Risks
Whose Life Is It Anyway?
It’s absolutely fascinating how much leverage going green has gained. It’s hard to miss the marketing, packaging, and commitments that continue to grow and show. Many of us make green choices daily, some bigger, some smaller, and some to feel better, all with positive impacts. My observations are that, in consumer goods, the visible focus is on producing “from recycled” materials or from producing from benign components or processes. But what about all the really big stuff we build, produce, or operate?
The globe is dotted with far too many closed facilities, done with their productive lives, some nasty, awaiting a future that may never look green. Nobody likes them and they serve as reminders and warnings for decision makers. It is easy to presume sinister capitalists or overzealous weapons producers as the blame, but it is hard to escape that it’s a lot about economics and prosecution of the national will and multiple interests. Economics is a bit like physics in that processes will frequently follow the paths of least resistance. Similarly, extraction and harvesting economies have denuded the landscape, inviting regulation and in some sectors and countries, restoration efforts, but not yet without irreversible consequences. Getting to green may require multiple generations and someone to pony up on the costs. There is no Utopia, and the noble natives of the planet Pandora exist only in fantasies; and illusions that these harmonious societies ever existed are unsupported history. It’s challenging, because what got us here may eventually constrain us from getting there. What got us here was our capacity to solve problems and overcome obstacles, motivation notwithstanding. How we frame what are problems and opportunities drives important directional decisions.
After all, decisions are typically biased by the productive capability of what we make, build, or operate. What that means is that there is far more weight and attention given to the costs, effectiveness, and efficiencies of fabricating, constructing, and operating than to what happens at end-of-life. For lots of the big stuff, end-of-life is typically far into the future, messier to deal with, and makes the review and approval process more “difficult.” I’ve tested this hypothesis multiple times over many years, and the responses are consistent, end-of-life and decommissioning are not a big factor in the design discussions. Perhaps that is changing.
Over the last 50 years, some of the ugliness that we contend with as enterprises, governments, and consumers has to do with the direct costs and externalities ensuing from unplanned outcomes or effects at end-of-life. Granted, many plans and proposals have language addressing full life cycle costs, yet the evidence of subsequent actions have not aligned. A lens that I’ve found to be helpful is that what we get is precisely what our design, fabrication, and operation is supposed to give us. If it is not giving us that, then we have to investigate, the design fabrication and operation, where the errors or defects were generated that result in what we’re getting. It is as true for what we’re doing today as for what yet awaits us when we have stop or abandon the process. We’ve already designed, built, and operate with end-of life costs, to a good or poor degree.
The challenge ahead is not simple, simplistic, nor easy. Our economic systems create powerful forces and motivators. I really love the life that technology enables and don’t really want to give it up. I have many friends who build and operate some of the really big stuff and they are good, intelligent, highly principled, and ethical people. They care about the welfare of our world and their legacy as much as we do. The challenge is striking the balance between a more certain today and a sometimes very uncertain tomorrow. It gets really hard, when our positive economic rewards are about what we do in the present. They are immediate and positive, versus far into the future and negative. Which would you pick?
For visionaries, this creates an opportunity. The storms of growing public sentiment and distrust of some industries creates an awesome opportunity to design and differentiate with a smarter end-of-life offering. Smarter end-of-life creates value, reduces compliance burdens, fosters complementary lines of business, impacts investor perceptions, and can have a transformative effect on vision, values, and behaviors. For revisionists, a different family of motivators is often necessary. Carrots have longer lasting benefits than sticks.
Sometimes, the military does this well. The really good conquest and occupation strategies are done and executed against a well developed exit strategy. Forethought enables us to manage the present from the future.
“The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand.” Sun Tzu
What’s Luck Got To Do With It?
