the Consummate Professional Series