A balancing act

Posted by on September 1st, 2005 at 5:22pm

We live in an ever increasing competitive world which demands or at least expects we succeed in our various pursuits.


What is success? How do you measure it? Is there a single measure of successful performance?


For the Australian Cricket Team was winning the Ashes the only measure of successful performance? For the Adelaide Crows was the 2005 premiership the only measure of success? Are the rating results the only measure of success for a radio station or a TV network? How important is the share price for Telstra’s success? Has a year 12 student who obtained a score of 90 failed to achieve? As individuals would we feel “successful” if Adelaide achieves the highest ranking on the William M Mercer Quality of Life index?


In my opinion “No” is the simple answer to the question: can success be measured by one indicator?  


Given my interest in the Adelaide Crows, I will explore the question and the answer in a little more detail [my apologies to those readers who are not AFL followers].


At the end of the 2004 football season, the Board of the Adelaide Football Club would have considered its past performance, reviewed its five year strategic plan and developed a business plan for the 2005 season. The business plan would have set a number of goals for the coming year related to its strategic objectives.


I do not know the content of the Club’s 2005 Business Plan [or whatever it may be termed] or the performance measures and associated targets for each goal but I would expect it would include goals which could be grouped into the following four major areas of performance measurement [sometimes referred to as dimensions]:


1. financial performance [eg operating surplus]
2. stakeholder satisfaction [eg membership numbers, crowd attendances]
3. operational performance [eg finish in the top eight, injury rehabilitation]
4. organisation learning [eg development of the younger players]
 

So if the Crows loose both finals matches, has the Club had a successful year?


The answer depends on the achievement of targets consistent with strategic objectives and the relative priorities of the various targets.


But how do you bring the range of measures together? How are they related? Are some more important than others? How are the relative priorities determined?


A theory was developed in 1996 by Kaplan and Norton termed the Balanced Scorecard which addressed these questions. Their concern was that in many organisations financial results were the primary [only] measure of performance and insufficient attention was given to other performance indicators. They argued that indicators should be developed with a connected relationship and not as independent elements. The challenge is to develop a set of performance indicators which are ‘balanced’ or ‘weighted’ within the framework of corporate objectives.  


This also presents a challenge for organisations to develop a comprehensive Performance Management System [Management Information System].


And there is an important issue of ‘hard’ [or objective] statistical measurement versus ‘soft’ [or subjective] measurement indicators of say stakeholder satisfaction. For the Adelaide Football Club, high stakeholder satisfaction would manifest itself in increased membership and attendances, greater involvement of sponsors etc. Market research would play a vital role in determining attitudinal attributes of supporters [eg do ticket prices represent value for money].   


Although the balanced scorecard was originally conceived as an important performance measurement system, it soon became evident it could be used to implement strategy.


It is well documented that the most successful of the World’s leading organisations [both commercial and government] use the balanced score card approach. The concept of creating a balanced approach to driving the performance of an organisation is arguably the most powerful management concept of its time, with over 40% of the fortune 1000 US companies having installed versions of the balanced scorecard in the last 10 years.


And staying with a sporting analogy, a balanced score card does not mean a tied Test Match.

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