Saturday, August 11, 2007 Batuhan: Tipping the balance...finally By Allan S.B. Batuhan Foreign Exchange
WE have covered a lot of ground on the subject of Business Performance Management over the last few weeks.
Our basic premise was that in most organizations today, it is very difficult to get all the parts working together as a coordinated whole. This is true especially in large and “professionally-run” organizations. While the people who work in them know their individual roles and responsibilities, not all have the entrepreneurial vision to understand what it takes to manage a total business.
We introduced the metaphor of an orchestra, complete with skilled and talented musicians, which without the presence of an experienced and competent conductor will not be able to produce melodious music.
Applying this to business organizations, we then explored the ill effects of the over-reliance on the “one version of the truth” from our accountants, which many still use to measure and manage the performance of organizations.
But as we took pains to point out, financial numbers show us only the effects of our past actions. They tell us precious little about what we need to be doing in the present, and even much even less of where we ought to be focusing our efforts on in the future.
One of the recent and most significant advances in management that has come about to address this major shortcoming in business performance management (BPM) is the introduction by Kaplan and Norton of the Balanced Scorecard.
Although both finance professionals by background, they realized the folly of relying on financial statements alone to run a business, and wisely pointed out that to both gauge ongoing performance and guide future action, a much broader perspective is required.
Today, at least on paper, many organizations seem to be using balanced scorecards in their BPM processes. In fact, a number claim to be employing it as their main BPM tool. And yet it is apparent that this seemingly widespread acceptance is nowhere near enough to redress the imbalance.
As the story told by my friend the Finance Director illustrates, old habits die hard.
Business organizations, despite their pretensions to having embraced the merits of balanced BPM measures, are still predominantly judged by their financial results. Whether such financial success was obtained at the expense of the business’ future viability, seems to matter little in the equation.
This happens despite the fact that over the years, many companies have been found to have “massaged” their numbers in various ways, to make it appear that their organizations have performed well, when in truth they were already in dire straits. When it comes to the crunch, financial numbers still take precedence over everything else.
It is difficult to work successfully toward a goal, unless a business knew exactly which goal it was wants to achieve.
Perhaps it is with this preceding statement that we can conclude our entire series on the Balanced Scorecard.
If we are to finally tip the scales towards having a BPM system that tells us the whole story about our businesses — we need to stop relying on financial numbers alone as the main criteria for determining which ones in our organizations deserve rewards, and which ones require punishment for their actions.