“Plans are nothing; planning is everything.” Dwight D. Eisenhower
How much depends on the yearly business plan? For many, it triggers budgets, funding, capital approvals, sanctioned projects, operating targets, salaries, product launches, support activities, hiring, office renovations, perks, …, lots of movement and a myriad of decisions, hopes, dreams, and nightmares. It is often the summary of what we expect, maybe wish or hope, to happen, commit to do, and the outcomes that the world of business should see, translated into the language of finance. How we get to a business plan is often very complex and incorporates science, judgments, guessing, posturing, analysis, modeling, gaming, negotiating, positioning, negotiating, horse trading, quid pro quos, and most importantly, the uneasiness of uncertainty. For some, it starts with a number that becomes the hard operational constraint, or a number that becomes the aspiration goals, or a combination or permutation of both. After years of roles building, executing, and navigating through business plans, many of us have concluded that they are often great for initial direction and alignment, but getting much more challenging for decision making as the fiscal year ensues. Reality looks more like Von Clausewitz’s “fog of war” than the futures we describe in our plan.
One aspect of business planning that continues to surface is the frosting of optimism that flavors them. After all, the business plan underpins our budget request, and we have a lot of interest in its approval. Nobody would ever accuse a turkey of voting for Thanksgiving. Recently we’ve witnessed the BP catastrophic events in the Gulf of Mexico, Apple’s embarrassing iphone reception flaws, and other unanticipated and unplanned failures, perhaps first hand. How outside of the known laws of physics or economics were they? What could we have considered to make a better choice? Would we change our decision with the benefit of retrospect?
As we begin to refine and polish our business plans for the fall submittals, are we confident, hopeful, or fearful? Did we subject our thinking to a skeptic’s review? Do our tools for evaluation ask the right questions? Do our planning, review, and approval process incorporate more science or art? How much is sales and how much is substance in the presentation?
What’s luck got to do with it?
Oh, Now I See!
“I was seldom able to see an opportunity until it had ceased to be one.” Mark Twain.
“Oh, now I see!” It’s a phrase we use so often to convey that we understand, or get it. We use sight as a metaphor for understanding all the time. The word lens is used to mean a channel through which something can be seen or understood. “Mary sees the world through rose colored lenses,” (an optimist, or naive). We are creatures of pattern recognition and our conjuring process requires imagery to put things in place, or to make sense of what we experience or think. We will typically apply what we know (our storehouse of imagery) to what we see and work hard to make sense of things.
Lenses matter and the choice of lenses have interesting effects on what follows. We believe that lenses allow us to see better, and that is true, but for a very limited and specific range of stuff. The lens is helpful in that it blocks out an infinite number of things we could see or consider so that we get clarity and detail on what the lens puts into focus for us. I’ve looked through telescopes and microscopes, sunglasses and readers, wide angle lenses and telephoto ,,,, all bringing into focus different stuff and making me oblivious to everything else around me. If driving fast, I do no longer see what was in front of me seconds before. Nor should I, be looking anywhere but where it’s critical when driving. Texting while driving is illegal in some states, thank goodness.
In our enterprises, we make choices about lenses all the time. We don’t call them lenses, even though they affect what we see and subsequently interpret. If our lenses are the wrong ones, then we’ll just have to deal with interpreting what we see and worry about what we don’t see. If our lenses cover too much to absorb at once, because we’re driving the business so fast, then we’ll just to trust our luck that we did not miss an important turn-off or on-ramp. If our business roadways are all smooth and devoid of danger or speed traps, then it doesn’t matter so much. If the scenery doesn’t change or we’re not trying to take our enterprise anywhere new, then all is good.
Among our most important lenses are what we measure, how well we measure, how often we measure, and what we do with what we measure. They are important if we do actually do something of value with what we measure in time to make a difference. It does us little good to find out that we missed a turn-off two weeks or a month ago, unless we’re pretty good at u-turns and restarts, except when opportunities don’t wait around for us to u-turn. Also, who decides what to measure, or who interprets what we measure, or who decides what to do with what we measure, or who reports what we measure, or doesn’t report what we measure is likely to matter a whole bunch too.
