Balanced scorecard problems solutions and hoshin planning issues was the focus of a Smarter Solutions Lean Six Sigma Master Black Belt (MBB) homework exercise.
In addition, this assignment addressed the benefits of an operational excellence system that can integrate predictive scorecards with the processes that are associated with the performance measurements or key performance indicators (KPIs).
This two-week over two-month MBB training is being conducted in Baltimore, Maryland at the National Electronics Museum.
Balanced Scorecard Problems Solutions and Hoshin Planning Issues Exercise
The wording for this Lean Six Sigma Master Black Belt exercise was:
- Purpose: Describe the book-stated issues relative to traditional balanced scorecards and hoshin planning and the suggested Integrated Enterprise Excellence (IEE) alternative (i.e., an operational excellence system).
- Objective: After reading, Chapter 3 of Integrated Enterprise Excellence, Volume II, page 45, document a summary of issues with traditional scorecard reporting and strategic planning. Describe the suggested IEE alternative.
The following is a summary of the report-outs from two teams.
Team 1: Issues with traditional scorecard reporting that uses techniques such as the balanced scorecard
- Can influence (bad) behaviors.
- Backward looking reports provide only a snapshot in time and are not data (process) driven. Reporting does not provide a prediction statement.
- Difficult to interpret and can lead to ″stories″ that attempt to describe what is currently occurring, which often has questionable value.
- Erroneous conclusions can lead to firefighting common cause variability as though it were special cause. Can create ″heroes″ from fire-drill efforts, where often the problems that were ″fixed″ later simply re-occur.
- Data not driving organization and are sensitive to leadership/organizational change.
Team 1: Issues with traditional strategic planning that uses techniques such as hoshin planning and the balanced scorecards
- Hoshin Kanri issues: A lot of detail to keep track of where one can end up working in the weeds. Form-based report-outs that lead to much paperwork and tabular reporting, which does not stimulate long-term process-improvement thinking.
- Balanced Scorecard issues: Balance of metrics is forced and not a natural balance. Methodology is not process based but instead is based on goal-setting, which often has arbitrary objectives.
Team 1: Benefits of the IEE system over traditional scorecarding and improvement methodologies
- Scorecard balance is natural through linkage to the enterprise’s processes via its value chain.
- Goals are SMART (Specific, Measurable, Actionable, Relevant, and Time-based.
- 30,000-foot-level performance metrics can provide a prediction statement.
- Focuses on what AND how to measure, including the creation of reports that are actionable.
Team 2: Issues with traditional scorecard reporting that uses techniques such as the balanced scorecard
- Ignores history.
- Lacks detail.
- Can provide lagging but does not provide leading-style of reporting.
- Metrics not viewed as having linkage to processes.
- Metrics don’t translate to the real world.
- Promotes a culture of firefighting, where there are perceived special-cause issues that are simply the result of not-unusual variability in the process.
- Confuses special and common-cause variability.
- Promotes ″story telling″ of what happened during the latest report-out.
Team 2: Issues with traditional strategic planning that uses techniques such as hoshin planning and the balanced scorecards
- Executive driven and depends on who is in current leadership position.
- The techniques are not data driven.
- The strategic statement is dependent upon team who created the strategy.
- The strategic methodology may lack a roadmap for execution.
- Goals as part of hoshin planning are typically not SMART (Specific, Measurable, Actionable, Relevant, and Time-based)
Team 2: Benefits of the IEE system over traditional scorecarding and improvement methodologies
- IEE reports history data as though it were from a process.
- The methodology gets organizations out of the firefighting mode (special versus common-cause variability).
- Technique shows BIG picture; i.e., seeing the forest through the trees.
- The approach assesses trends.
- In the methodology, one can manage time by managing discussions.
- Techniques provides starting point for conversation.
- Provides reports of processes across organization.
- The methodology imbeds a strategy with an execution roadmap.
- The techniques provide an approach that is independent of leadership changes.
Balanced Scorecard Problems Solutions through the IEE System
IEE addresses the traditional business scorecard and improvement issues that are described in a one-minute video: