Applying the Balanced Scorecard

It’s fifteen years ago that I was introduced to the Balanced Scorecard, and in all my consulting work on strategy since I have consistently incorporated its approach. The concepts are well known and applied by a reasonable number of organisations in Kenya, but still only a small minority. So let me take you through the basics and how they were introduced into the world.

The Balanced Scorecard was launched in January 1992 by Robert Kaplan and David Norton through an article in the Harvard Business Review. They had observed that the scorecard of most companies was unbalanced, with disproportionate emphasis on revenues and costs, cash flows and profits, return-on-investment and earnings-per-share. Yet these are but the consequences of other factors, ones that drive financial performance.

So they helped us with a simple and universally applicable way of looking at a business from four key perspectives: the satisfaction of our customers, through the products and services we offer them; the wellbeing of our people, which they described as “learning, innovation and growth”; systems and processes; and yes, financial performance, with particular emphasis on pleasing shareholders.

Even at its outset, the Balanced Scorecard noted the linkages between the four perspectives, encouraging companies to identify the cause-and-effect relationships between them. They also pointed out that the financial performance measures of the day over-focused on backward-looking and short-term measures.

Plus, the fact that business leaders needed to show how what was happening in the other three perspectives resulted in strong financial results: they are the lead factors and the financial perspective is the lag one. Having said that though, finance must be available to fund the lead factors, so that perspective also leads. That’s the interconnectedness which is revealed so clearly by he Balanced Scorecard.

In their article, Kaplan and Norton pointed out that while traditionally it was financial experts who put together a company’s performance measures – they were after all, unbalanced in favour of the financials – now it became clear why all of the senior management team needed to participate in putting their company’s scorecard together, in a spirit of “systems thinking”. And this was also much more likely to result in productive collaboration between them.

But relative to how we see the Balanced Scorecard today it was relatively “primitive” at the outset, merely getting companies to lay out operational numbers for the four pillars, through what one might call a performance measurement framework, rather than offering a full strategic performance management tool.

The initial version was followed by a second-generation Balanced Scorecard in 1993, and a third generation in the late nineties. Since then there have been overlays that merely reflected what was trendy at the time – first Total Quality Management, now sustainability and Environmental, Social and Governance issues (where the interests of shareholders are expanded to include all key stakeholders), and maybe AI next. Meanwhile, although the Balanced Scorecard was initially only applied to for-profits, its use was expanded to not-for-profits and to government, as the four perspectives apply equally well everywhere.

Not everyone who has applied the Balanced Scorecard approach to their strategic planning has succeeded in making it work for them, and from what I have seen the main cause of failure has been overcomplicating it and also coming up with far too many objectives and measures. The other issue is not following through with managing and adapting the implementation, so like many other kinds of strategic plans, it just gathers dust on a shelf.

And as any other strategic plan it must be cascaded down the organisation, so there is vertical as well as horizontal alignment, and indeed it should reach the individual level, with each person knowing how they contribute to the overall objectives, and indeed to the overarching vision.

I and my colleague Twalib Ebrahim have helped all kinds of organisations to work with the Balanced Scorecard, from large government bodies, development partners and corporates, to NGOs and research institutions, to large and small family businesses. For our most sophisticated clients, when we explained our approach they worried it would be so simple as to be simplistic. And among the less exposed, those who had never imagined they could become “strategic thinkers”, their concern was whether they could handle it all.

Once we got going though, the inspiration of Kaplan and Norton, applied by us, pulled them all through to become enthusiastic disciples. So if you are not familiar with the Balanced Scorecard, I encourage you to find out more about it and to have a go.

The Native Son

Almost exactly ten years ago I wrote a column here about the launch of Joe Wanjui’s book, The Native Son: Experiences of a Kenyan Entrepreneur. In it I described the enthusiasm around the event where, as I put it then, “speakers during the evening were so effusive about the author who was being fêted that when it was his turn to speak Joe wondered whether all the talk had been about someone else who just had the same name. Indeed had the man of the moment not been his usual alive, thoughtful and sparkling self, we could have been forgiven for imagining we were listening to the eulogies at his… well, you know what I mean.”

Sadly, a decade later it is indeed time to eulogise this wonderful gentleman, and I will do so by taking from my earlier article. Going back to the book launch, I described how it took place at the University of Nairobi, where Joe had recently completed his time as its Chancellor. Among those who talked about the man and his book we heard something of his rich family life from his friend Fr. Dominic Wamugunda and from his eldest daughter and two of his grandchildren. Others like Roger Steadman spoke of him as a successful entrepreneur and businessman.

Chief Guest George Magoha, then the University of Nairobi’s Vice Chancellor, talked about the leader who for almost a decade was his Chancellor. “He found us as professors, thinking in truncated mode,” confessed the institution’s CEO, adding proudly “but now we are university managers.” In the same vein the Vice Chancellor noted that under Joe’s influence the CEO position he filled was sourced competitively, a pioneering and controversial approach for such institutions at the time.

Joe was absolutely for meritocratic appointments, independent of ethnic background, we heard. He brought entrepreneurs into the Council, and he encouraged other businesslike practices. In concluding, Prof. Magoha described Joe as a true friend, “telling you what you don’t want to hear… and then taking you to lunch afterwards”.

As for me, I wrote, I thoroughly enjoyed all my interactions with Joe. I’ve known him since a year after I arrived in Kenya in 1977, when I joined the Rotary Club of Nairobi. Ten years before that Joe was proposed as the first African member of the club, and in 1974 he became its first African president. In his book he revealed that he continued to support our Rotary Club and its noble ideal, as he actively supported so many other worthy causes. Which is why just recently he was made an Honorary Member of our club.

In The Native Son, Joe wrote about becoming a member of the Kenya Institute of Management’s first Governing Council in 1969. By the time I was elected to chair its council in 2000 he was KIM’s National Chairman, or patron, in which capacity he was always available to me as a source of sound advice, I remembered. It was during that time that he and I organised several Chief Executives’ Forums, a concept Joe described in his book as akin to a “mini Davos”. What a great experience it was.

In my earlier article I also mentioned Joe’s valuable contributions to KEPSA, where in its infancy he became the private sector umbrella body’s most active elder and a strong supporter. I was one of KEPSA’s founding directors, and at one of our retreats I had arranged for a presentation to be made on the emerging Brand Kenya project. Joe was present at the event and promptly offered to organise a presentation to President Kibaki, that led to the initiative being propelled to its national position.

For well over three decades I have sat with Joe at many meetings and shared many platforms with him, I wrote, enjoying the benefit of both his wisdom and his wit. To be with him you know you will be with someone who is pragmatic, straightforward and solution-oriented; and, just as important for me, someone with whom you always also expect to share a good laugh.

He was further building his foundation to promote the education of women scientists, I mentioned, and he continued as a director of major institutions in this country. Here’s how I concluded: “I salute the man who grew up feeling disrespected by the colonials as a mere ‘native’ but who emerged a proud native son of Kenya.”

Today I conclude by stating how privileged I feel that I had the opportunity to interact with Joe Wanjui in so many contexts and over so many years. He leaves a great void.