When we go for our annual physical, all the same measurement stuff applies, and we surely hope the doctor and the lab get it right. I lost a cousin to cancer this weekend because a doctor and a lab got the measurements wrong years ago when they could have done something in time to save Bob’s life.
So, when was the last time you checked the lenses you use at work, home, or play?
“There are three classes of people; those who see, those who see when they are shown, and those who do not see.” Leonardo da Vinci.
What If?
There may be a really big storm brewing. It may be a signal from a political barometer, or positioning, real outrage… not sure, but the thunder is increasing. The last few months have stoked the fires of outrage, anger, frustration, and deteriorating confidence from a public that may feel that they may have been too trusting. Mine disasters are prompting a more diligent review of whether laws were broken and whether responsible regulators did not regulate, or were distracted when they should have been focused. The oil spill disaster is challenging the process of due diligence and the veracity of permitting submittals, leaving people scrambling to solve the should-have-been foreseen or explicitly considered in operational risk assessments. The financial crisis and the ensuing Goldman Sachs nightmare is ringing lots of alarm bells around the public service halls, prompting the questions of, “Did we do enough? Were we diligent in our responsibility? Where will the light of review shine next?” I suspect that readership will skyrocket for Government Accountability Office (GAO) reports that have been ringing the bells for regulatory reform, transparency, accountability, and better oversight for many years. The scary part of a pendulum swinging is that it often has an axe attached at the end. The court of public opinion is a feeding frenzy for responsible and irresponsible media.
The challenges ahead are not easy, simple, or clear insofar as right or wrong, the role of government, and the balance between protecting the public trust and preserving an environment that is economically fertile for business. The polarity of positions makes the task of finding societal answers that are workable frighteningly complex, requiring agile minds, principled players, and strategic balance. The ravages of unemployment and a riskier economic outlook may stoke the fires for those in search of the guilty. Anger and the search for public justice enjoy a history of harming too many innocent in search of the guilty.
For those enterprises where compliance is a large economic investment or burden, consider getting ahead of this storm. For those who were doing “just enough to get by,” change is likely around the corner.
Compliance brings three categories of costs:
• The Cost of Non-Compliance. That is all the bad stuff that happens when someone is caught and held accountable for breaking the rules.
• The Cost of Compliance. This is a really big number that captures all the activities and costs associated with understanding the rules, complying, or doing whatever is necessary so as to not be found in non-compliance. This usually has many, many more hidden costs that the explicitly budgeted costs.
• The Cost of the Fear of Non-Compliance. This one is very nasty as it captures all the unnecessary, just in case, better look it over, get more reviews, run it by the lawyers, get lots of extra approvals, let’s have a meeting, and endless tons of costs and constraints heaped on because we are afraid of getting in trouble.
Far too many of the assurance and compliance systems rely on “detect and correct.” The unfortunate consequence of control and contain systems that rely on downstream checks and inspections is that they will always fail to some degree. That means that sometimes we learn that we’re dead before we learn that we’re sick. Yep, failure is what tells us that something is wrong. The smarter folks are applying the principle of “predict and prevent.”
Now, what if the yoke of regulation and compliance is about to get heavier, and those who are responsible for guardianship of the public trust are under greater scrutiny, might they also be thinking about their own fear of non-compliance? What’s the cost to everyone else if that is true?
Where are our enterprises? Is this something to think about, or something to think through?
“A man does what he must – in spite of personal consequences, in spite of obstacles and dangers and pressures – and that is the basis of all human morality.” Winston Churchill
The Roads to Nothing or Zero
Mayan Calendar
Zero is interesting since, strictly speaking, there is nothing that actually is nothing. Just because we can’t see it or have the means to measure or detect it, doesn’t mean it isn’t there. Zero seems like a simple concept, in retrospect, but we often don’t believe that it can exist. Over the years, I’ve encountered incredible walls to surmount in discussions about getting to zero. Stay with me just a little longer.
Zero is, in fact, achievable when we put some tangible qualifiers, like money, patent leather shoes, polio, or Betamax tapes. Those are easy … there are two types of zero that are often hard to conceive, believe, or achieve in the workplace. They are zero defects and zero harm. It’s not because they are impossible or improbable, but because we might be one of those who believe that people are just not good enough to be able to do it. Yet, we can immediately reach zero when conceiving whether or not we can be capable of zero defects or zero harm. In other words, “I have zero chance of achieving zero because, just because.” We can accept some degree, perhaps small, or level of the undesirable as “that’s the way it is,” or “it’s never been done before,” or “we tried that once and failed,” or “whenever you have people working, some things are just unavoidable.” We may have paradigms of acceptability that blind us to possibilities.
Yet, some do achieve zero. Can they sustain zero? Perhaps it is achievable with focus, discipline, and follow-through. Is it worth it? What are the consequences of defects and harm? What do our values say about what we can tolerate a little and what we consider intolerable?
So, where is zero in our paradigms? Is it achievable? I’ve heard from some wearing the yoke of unhealthy practices, be they smoking, alcoholism, or too many supersized heart stoppers with a side of fries, that they believe that the chances of getting to zero are so small, that trying is just a waste of time. What would we say to them if they are dear ones?
What if our processes were wearing the yoke of unhealthy practices? Is trying just a waste of time? If our product or service creates failure for our customer, would we say, “that’s the way it is,” or “it’s never been done before,” or “we tried that once and failed,” or “whenever you have people working, some things are just unavoidable?” Would we say the same to the family of someone who was hurt or destroyed in our workplace?
So, should we take the road to zero? Consider where the road to nothing goes.
Thoughts?
Seneca, Darwin, And The Flying Dinosaurs
“It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” Charles Darwin. It is very specific about who or what survives, yet the more significant message is the meaning that “if you are not responsive to change, you will not survive.” There is ample anthropological evidence providing insights into how the differences we see between peoples may have evolved. It becomes more fascinating when I see birds that share a common ancestor with dinosaurs. Much of the same applies to organizations, governments, cities, businesses, religions, and even management systems. Management systems contain the DNA and resources that define how an organization operates with the intent of thriving and surviving to thrive another day.
A stroll through business publications and historical data depicts behaviors that resemble evolutionary changes. Three important observations come to mind, interestingly evolutionary and fraught with nonlinearities:
- Survival comes from responsiveness to changing requirements
- Extinction comes from decay or disruption
- Decay makes us more susceptible to disruption
Responsiveness connotes action. Something around us changes and we change to take advantage of it or don’t change quickly enough and we become victims of it. We can’t always control what may be changing, nor can we predict them all. But we can always make a safe bet, that is, change is coming, always coming. Are we going to survive the changes? Can we increase our chances of surviving?
“Luck is when preparation meets opportunity” Seneca, mid-1st century AD.
I really like the way Seneca frames change as an opportunity. We have virtual evidence that change is afoot across incalculable dimensions. How we communicate and are connected or marginalized is different and accelerating in morphing. The winners and losers as measured by financial indicators display a huge transformation from economies that harvested resources and converted them in to durables (steel, coal, wood products, and automotive) to one that delivers service and convenience on a virtual plane. Who would have dreamed 50 years ago that giants like Microsoft and Apple would be major players while some giants, perhaps too rigid to adapt, became extinct or were devoured by a competitor or another hungry species?
I’m fascinated because the emergent behemoths have figured out how to redefine how convenience is delivered and value is created. Value has always been created by creating convenience, but the virtual world redefined what is possible. The world Thomas Friedman describes in “The World is Flat” is one where the interconnected web strips away some of the advantages the big and strong hoarded. As the early giants created a generation of convenience on the shoulders of the Industrial Revolution, the rigidity of the delivery systems, consumption of materials, and business management systems evolved into big and strong. Dinosaurs were big and strong too.
The last two years certainly met the standard of being a disruption, a mini ice age from a cataclysmic event. But the decay that preceded and followed it may likely claim more for the museums. Are we going to be lucky? If we’re good, how long does good last?
“There is opportunity in every storm”
A Tale of Two Tigers
“It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way.” So begins “A Tale of Two Cities” by Charles Dickens. Although a story replete with social commentary, it brings into focus the impacts of adversity, particularly on the elite and unprepared. Aristocracy meant respect and a special place in the eyes of many, perhaps leading to hubris, and hubris often led to disaster.
Our current tale is akin, perhaps “A Tale of Two Tigers”. The recent months have put the light on two icons of the modern world, a commercial aristocracy, Tiger Woods and Toyota. Both have demonstrated a level of performance superiority that has not only secured dominance as the standards for performance and quality, but have become idolized and revered as role models for industry. The Toyota brand has bred an image and reputation that placed their management system as near perfection in creating strategy, culture, and execution excellence, devoid of constraints, and in perfect harmony with customers and suppliers. Tiger Woods may well be the greatest golfer of all time whose incomparable agility on the golf course has led to corporate sponsorship inclusive of Rolex Watches and Accenture, the consulting giant, both seeking affinity with the image of high performance.
What got the two Tigers to the pinnacle may have left them unprepared for the calamities they are confronting today. Success and recognition are powerful narcotics for anyone or any enterprise. Success reinforces confidence and creates energy for increased initiative, spurs growth and breeds many followers. Success can sometimes make us believe that it comes from our special place in the order of things, earned through focus, discipline and follow-through. Success can make us believe that we are better. But does it prepare us for adversity? When all is well, how often do we think of the world otherwise? How often do we prepare for failure and how to deal with it?
This “Tale of Two Tigers” can be about any or all of us. The financial meltdown and experiences with the global economy of the last 18 months are not unlike the two tigers. Success led to confidence and some of it diverted into hubris, we followed in adulation with investments, and perhaps did not think about a need to prepare for the adversity that followed.
So let’s consider:
- What makes us successful?
- Does our success create a belief that we are good or perhaps that we’re lucky?
- What are our assumptions of what lies ahead? Will these new trees continue to grow to the sky?
- What book are we reading or writing about the “Way” to succeed?
- Are we investing in becoming better at what is making us winners today? Does that mean that tomorrow will be like today?
- In 1970 there were 35,000 tigers in the world. Today, fewer than 7,000 tigers are left. Why is that?
Why did the French build the Maginot Line? What is the difference between confidence and complacency? Defending Against Risks with Structures and Controls? Think Again!
Also: Toyota’s Headache and Tylenol and
Simply Speaking with Albert Einstein
Years ago I was visiting a financial services regional office and conducting an informal “walk-through” prior to deciding on whether to pursue business development with them. This particular division serviced auto loans. As I went around the workstations I noticed a desk with a very large stack of mail, a very large stack. One individual was opening and sorting each envelope. I asked about it and was told that the individual was the accounting manager and they were the only person in the facility authorized to open incoming mail. I tried very hard to mask my reaction as I asked why that rule was in place. “Well, a few years ago we had an individual steal some money from a payment envelope, so we implemented this improved control so that never happens again.” Flashes of Humphrey Bogart and strawberries in the “Caine Mutiny” suddenly appeared.
I’m certain most of us have countless similar stories. I’ve long held that given enough time, today’s problems generate solutions that eventually become tomorrow’s problems. In fact, most controls have an inherent constraining dimension; they want to keep something from happening. When they are good controls, they attack the current causes and then adapt to changes in inputs or causes, but for many controls, not often enough. Controls become part of the paradigms of “how we do it around here.” Sadly, poor controls tend to punish the innocent in search of the guilty.
Albert Einstein is well known for his genius and insights into the nature of the cosmos. He cracked the nut around what gravity is, something Isaac Newton described as an attractive force, but could not explain. Genius notwithstanding, many of his enjoyable insights have survived in quotations that serve us well in life and business. Constraints that we encounter in our processes are often invisible to our eyes because they are consistent with the way we think or have been trained to see. We are empirical creatures who observe patterns and ascribe meaning to patterns. When we try something and it appears to work, we store that bit of information and draw upon it over and over. We call that knowledge and experience and it gives us and those around us comfort and confidence, even when that knowledge and experience is the cause of current calamities. Albert would say, “We can’t solve problems by using the same kind of thinking we used when we created them.”
There is unquestionable merit in reducing unnecessary complexity and inappropriate controls in or work and lives. In fact, Albert would say, “Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius — and a lot of courage — to move in the opposite direction.” Many have assumed that simplification is the way to go. I’ve noticed a disturbing trend to make simplification the objective of improvement, potentially at the expense of quality and consequences. Years ago a good friend explained that where they grew up, calling someone “simple” was very uncomplimentary …. I understand why. Simplification does not mean simple.
Our auto loan example likely dealt with dishonest behavior, but at a huge price to flow and bandwidth. It did not address the root causes that were likely to be more complex and likely to emerge in other behaviors.
“Everything should be made as simple as possible, but not simpler.”
Blaise Pascal and the Somali Pirates
Are we confident that our processes are delivering to the right quality and compliance requirements? How did we decide what the right controls, checks and balances are? Do we build in a safety margin or pay for insurance because we might fail? After all, failure has consequences, and insurance and safety cushions can be costly.
For many years I’ve held the view that when managing processes, decisions about controls and risk management fall into a range that has fear-driven on one end and confidence-driven at the other. Admittedly, this omits the groups that are either clueless, delusional, or the different forms of arrogant. Fear or confidence can be very rational or irrational, often affected by our access to information, our knowledge, skill, bandwidth … and endless other influences. But in any of the cases, we make choices and implement decisions that affect how we do what we do and what costs we incur in doing it.
For a long time, most of human history, the decisions about controls and insurance were driven by a lot of subjectivity or by the economic value of the product or delivery. Fear of loss was a big factor. Until someone figured that likelihood of something happening matters and that there are ways of determining that likelihood.
In fact, the evolution of the commercial applications of probability took decision making on just a journey. When insuring merchant vessels, decisions about risks and premiums moved from very subjective values based on the value of the cargo only to one that comprised value and probabilities and consequences. Much of that journey’s naissance we owe to the French essayist, mathematician, philosopher and religious thinker, Blaise Pascal. His life and works are essential reads. Additionally, Pascal sponsored and funded work by others, among which was entitled La Logique, Ou L’art de Penser by the Port-Royal monastery in Paris (Pascal also owned a transport company and needed to figure out the cost and level of insurance). The author of the work, Antoine Arnauld said, “Fear of harm ought to be proportional not merely to the gravity of the harm, but also to the probability of the event.”
The ramifications of this journey transformed decision making and problem solving, all the way to our current approaches that include Six Sigma, Lean and countless modeling algorithms. So in some instances, fear could be replaced by objectivity and the science of prediction leading to prevention and upstream controls. History could be tracked and the data could be complied to provide us with distributions that allow us to make inferences about the future, should the future be like the past. This gave us lots of opportunities to quantify our risks and improve our decision making and investments in controls or insurance. Now, that’s confidence.
Confidence that is supported by facts is surely better than actions driven by ignorance and fear. This is true as long as the past is a great predictor of the future. Since we rely on these predictions, we become predictable. Often that’s really good, but it can also create blinders when things or others are changing. Some of that has been happening with more frequency and some have happened with severe consequences, September 11, 2001 as a grim reminder. The growth of Somali piracy has certainly redefined the boundaries between fear and confidence as well as the requirements for capabilities and insurance.
