Saturday, 14 July 2007

Balancing your scorecard (2)

WATCHING the British Grand Prix over the weekend was a visual demonstration in total coordination. Traveling at speeds well above what many normal drivers can even imagine, the competitors race with very little room for error – with the slightest lapse of concentration potentially costing them their own lives.

With business being the way it is these days, running companies is almost like driving Formula One racing machines. A wrong turn and somebody else could be in the lead. Similarly, an opening spotted before others have noticed it could put an organization very quickly in the forefront.

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The problem is – very few CEOs drive their companies like Lewis Hamilton pilots his McLaren.

Most large organizations are uncoordinated, lumbering, and slow to adapt to change. In the context of Formula One racing, many would have collapsed a long time ago, if not for the fact that their competitors are likewise velocity-challenged.

Rather than the high speed sport of motor racing, looking at companies operate is mostly like watching a game of lawn bowling – and played in slow motion at that.

Without a doubt, the way they are organized has got a lot to do with it. And of course, the way their performance is measured only makes the problem even worse.

Last week, we introduced the metaphor of multiple drivers controlling one vehicle, with neither of them knowing how to drive a car on their own. There cannot be a more appropriate way to describe how many companies are run these days.

Specialization, for all the benefits that it brings, is a major culprit in promoting fragmented thinking. Each division, department or section does its own thing, often with very little understanding of how they affect the total organization.

Invariably, they view their colleagues with suspicion, even contempt, for doing “unnecessary” things, and not understanding their own points of view.

How often do we see marketing at odds with production, with both disagreeing with finance? Possibly enough times to convince ourselves that this is actually how things should be.

The conflict is all a matter of perspective – time perspective that is.

Marketing thinks in the future, production deals mainly with the present, and finance mostly dwells in the past. This to me best illustrates what the whole problem is about.

Most of us non-marketing individuals often think that our marketing colleagues just waste company money, with campaigns that do not seem to produce tangible benefits that we can accurately measure. Those of us who have never stepped on a factory floor will have no appreciation for the day-to-day problems our production colleagues face to get our products out the door.

Why does this happen?

Well, think about it carefully. Most companies measure performance by the numbers that their accounting systems produce. Therefore all we see are historical costs – consequences of actions that have already taken place – without regard to the future benefit that they could bring, or otherwise the potential harm that they could cause.

Clearly therefore, any measurement system that focuses mainly only on the past, must be consigned to remain there.

ANNOUNCEMENT: The UP Cebu High School Class of 1982 will be having its Silver Jubilee Anniversary Reunion at the Shangri-la Hotel, Mactan, Cebu on the 22nd of July 2007. All alumni are encouraged to attend. For details please contact Virgil Urgel (09204039138), Joy Go (09178515601), Carlyn Relampagos (09209005970) or Randy Cabahug (09173229923).

Published in the Sun Star Daily, Saturday, July 14, 2007 (

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