3:57PM Apr 9, 2022
Dale Pilgrim Wade
Dr. Robert Kaplan
Hello and welcome to Caribbean HR radio broadcasting from Kingston, Jamaica. April 2016. Francis, we're gonna be with you for the next hour or so, as we do a special set of interviews from the hermit conference from 2015. That's the HR Management Association of Trinidad and Tobago. During this particular episode, we'll be interviewing three presenters, one of whom happens to be Dr. Robert Kaplan. You may know the name. He's the inventor of the balanced scorecard and the strategy map from he's from Harvard Business School. We'll also be interviewing Lea de Souza and Maxine Aton, two consultants who are local to here in Trinidad. So stay tuned. This is a special episode. So during the show, take a moment to connect with our social network, including our discussion list that caribou hr forum.com Then listen to like our page on Facebook. And make sure to introduce yourself to the wider community through our group on LinkedIn. It's called Carib HR net. So keep listening. Don't click away to another website, stop checking that email. instead. Keep your computer locked in here at the Carib HR radio. We're right back after these messages.
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Hi, and welcome back to a curb HR radio. And as I mentioned at the top of the show today we have the distinction of having a very special guest from the Harvard Business School. Robert S. Kaplan is a professor and as you know, a PhD actually in operations research, who is the expert who came up with the whole idea of the balanced scorecard and the strategy map. Professor Kaplan, welcome to the hermit conference.
Thank you, Francis. Great, it's
great to have you here. And well, for those who may never have heard, and I imagine there are many who don't know the balanced scorecard or the strategy map. Could you explain for the very naive, maybe perhaps younger practitioner, what the tools are all about?
Well, we developed the balanced scorecard 25 years ago, because of the limitations of using financial measures alone to evaluate and motivate the performance of companies. And while financial accounting. measures such as net income or return on investment are good over long periods of time for assessing the success of organizations in short periods of time, such as a year or certainly a quarter. They give misleading signals about how well a company is doing. Because we found that increasingly the company's value is determined by its intangible assets. Its people its innovation, its customer loyalty, more than by its tangible assets of its financial assets and its physical assets. But the balance sheet of a company only shows its physical and financial assets and that its intangible assets. And so there's a huge gap. And we believe if you don't measure something, you don't manage it well. So we developed the balanced scorecard to give us measures of the most important value created for companies which are customer loyalty and customer relationships, critical processes such as quality and innovation, and also employees and culture, which are the most intangible assets of all, but perhaps the most important and we have given this framework to measure customers and processes and employees and culture.
Fantastic. I could see why an HR practitioner would be excited by the idea of the scorecard because it brings into it brings into relief The intangible asset that they care about most, which is people,
yeah, HR professionals somewhat frustrated, they always want to say play a more strategic role. And they try to do it with simplistic financial measures, what's the rate of return on HR spending, and you just can't calculate it that way. Because the HR spending doesn't directly lead to better financial results, it gets there through a whole chain of cause and effect linkages that more intelligent HR spending improves capabilities and motivation of employees, that in turn enables them to perform processes better. And if they selected the right processes to focus on that delivers a better value proposition to customers. And if that all works, then the customers will give us more business at higher margins. But it's only at the end of that chain, that you see the connection from the initial HR spending to improve margins and higher return on capital.
Right. As our listeners know, we've been going through a very difficult economic times here in the Caribbean. And I would think it's safe to say that most companies are focusing on the financial results more than anything else. And that cause and effect relationship that you just mentioned, between learning and development or people, internal processes, customer development, and ultimately, customer experience, and ultimately, financial results is often is being overlooked nowadays.
And that's exactly the problem with managing by the financial numbers, because you can take short term actions that improve your financial results. But in so doing, you're destroying future value.
Right, especially among your human resources, right, actually,
you know, because you end up with a workforce that's not well trained, that's becoming alienated and demotivated. And then when you finally say, Okay, let me grow and try to do better. You don't have the loyalty and you don't have the skills in your employee base.
Right? Do you have any coaching for the HR employee, HR practitioner, who sees what understands what you're seeing, agrees, but somehow isn't respected when it comes to strategy by the executive team?
Absolutely. I think that HR just can't sit in its own silo and its own department. And they have to follow what I would call a customer solution strategy, that customers are the internal business units or the company as a whole, and have to treat them as their customers. And they have to think about what can we do for them, that creates value for them. And so we have to learn how to partner with the line executives, because they shouldn't be the line executives best friend, because the executives are not going to be able to be successful, unless they have the right people with the right skills and the right jobs.
Are you suggesting that HR should educate educate managers and executives as the truth of this cause and effect relationship and the cost of not following it?
That's certainly one possibility. And we have seen in some organizations where the HR people actually can work collaboratively with business unit managers to create a strategy map and balanced scorecard for the business unit, you know, so now they're partnering with them. And then they can see very clearly the role for HR in implementing that strategy. But I think also to do that, the HR people have to understand better strategy. So at this conference where this interview is taking place, there's a lot of sessions about HR strategy, right, but not so many strategy sessions on business strategy. And I think that for HR to be credible partners with business and company managers, they have to first understand the strategies that the businesses and the companies are trying to implement, and then demonstrate how the HR function plays a critical role in helping them implement those strategies. So perhaps
an HR practitioner could start by going back into prior strategies and illuminating the important role of HR before starting a new strategy.
Well, if you're looking at the indexing strategy, and first see if it's successful, how the employees contributed to that success, or if it was unsuccessful, perhaps it was due to a misalignment between the employee capabilities and motivation, and the strategy itself. So it could work in either direction as a diagnostic where the previous or the existing strategy is not delivering the desired results, because of the lack of alignment to the strategy. So at the end of the day, when we speak to senior executives who have used the balanced scorecard successfully gotten really terrific results. And we asked them, what did it really do for you? What was the capabilities it created for you and they come back with two words, two words of focus and alignment, the focus is on the strategy, we became much more a strategy focused organization. But the alignment is we now had all of our, all of our departments, but especially our people aligned to the strategy execution in a way that we never had before. And so I think those two words, really what to keep in mind focus, and that is that we need a strategy, and we have to be focused on that strategy. But then we need the alignment and the alignment is people, it's also spending, you have to spend on critical projects and initiatives. And we have to spend to develop our people to align better to the strategy.
If an HR practitioner, and I'm sure there are many of them listening, who are nodding their heads as they listen, because they would agree completely, but me find themselves short of some of the critical skills, because I imagine, as HR practitioners, they're not taught how to think in terms of business strategy, and then are also not taught how to influence their peers in terms of long term strategy, even three to five years, as you said in your presentation, what kinds of critical skills that you find that HR practitioners missing, that they should work on, if they're going to some companies, they might be the one to introduce the balanced scorecard from scratch.
But what they could try to remedy that bring you the skills gap by attending an executive program, you know, at a business school focused on strategy. And so maybe there'll only be a few HR people that are there with line managers and interacting with them in the program, then first, they'll learn the language, both the cognitive language of strategy and also the body language of business managers, who they are also to learn how to be better at strategy. So that requires identifying a place to go where you can take perhaps a three day or a five day course, you know, alternatively, because I know that that's a that's an expense. I'd kind of go on the internet and see, you know, what kind of courses are out there, and especially with MOOCs, Massive Online,
I forgot what the other always courses courses, I'm sure there are courses on strategy. And that would be worth investing, who really wouldn't be worth just because you have to learn the language of strategy. So you can have the same conversations with the business people and be thought of therefore as a credible partner, because a lot of HR functions end up just being more transactional relationships. You know, we hire people, we, we offer programs, we run the benefits program, we take care of some compliance issues and harassment and discrimination issues. And the business people think of us in that role, but not as a partner with us to create value. And so I think the HR I have to shift from, you know, the historic silos to be collaborators that will require new skills. So you know, speaking the same language, and also learn how to be a relationship partner.
Right, right. I think many HR practitioners lose, or they lose respect in their businesses respected business, because they don't talk the numbers game. They don't, they don't talk the numbers of the business. But they also don't talk HR numbers. And I know you're gonna get to the HR scorecard today. But we ran out of time, can you give them any insights are listeners any insight as to how to develop the fluency in measuring what they do on a daily basis, so that they can at least get a little bit of respect from the other executives in the company?
Well, that would require having some type of HR scorecard which is related to help what the HR organization is trying to accomplish. And to me that another power of the scorecard framework would be a customer and have to think about who their customers are their customers will tip is the internal business units of the company, and they have to speak, but what can we do in our daily job that creates value for internal customers? Now, some of it is traditional HR functions, and you still have to do that well. And they're counting on the HR function, to have good compensation plans, and good career development plans for the employees and run this fringe benefits programs and the compliance programs and training the employees and the culture and ethics and all those important ideas and we consider that traditional HR functions and they have to be excellent at that. But the other dimension, another dimension and another theme that could run through your balanced scorecard is this relationship. hoping. And maybe it starts with a service agreement, you know, some type of agreement once a year with the the business unit or the each business unit or the company as a whole, as to what they want HR to deliver and be explicit, you could have had to have tangible measures or even just objectives. And periodically, actually, the HR people could serve maybe a quarterly survey here, the business units will ask them, How are we doing for you satisfied,
and actually go one
to five, and get feedback on HR performance for the business units with their customers.