So, the basis for fear or confidence may be evolving. The capabilities that serve us well to control the many areas that behave like our past are essential. Are they sufficient?
- When evaluating our process and decision making, do we look at the rates of change we face?
- Are the skills and tools that made us successful and confident balanced against the changes and requirements we must meet?
- Are we investing in responsiveness to change or insurance against the consequences of failure?
What’s the Score?
Have you ever balanced a scorecard? What did you do? How did you decide what balanced meant? What did you do with the scorecard? Did you win? Was it a competitive win or was it a within the scorecard win? Would an outsider evaluate you as a winner without seeing your scorecard?
The balanced scorecard has been a source of lots of debate and consulting armies going about guiding organizations on keeping score. My observation has been that too often the exercise has amounted to filling data into a predetermined template from what data is available and accessible with follow on work to “interpret” what the scoreboard means. What continues to nag me is the distractions that some predetermined “balanced” views may precipitate.
First, no two categories are ever equal. But if you try to make them equal on a scorecard, you will get unintended consequences. The more something is claimed in a slogan, the less likely it is true in measurable practices.
“Employees are our greatest asset” is a statement of value, not a measure of opinions that are captured in an employee satisfaction survey score. What does the scorecard really measure? I would argue that, if asset quality matters, maybe it should measure how quickly we acquire good assets, secure the most out of the earning capacity, and then how quickly we dispose of bad assets. However, political correctness and actually treating people as assets is challenging and likely look bad on surveys. A scorecard would be sensitive to what the game is and how people are to be utilized at what stage of the game. The categories are dynamic as well as the numbers. Take a hard look at what tracking “training hours” does within very large organizations. You will find some interesting compliance systems that actually govern the speed of learning (check the on-line stuff) so that the scorecard hours are achieved. Yes, we are willing to slow down the quick studies and reduce their productive time for the sake of the “score.”
Financial strategy is even more dynamic and much more complex. What we desire to emphasize on the balance sheet or the income statement is very different for industries, organizations, health, global economy, volatility, growth, risks, competitors, asset mix, exposure … to name a few. So, the scorecard categories and weights are dynamic, not static, so the scorecard structure is not structural, but fluid. A structured scorecard in a dynamic environment will always lag the signals and thereby trigger responses inappropriately. Does it enable or constrain the best decisions? And, we can’t use the scorecard to score itself.
Customer satisfaction is a fascinating score to evaluate, if it leads to better decisions in time to make a difference, where it needs to make a difference. How often have we observed what appears to be poor business decision making in order to appease a “customer tyrant” for fear of low satisfaction scores? We all have. So again, the complexities of a dynamic world require sufficient agility in the relationship between what matters virtually so that the “score” leads to proper action. Again, what does balance in the score really mean and what does it really drive in behaviors? Does the statistical “dulling” effect hide the scary customer stuff happening on the fringes where risks are born and changes are incubating?
Now, for those that feel this is going in the direction of winging it and data anarchy, not so. Score is important, but balance cannot always be predetermined or should be hard-wired in dynamic environments. If life is quiet and stable and predictable, this may be an irritating and irrelevant sounding blog posting. I don’t know anybody like that anymore.
The questions that we should be vigilant about measurement and scorekeeping must be configured around decision making only. Data is useful for what I am about to decide. That’s it. The scorecard, scoreboard, or dashboard must fit the game we are playing and where and when we are playing it. Balance can be a dynamic challenge for multinational entities in a multi-polar world.
This should be exciting, if we agree. It is exciting because technology today enables transparency at the speed of light. Our interconnectivity and networked interconnections have the capacity to render a view to enable dynamic balance. Balance is a consequence of judgment and agility. Both require virtual transparency that grabs new and relevant lenses to look at what is happening when the decisions can alter the future most effectively.
Thoughts?
