Balanced Scorecard

The balanced scorecard is a new management concept which helps managers at all levels monitor results in their key areas. An article by Robert Kaplan and David Norton entitled "The Balanced Scorecard - Measures that Drive Performance" in the Harvard Business Review in 1992 sparked interest in the method, and led to their business bestseller, "The Balanced Scorecard: Translating Strategy into Action", published in 1996.
There's nothing new about using key measurements to take the pulse of an organization. What's new is that Kaplan and Norton have recommended broadening the scope of the measures to include four areas:
• financial performance,
• customer knowledge,
• internal business processes,
• learning and growth.
This allows the monitoring of present performance, but also tries to capture information about how well the organization is positioned to perform well in the future.
Kaplan and Norton cite the following benefits of using the balanced scorecard:
• Focusing the whole organization on the few key things needed to create breakthrough performance.
• Helping to integrate various corporate programs, such as quality, re-engineering, and customer service initiatives.
• Breaking down strategic measures to local levels so that unit managers, operators, and employees can see what's required at their level to roll into excellent performance overall.
Similarity to Hoshin Planning
The balanced scorecard has strong similarities to Hoshin Planning or hoshin kanri, the organization-wide strategic planning system used widely in Japanese companies. Both seek breakthrough performance, alignment, and integrated targets for all levels. The balanced scorecard suggests which specific areas should be measured for a balanced picture, but this isn't contradictory to Hoshin Planning. One thing that the Japanese emphasize is "catchball", the process of give and take between levels that helps to define strategy in Japanese companies. The balanced scorecard method seems to be more of a one-way street -- the executive team creates the strategy, and it cascades down from there.
One cautionary note
You tend to get what you measure for, since people will work to achieve the explicit targets which are set. Dr. Deming feared this effect, noting that people would skew their work to meet particular incentive pay targets. For example, emphasizing traditional financial measures tends to encourage short-term thinking - like rigging shipping schedules to make the monthly sales look good, or aggressively discounting to meet year-end targets. Kaplan and Norton, recognizing this, urge a more balanced set of measurements, which is good. Even so, people will work to achieve their scorecard goals, and may ignore important things which are not on the scorecard. Or, if the scorecard is not refreshed often enough, what looked like an important goal in January may not be very germane in June. Kaplan and Norton recognize these risks, and they don't pretend that they have said the final word on scorecards.



The balanced scorecard forces managers to look at the business from four important perspectives. It links performance measures by requiring firms to address four basic questions:

(a) How do customers see us? - Customer perspective
(b) What must we excel at? - Internal perspective
(c) Can we continue to improve and create value? - Innovation & learning perspective
(d) How do we look to shareholders? - Financial perspective

Motivation theorists and their theories

Motivation theorists and their theories

Although the process of management is as old as history, scientific management as we know it today is basically a twentieth century phenomenon. Also, as in some other fields, practice has been far ahead of theory.
This is still true in the field of management, contrary to the situation in some of the pure sciences. For instance, Albert Einstein, formulates a theory, which is later proved by decades of intensive research and experimentation. Not so in the field of management.
In fact this field has been so devoid of real fundamental work so far, that Herbert A. Simon is the first management theoretician to win the Nobel Prize for Economics in 1978. His contribution itself gives a clue to the difficulty, bordering on impossibility, of real fundamental work in this field concerned with people. In order to arrive at a correct decision, the manager must have all the information necessary relevant to the various factors and all the time in the world to analyze the same.
This is seldom, if ever, the case. Both the information available and the time at the managers disposal are limited, but he or she must make a decision. And the decision is, therefore, not the optimum one but a 'satisficing' one - in effect, a satisfactory compromise under the real conditions prevailing in the management 'arena'.

