Why are you creating your measurement management system? (And do you really need a balanced scorecard?)

A few years ago, I read an article by Ian Graham called, What’s Wrong with Targets? Graham made the case that setting targets or goals for employees creates the wrong kind of behavior. This is because it focuses the employee on the target rather than on the underlying processes that create value for customers and stakeholders. And once a goal is achieved, there is often no reason to reach further. He also asserts that targets can be gamed. The alternative he suggests is to focus on specific processes and measure everything you can with an eye to continuous learning. His perspective comes out of the quality movement and the concept of continuous improvement.

We thought of Graham recently when we read an article about the games that colleges play to ensure that they meet the thresholds for statistics used by US News and others to “rank” colleges. Areas that can be manipulated include soliciting alumni donations of as little as $1 to increase their alumni giving percentage, giving more weight to applicant GPA and SAT scores than in the past, and manipulating class size.  Anyone who has ever worked in a for-profit or not-for-profit organization knows that goals can drive behavior in good and bad ways. Read more

The State of Intangibles Measurement – KPI’s Are An Imperfect Answer

In the industrial economy, we had lots of ways of measuring our work. It was a mostly physical process so we could literally see what was going on. Our financial systems were built around this industrial model and we could also put dollar values on products as they progressed through factories and machines, converting raw materials into finished goods.

The shift to a knowledge economy has changed that. A lot of the value created today happens inside peoples’ heads or their computers. This is the case in service and technology businesses but even in manufacturing settings where it is the process, not the product, that creates so much of the value. Read more