Aligning Human Capital to Business SuccessA
TPS International Inc.
Total Performance Scorecard: Solution for Balanced Scorecard Failure in Organizations
Total Performance Scorecard; Redefining Management to Achieve Performance with Integrity
With a Foreword by Professor Dorothy Leonard, Harvard Business School
Author: Dr. Hubert K. Rampersad
Publisher: Butterworth-Heinemann Business Books, Elsevier Science, Massachusetts, May 2003
The implementation of Kaplan & Norton’s Balanced Scorecard (BSC) concept deviates in a number of points from the Total Performance Scorecard (TPS) concept. In practice the brilliant Kaplan and Norton approach is applied as mechanistic and too results driven, the TPS process ensures that business results are achieved through a focus on people. This is very important for sustainable performance improvement and developing a real learning organisation. The TPS, in contrast with Kaplan & Norton’s Balanced Scorecard, integrates people involvement and happiness into balanced scorecard and involves individual buy-in, in order to realize sustainable personal and organizational performance improvement. It is about aligning human capital to business success. That’s why numerous case studies indicate that the implementation of the BSC in North America have been disappointing at best, and in Europe and South America even more so. Despite the above criticism the BSC is a splendid concept that makes a most useful contribution to the successful implementation of TPS.
Total Performance Scorecard (TPS) is a thorough, systematic, and integrated approach to individual and organization success. It synthesizes and extends personal, leadership, and organization theories of change and success. It offers managers tools to do a complete physical for their organization and it offers individuals an encyclopedia of knowledge about personal success. It's a new blueprint for creating a learning organization in which personal and organizational performance and learning mutually reinforce each other. TPS makes a most useful contribution to the never ending challenge of aligning individual motivations and behaviors with enterprise performance aspirations. It takes the balanced scorecard and other management ideas and puts them in a framework of personal integrity. By unifying organizational change strategies with individual ethics Rampersad has written an outstanding synthesis, which is addressed to the corporate challenges of managing in the 21st century. TPS fills the gap with a complete system that unites individual and organizational performance scorecards, linking continuous improvement efforts with individual learning and development programs. Peter Senge broke the mindset barrier and showed how systems thinking and system change are essential to support individual development. The strength of TPS, however, is that it measures personal development in the context of organizational development. This highly interactive process creates the foundation for dynamic change where everyone can benefit from constant learning and improvement.
Ten Reasons for Balanced Scorecard Failures:
- Applied as mechanistic and too results driven, with no linkage between the critical success factors of the organization and the personal critical success factors of individual employees-- creating human capital tensions between work and non-work aspirations.
- Emphasis mainly on financial measures rather than non-financial, leading to measures that do not connect to the drivers of the business and are not relevant to performance improvement.
- No explicit link between shared ambition and specific organizational objectives; results in insufficient employee support to work according to organizational performance measures and an implementation plan that is not grounded in reality and unable to respond quickly to unforeseen events.
-
No explicit link between personal ambition and ethical behavior; neglect of personal integrity and business ethics.
- No explicit link between personal ambition and shared ambition.
-
Poor communication of the new way of working by management; results in creation of an employee mentality that is hostile to management messages.
- Results in an individual performance plan that focuses too much on the money side and not enough on delivering organizational values, leading to a “what’s in it for me” culture.
-
Self learning and team learning are not facilitated; results in creation of a climate of defensiveness and mistrust and a business strategy that is poorly understood and therefore impossible to execute.
- Too many objectives defined and too many performance metrics being measured.
-
Data on current individual and organizational performance insufficiently available; poor data on actual performance, negating most of the effort invested in defining performance measures by not being able to monitor actual changes in results from changes in behavior.
Ten Reasons for Applying Total Performance Scorecard:
- Enhancement of personal effectiveness with the Personal Balanced Scorecard concept, which is part of the TPS system.
- Personal Balanced Scorecard stimulates self-learning and working smarter through learning and knowledge of the self. We become more creative as we grow more conscious of ourselves—our real character, inner processes and driving forces. This leads to inner harmony.
- Development of personal integrity; by aligning and balancing your personal ambition with your personal behavior, you will create inner peace and improve your own credibility, as well as acting according to your conscience.
- Creating a happy workforce and enjoyment at work; as a result of the balance between your personal ambition and the shared ambition, your inner involvement is increased. Happiness is enhanced at work by reducing the gap between company life and private life, and between the way people deal with their colleagues at work and the way they act with their friends and family in their spare time.
5. Development of effective talent management; integrating the employee's Personal Balanced Scorecard in the appraisal system results in a sustainable talent management process, which is related to a continued taking up of challenges and development of related skills.
6. Development of team learning and creating trust; by stimulating individuals to share their personal ambition with each other they will get to know, understand and appreciate each other better, which forms a stable basis for greater mutual respect and trust.
7. Personal Balanced Scorecard helps to manage your time effectively and manage yourself like a business.
8. Personal Balanced Scorecard drives out fear; it creates conditions to eliminate fears of employees and enable them to realize their full potential and contribute creatively.
9. Aligning personal bsc with corporate bsc reduces stress and burnout.
10. Enhancement of employee engagement; by matching the personal ambition with the shared organizational ambition.
Balancing people and the organization
Our work in scorecards, performance and organizational development has led us to a further factor at work, a pervasive structural and cultural issue that impedes improved financial performance. What we are referring to is the aligning of individuals’ personal goals and ambitions with those of the organization, a prerequisite for sustainable culture change. Alignment means working through core values and critical success factors to link the organization’s vision, mission and core values on the one hand with the individual’s personal vision, mission, and core values on the other. In our experience, this lies at the heart of successful scorecard implementation. Traditional scorecard implementations tend to be insufficiently committed to learning and rarely take the personal ambitions of employees into account. Without a set of rules for employees that addresses continuous process improvement and the personal improvement of individual employees, the experience is that too little employee buy-in and insufficient change in the organization’s culture underlies balanced scorecard disappointment. The result, experienced in so many scorecard implementations, is that any improvements tend to be superficial and temporary. We have seen many examples of scorecards that did not achieve alignment and resulted in an apparent performance improvement that dissipated very quickly. In other cases, the improvement never ma-terialized. Frequently in such cases, man-agement’s efforts to improve performance were seen as divisive, viewed by employ-ees as aimed at benefiting senior management compensation plans and fostering a “what’s in it for me” attitude among the employees.In the aligned environment, metrics needs to support the people alignment to organizational alignment. For example, employee metrics (internal processes) might focus on motivation measures such as absenteeism, team productivity, leadership quality and employee satisfaction. Customer-oriented metrics might include share of wallet, retention, recommendations to noncustomers and perceived compatibility of frontline staff with customer goals. Among other things, these can highlight how well employees are functioning as teams, whether personal ambitions are compatible with organizational direction and how quickly the organization can move towards an environment of information-sharing and trust.Such metrics are an addition to, not a replacement for, more traditional metrics, including financial measures such as revenue and costs, as well as business metrics such as customer profitability, share of wallet and retention. Does an alignment approach work? Indications from Europe suggest there can be a beneficial effect. A range of organizations including an integrated oil company, an international bank, a large airline and a consumer technology company all are reporting a positive trend after implementing an alignment approach in major operating divisions. This tends to confirm our hypothesis that lack of alignment is a major inhibitor of sustained performance improvement.
Sustainable performance improvement
Bringing people involvement into scorecards is a step-by-step process that not only involves individual buy-in but also stimulates individual and team learning. Given that the scorecard relies so heavily on knowledge that quickly becomes obsolete, an integrated approach to organizational improvement, development and learning is a prerequisite for scorecard success. The role of the finance department in this is crucial. While the balanced scorecard encompasses the entire organization from a human capital and operational viewpoint, the finance department is uniquely placed to drive the measurement of results. This is very timely, as CAs are finding themselves in the spotlight as leaders in managing and resolving performance exposures along with risk. The scorecard and meeting performance expectations are of course integral to the organization’s risk assessment. Most methods of organizational change “fail because they do not start at the very beginning, that is, with the core of personal identity itself,” according to Hubert Rampersad in Total Performance Scorecard; Redefining Management to Achieve Performance with Integrity. Balanced scorecard performance is not a question of concept so much as execution. The consequences relate to the near-universal difficulty in getting sustained performance. The solution lies in aligning employee and organization goals and addressing real performance culture change.Our conclusion, based on 20 years of research, is that scorecard performance depends on alignment between the goals of the organization and the personal goals of the employees to realize transformational performance change.