Mar 12 2013

Over the last few years I’ve lost count of the times I have heard the term “balanced scorecard” used to describe a set of metrics when in reality what they have is a mix of measures that they think are “balanced”. The connection with what was originally intended & developed by Norton & Kaplan seems at best a distant memory, more likely something that has never been experienced or researched by those who developed the measures.

The Balanced Scorecard is specific in the dimensions it covers; Financial, Customer, Process and Learning & Growth. The first 2 are lagging indicators of the latter 2 leading indicators. I’m not going to profess to be an expert on the balanced Scorecard, but I know what it isn’t. It isn’t a handful of measures or metrics that “feel” balanced because they look at more than one aspect of a process or an operation.

There is a strong linkage between what we do in Lean & the Balanced Scorecard. Phil Jones discussed the connections quite well in his blog about the link between Lean & the Balanced Scorecard. I would expound on his position and say that lean does link quite well to the learning & growth perspective. However the linkage is more indirect through the process focus & the incessant problem solving using the concept of coaching to develop people. This capability development can be about how to complete a process, how to solve a problem (the process used to do so) or what capability needs to be developed to enable (us) to provide something that the customer wants, etc. I suppose Phil’s position about Lean placing less importance on this aspect is true to an extent but there is a linkage nonetheless.

The frustration I have, is that all too often people & businesses focus so much on the financial  aspect of what Lean can do, they forget, choose to ignore or were never taught, that it is actually more about creating a culture where people continually challenge the status quo to create a better environment, a better operation, a better product that meets the customers needs better, etc.

There’s an old proverb that says to look after the pennies & the pounds will look after themselves. Lean is about creating & sustaining a culture where people look after the pennies (details) by relentlessly removing the waste in the operation, by doing so they continually provide the same or more output for the same or usually fewer/lower costs. The pounds will begin to accumulate over time. Toyota’s principles begin with “Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals”. If your Lean initiative, project or programme is all about what it can deliver in bottom line results in the next quarter, it is unlikely to continue to deliver results beyond the 4 quarters.

Of course we can’t forget the financial aspects of anything we do in business, and Lean will deliver significant improvement to the financials but only if we use it to focus on the process & the culture, not if we are only looking for a quick win to boost our quarterly profits. Lean links well to the Balanced Scorecard, but I would argue it links best with the other 3 of the dimensions; Customer, Process, and Learning & Growth.