Complexity LO9109

kent.myers@lmco.com
Wed, 14 Aug 1996 11:18:50 -0400

Replying to LO9067 --

Norton's co-author is Robert S. Kaplan. Their new book, which might be
out by now, is The Balanced Scorecard: Translating Strategy into Action.
Kaplan's last article on this was quite interesting -- Using the Balanced
Scorecard as a Strategic Management System, HBR, Jan-Feb 96.

Many of those who write about non-financial measurement seem to want to
extend the certainties of accounting. Kaplan is different. He recognizes
that he is in new territory and appears to be guided by systems thinking,
although he doesn't always use the language. He faces the difficulty of
formulating a set of measures instead of just saying what they should be
like. The results are easily criticized (by accountants) as incomplete,
hard to interpret, "subjective", not a fit basis for automating your
management function, and so forth. But the scorecards he produces are
relevant. He is refreshingly honest about the process of formulating a
scorecard. (I've done several, and Kaplan is the only one who has ever
described my experiences.) He probably isn't as honest about the wonderful
results of using them, but there are clearly benefits.

Kaplan seems to have jumped a level of analysis and doesn't tie his
scorecard to activity based costing. In this sense, he is not making a
bridge to existing practices. On the other hand, he recognizes that
executives are influenced by data, and an opportunity exists if you can
put data in front of them in a form that looks right. The existing
practice that he is keying on is executive discourse. He creates a new
"accounting sheet", which has data that are at least as relevant to
strategic issues as traditional financial data. Part of his art is to call
it a "scorecard". No executive will admit to not caring about the score
or not being able to read the score.

I agree that non-financial accounting and systems thinking can be
connected to the benefit of both. (Peter Drucker once mentioned some
radical concepts in accounting, and how they would develop to support the
new economy and its organizations, but I was never able to track his
sources.)

Kent Myers
Alexandria, VA myersk@us.net

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kent.myers@lmco.com

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