Traditional theory 'X'

This can best be ascribed to Sigmund Freud who was no lover of people, and was far from being optimistic. Theory X assumes that people are lazy; they hate work to the extent that they avoid it; they have no ambition, take no initiative and avoid taking any responsibility; all they want is security, and to get them to do any work, they must be rewarded, coerced, intimidated and punished. This is the so-called 'stick and carrot' philosophy of management. If this theory were valid, managers will have to constantly police their staff, whom they cannot trust and who will refuse to cooperate. In such an oppressive and frustrating atmosphere, both for the manager and the managed, there is no possibility of any achievement or any creative work. But fortunately, as we know, this is not the case.

Theory 'Y' - Douglas McGregor

This is in sharp contrast to theory 'X'. McGregor believed that people want to learn and that work is their natural activity to the extent that they develop self-discipline and self-development. They see their reward not so much in cash payments as in the freedom to do difficult and challenging work by themselves. The managers job is to 'dovetail' the human wish for self-development into the organizations need for maximum productive efficiency. The basic objectives of both are therefore met and with imagination and sincerity, the enormous potential can be tapped.
Does it sound too good to be true? It could be construed, by some, that Theory 'Y' management is soft and slack. This is not true and the proof is in the 'pudding', for it has already proved its worth in the USA and elsewhere. For best results, the persons must be carefully selected to form a homogeneous group. A good leader of such a group may conveniently 'absent' from group meetings so they can discuss the matters freely and help select and 'groom' a new leader. The leader does no longer hanker after power, lets people develop freely, and may even (it is hoped) enjoy watching the development and actualization of people, as if, by themselves. Everyone, and most of all the organization, gains as a result.

Theory 'Z' - Abraham Maslow

This is a refreshing change from the theory X of Freud, by a fellow psychologist, Abraham Maslow. Maslow totally rejects the dark and dingy Freudian basement and takes us out into the fresh, open, sunny and cheerful atmosphere. He is the main founder of the humanistic school or the third force which holds that all the good qualities are inherent in people, at least, at birth, although later they are gradually lost.
Maslow's central theme revolves around the meaning and significance of human work and seems to epitomize Voltaire's observation in Candide, 'work banishes the three great evils -boredom, vice and poverty'. The great sage Yajnavalkya explains in the Brihadaranyaka Upanishad that by good works a man becomes holy, by evil works evil. A mans personality is the sum total of his works and that only his works survive a man at death. This is perhaps the essence of Maslow's hierarchy of needs theory, as it is more commonly know.
Maslow's major works include the standard textbook (in collaboration with Mittlemann), Principles of Abnormal Psychology (1941), a seminal paper, 'A Theory of Human Motivation' (1943) and the book, Eupsychian Management (pronounced yew-sigh-keyan) published in 1965. Maslow's theory of human motivation is, in fact, the basis of McGregor's theory 'Y' briefly described above. The basic human needs, according to Maslow, are:
• physiological needs (Lowest)
• safety needs;
• love needs;
• esteem needs; and
• self-actualization needs (Highest)
Mans behavior is seen as dominated by his unsatisfied needs and he is a 'perpetually wanting animal', for when one need is satisfied he aspires for the next higher one. This is, therefore, seen as an ongoing activity, in which the man is totally absorbed in order to attain perfection through self-development.
The highest state of self-actualization is characterized by integrity, responsibility, magnanimity, simplicity and naturalness. Self-actualizers focus on problems external to themselves. His prescription for human salvation is simple, but not easy: 'Hard work and total commitment to doing well the job that fate or personal destiny calls you to do, or any important job that "calls for" doing'.
Maslow has had his share of critics, but he has been able to achieve a refreshing synthesis of divergent and influential philosophies of:
• Marx - economic and physical needs;
• Freud - physical and love needs;
• Adler - esteem needs;
• Goldstein - self-actualization.


Frederick Herzberg - Hygiene / Motivation Theory

This is based on analysis of the interviews of 200 engineers and accountants in the Pittsburgh area in the USA. According to this theory, people work first and foremost in their own self-enlightened interest, for they are truly happy and mentally healthy through work accomplishment. Peoples needs are of two types:
Animal Needs (hygiene factors)
• Supervision
• Interpersonal relations
• Working conditions
• Salary
Human Needs (motivators)
• Recognition
• Work
• Responsibility
• Advancement
Unsatisfactory hygiene factors can act as de-motivators, but if satisfactory, their motivational effect is limited. The psychology of motivation is quite complex and Herzberg has exploded several myths about motivators such as:
• shorter working week;
• increasing wages;
• fringe benefits;
• sensitivity / human relations training;
• communication.
As typical examples, saying 'please' to shop-floor workers does not motivate them to work hard, and telling them about the performance of the company may even antagonize them more. Herzberg regards these also as hygiene factors, which, if satisfactory, satisfy animal needs but not human needs.

Chris Argyris

According to Argyris, organization needs to be redesigned for a fuller utilization of the most precious resource, the workers, in particular their psychological energy. The pyramidal structure will be relegated to the background, and decisions will be taken by small groups rather than by a single boss. Satisfaction in work will be more valued than material rewards. Work should be restructured in order to enable individuals to develop to the fullest extent. At the same time work will become more meaningful and challenging through self-motivation.

Rensis Likert

Likert identified four different styles of management:
• exploitative-authoritative;
• benevolent-authoritative;
• consultative;
• participative.
The participative system was found to be the most effective in that it satisfies the whole range of human needs. Major decisions are taken by groups themselves and this results in achieving high targets and excellent productivity. There is complete trust within the group and the sense of participation leads to a high degree of motivation.

Fred Luthans

Luthans advocates the so-called 'contingency approach' on the basis that certain practices work better than others for certain people and certain jobs. As an example, rigid, clearly defined jobs, authoritative leadership and tight controls lead in some cases to high productivity and satisfaction among workers. In some other cases just the opposite seems to work. It is necessary, therefore, to adapt the leadership style to the particular group of workers and the specific job in hand.

Victor Vroom

Vroom's 'expectancy theory' is an extension of the 'contingency approach'. The leadership style should be 'tailored' to the particular situation and to the particular group. In some cases it appears best for the boss to decide and in others the group arrives at a consensus. An individual should also be rewarded with what he or she perceives as important rather than what the manager perceives. For example, one individual may value a salary increase, whereas another may, instead, value promotion. This theory contributes an insight into the study of employee motivation by explaining how individual goals influence individual performance.
We have discussed above only a selection of the motivation theories and thoughts of the various proponents of the human behavior school of management. Not included here are, among others, the thoughts of:
• Seebohm Rowntree - labor participation in management;
• Elton Mayo - the Hawthorne Experiments;
• Kurt Lewin - group dynamics; force field theory;
• David McClelland - achievement motivation;
• George Humans - the human group;
• William Whyte - the organization man.

MANAGEMENT BY OBJECTIVES

The concept of ‘Management by Objectives’ (MBO) was first given by Peter Drucker in 1954. It can be defined as a process whereby the employees and the superiors come together to identify common goals, the employees set their goals to be achieved, the standards to be taken as the criteria for measurement of their performance and contribution and deciding the course of action to be followed.

The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and the choosing the course of action to

be followed by them, they are more likely to fulfill their responsibilities.

THE MBO PROCESS




UNIQUE FEATURES AND ADVANTAGES OF MBO

The principle behind Management by Objectives (MBO) is to create empowered employees who have clarity of the roles and responsibilities expected from them, understand their objectives to be achieved and thus help in the achievement of organizational as well as personal goals.

Some of the important features and advantages of MBO are:


■Clarity of goals – With MBO, came the concept of SMART goals i.e. goals that are:

Specific
Measurable
Achievable
Realistic, and
Time bound.

The goals thus set are clear, motivating and there is a linkage between organizational goals and performance targets of the employees.



■The focus is on future rather than on past. Goals and standards are set for the performance for the future with periodic reviews and feedback.



■Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment increases employee job satisfaction and commitment.



■Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the enterprise and also solve many problems faced during the period.