You know, as you're saying that I'm imagining that some of our listeners are getting a little bit nervous, because many HR practitioners, from my point of view, thrive on not being measured using hard numbers. And to ask for that kind of feedback or the setup, that kind of measuring mechanism is a little bit like asking for trouble in a way.
I mean, it's ironic, because one of the important HR functions I didn't mention is to establish a performance measurement system for employees of a performance management systems. And we're asking employees to do this management by objectives, where each employee has, you know, three or five measures that they're going to be accountable for. And HR, it's like we call the cobblers shoots children go unshod. What I've known that's not good, they have to be accountable for themselves, just the way they want employees to be accountable for the employee performance as they should HR professionals should be accountable for their HR performance. Agreed,
I'm sure many would agree in principle is that that application seems to be sorely lacking. I remember a conversation with a general manager. And he said, people are the number one thing when it comes to implementing strategies. So I said, Oh, great. So you plan to work with HR? He said, No, no, no, we don't have HR. And he's actually said, I don't have faith in my HR function. And I wonder, and this is my final question for you in a way. When it comes to implementation. The many companies across our region who have tried the balanced scorecard, they may have put together a decent strategy. But when the rubber hits the road, HR, whether it's HR or not, but somehow it didn't get implemented. It didn't get past the binder or the PowerPoint presentation. Nothing changed in terms of executive behavior or employee behavior. And HR typically wouldn't see that as its job. Do you see that as an issue? And what would you recommend to those who have tried the scorecard and not seeing the implementation?
I mean, ultimately, if the scorecard fails in the way you described, there really is a CEO and executive team leadership failure for not aligning all parts of the organization, it's an HR is not in a position to really tell the CEO, this is what you have to do, though, if the HR people are more knowledgeable about the strategy execution system based on the balanced scorecard. They perhaps could coach, the CEO, but you should talk about one other function. And it took us 15 years to realize this, but realize that the system of strategy implementation that Dave Norton and I have advocated doesn't run by itself. And we found we needed a new class of professionals that we call the strategy management officer. And these are the people who have expertise, really, in how to create strategy maps and balanced scorecards. And really the center of excellence for the within the organization. I mean, 20 years ago, there would be nothing for those people to do, because we didn't have a system. But now we actually do have a system that can be implemented, and has been implemented all over the world, in all types of organizations and sectors. Now, the question comes in is what who should be a Strat in that strategy management office? Well, certainly you could take people from strategic planning, but certainly an HR person, could, you know, step up to that role. One who really understands it, they would have the right, some of the right kinds of skills to be effective in the strategy management function.
Would it not will also include change management and project management.
Yes, yeah. And all of those things come in. And it's a challenging position, but an exciting one, because it does involve left brain skills, strategy, analytic tools of measurement with the balanced scorecard, but also has things right brain components that you describe about leading change, change management, motivation, plus also personal skills, of being able to work with people because often you're As the person who's the strategy management officer might be to organizational levels away from the executive team, but they're working very closely with the executive team members. So they have to be able to have the trust and confidence of those executive team members. And they also have to be able to help implement the executive teams wishes with decentralized operating managers. So you need very strong kind of right brain skills, along with the left brain skills. But if you have that, it's a tremendous position.
It sounds it sounds fascinating. Is this mentioned in your latest book?
Actually, it's the final chapter in the book. So we describe the whole system. And then in chapter 10, the final chapter, we say, Okay, how does this all work together? And so chapter 10, is creating the office of strategy management and the name of the book again, at the execution premium.
And it's available, where can people pick up a copy of it online? Or
probably the easiest way is via Amazon?
Is it a bit of an e book or as a Kindle? Or?
I believe it is, I haven't checked recently. But if it isn't right to me, we should make it but I think it is
fantastic. And they wanted to delve in more into the principles of the balanced scorecard strategy map, which website can they access to get more of the answers that you have come up with? And he has provided?
Dave's no one said My company has called palladium. So there's a palladium group.com budget that is just describing the range of services that are being offered? I'm not sure there's a go to website. But an alternative is we have a one week program at the Harvard Business School about third week in July, called driving corporate performance. And the balanced scorecard plays a prominent role in that one week, costs will come to HR practitioners. Oh, yeah, no, no, as long as you can get the company to sponsor you. We'd love to have HR people there. I mean, it's often strategic planning people and financial people. But it would be a great place for an HR person to come up to speed on strategy, and also the measurement aspects that we've been talking about. It feels
like an awesome opportunity. Robert Kaplan, thanks for spending time with us here at the hermit conference in Port of Spain, Trinidad, sharing your knowledge about the balanced scorecard and the strategy map and it's great to meet you in person and have you here.
Thank you. You conduct a very good interview. Congratulations. That gift because we're calling it
our graduates. Stay tuned. There's more coming