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Creating scorecards can stifle performance

Governance | Mike Hudson | 1 Nov 2009

Stephen Moreton challenges Mike Hudson's view that scorecards can be a useful way of helping charities to assemble and manage their performance information.

The excerpt from Mike Hudson's Managing without Profit book that was published recently by Civil Society Governance gave a lot of food for thought, but gave more significant cause for concern.

Before launching into an all-out attack, I should now write a section on the uses and benefits of Kaplan and Norton’s balanced Scorecard, but  this has all been done before and life is too short to do everything. What I would like to do is highlight how this management model can stifle performance – particularly in the voluntary sector – and what key considerations need to be in place for those who are keen to apply the model for their organisation, to avoid this ‘stifling’ effect.

So straight to business – what is the problem?  The problem is that this model can make everyone focus on the individual pieces  of the jigsaw, rather than the actual picture the pieces create when  they are put together.This model, implemented without sufficient insight, can make everyone involved with the organisation to feel their activities are constantly being measured, and  they will not  be able to focus solely on their tasks, because they will also be concerned about meeting the requirements  of the evaluation. The knock-on effect is that people’s personal interests and the organisational targets they  are responsible for exist as separate entities,  and the organisational ‘picture’ is damaged.

The problem is rooted in 1) the design, and 2) the implementation of the balanced scorecard approach.

1. What the model is seeking to do is to establish the contributory factors that make the organisation successful.

As an example, take the case study scorecard referred to in the magazine article in question –  95 per cent of appraisals completed by deadline.  A focus on this measure can undermine the whole purpose of appraisals, which could be paraphrased as: ‘to check staff and the organisation are happy with their relationship and change things if not’.

The key issue here is that the scorecard is using the wrong measures. We are seeking to check the extent to which the individual’s personal aspirations are aligned to the organisation’s aspirations.  We need to measure other things here – not just whether appraisals happen on time, whether staff turnover is increasing or decreasing,  or how much is spent on training etc.

Hamel (2007) argues that getting the most  out of people requires them to be creative and committed, and this involves less management rather than more. It means less of the ‘wrong’ type of measurement. So what should  be measured?

Again, Hamel suggests the following focuses for measurement for organisations that are seeking to be places fit for human beings, where freedom and discipline are not mutually exclusive:

• the extent people have meaning in their work;
• the extent of innovation and management mutants (both positive and negative ‘deviants’);
• measuring the political decision-making that influences what ideas are adopted;
• the opportunities that exist in reality for people to make a contribution to the organisation;

With these in place the rest of the ‘business’ of  the organisation can be left to itself. The finance can be managed, the customer will be happy,  the working cultures and infrastructure can be  fit for purpose, and learning can flourish.

2. Implementation

Any measurement of ability and motivation  must therefore be aligned with the individual’s desire for ‘meaning’ so the individual perceives the measurement to be supportive rather than intrusive. As soon as someone perceives they are being measured, they will focus on the targets they are being measured against and not the greater purpose of the task, thus detracting  from the organisation’s effectiveness.

So, whilst we could design a balanced scorecard that gets all the right measures in place, we can totally undermine this with clumsy implementation. People must not perceive that they or their contribution are being measured.

Rather, they must perceive the organisation  is determined to make sure that everybody  has the opportunity to contribute to what is important for success. The focus moves from concentrating on whether the pieces of the jigsaw are in place, to the actual picture that needs to be created.

This philosophy of management is central to  the voluntary sector where both paid staff and volunteers value the opportunity to ‘live, breathe and have being’ whilst contributing their talent, passion, creativity, time and loyalty in a way  that is of value to the organisation they are committed to.

Stephen Moreton is head of education & developmen at Attend

Response from Mike Hudson...

Stephen Moreton is right to highlight the dangers of using scorecards inappropriately, but wrong to imply that organisations therefore should not have systems that  allow managers and board members  to quantify and track performance.

Organisations, departments, teams and individuals need to know how well they are doing. Performance measures help people  to make those judgements.

Together with soft information such as case examples and impressions, they enable people to decide whether all parts of the organisation are making a significant contribution to the achievement of its objectives.

Without some measures, it is not possible for managers and board members to make good judgements about whether the organisation is performing at the highest level, or whether it has become a bit complacent and needs  action to ensure that it accomplishes more  with its resources.

What scorecards do is force people  to develop the best ‘indicators’ of performance, and then use them to celebrate achievements and pinpoint underperforming activities that require attention.

They do not in any way devalue those crucially important but less measurable characteristics of successful organisations such as people’s motivation, their creativity and the quality of leadership and teamwork that are all ingredients of successful organisations. Scorecards are a tool and should not be adhered to slavishly.

Mike Hudson is director at Compass Partnership 

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