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Thursday, June 25, 2015

An Interview with Dr. David Norton 06-25

An Interview with Dr. David Norton

In an interview with James Creelman, head of Palladium’s Knowledge and Research
Center, Palladium Chairman Dr. David Norton explains why more and more
government organizations are using tools such as the Balanced Scorecard and
Execution Premium Process™ (XPP) to effectively manage complexity in the 21st

With particular reference to the military and police sectors, he explains how globalization and technology are changing the way work gets done and how this is driving government entities to adopt these tools so to better visualize and deliver to their mission and to manage inter- and intra-agency collaborations.

The Balanced Scorecard was in the right place at the right time. By the early 1990s the economic model was changing from one that was product-based to service-based. In this new economy there were requirements for a model to manage knowledge and tools for managing intangible assets. Many organizations were realizing that in this new economy measuring financial performance was still critical but that they needed a new approach to understanding the more intangible drivers of fi nancial success, and the Balanced Scorecard offered a way to do that.

It has endured because it delivered transformational results in many of the early adopters. Also, although originally a way to balance fi nancial and non-fi nancial measurement it developed into more of a management system than just a measurement tool. The adding of the Strategy Map was also an important milestone as this enabled organizationsto better visualize the strategy and what they had to do to deliver it.

The Balanced Scorecard concept is now almost 25 years old. Why has it proven to be so enduringly popular?

Since the mid-1990s the government sector has been a big user of the Balanced Scorecard, but usage has increasedsignifi cantly in recent years and across the globe. 

What has driven this uptake?

Leaders of government entities increasingly saw the Balanced Scorecard as a good idea. They had seen others succeed with its usage and decided to try it. Some of the early government successes, such as the City of Charlotte in the USA in the mid-1990s also helped to spread the message that this new way of managing could work in the  government or not-for-profi t sectors. A small number of early adopters inspired a growing number of followers. It is not unusual for any new idea to take time to trickle through and 20 years is a relatively short time.

The Balanced Scorecard is primarily a strategy implementation framework, yet many defense sector organizations have adopted it and focused more on “battle readiness.” In what important ways have defense organizations, such as Balanced Scorecard Hall of Fame™ inductees the Royal Norwegian Air Force and the US Army, tailored the Balanced Scorecard methodology for their own needs?

I would argue that “battle readiness” is a strategy. Every organization that we have worked with has a set of strategic themes that they must deliver to, rather than a one-dimensional strategy. Private sector fi rms have themes such as managing the core business, customer management, innovation, etc. The same is true for the military, which will have several themes that they must manage, such as operational effi ciency and battle readiness. The Strategy Map enables them to see those themes and how they work together.

Specifi cally related to police organizations, Abu Dhabi Police, Dubai Police, the FBI, and the Royal Canadian Mounted Police are also inductees into the Hall of Fame. What did they do well that others can learn from?

Most organizations have complex missions, but these organizations have very complex missions. The reason I say this is because to succeed to their mission they have to interface with many other organizations - success is impossible without doing so. For example, tackling the problem of drugs requires interfacing with many other agencies
such as customs or the coast guard. The Royal Canadian Mounted Police, for example, built strategic themes around pieces of their mission to drive such cooperation in areas related to drugs and gangs, in which they did not have all the knowledge required to deal with the problems on their own. The Balanced Scorecard provided these organizations
with a way to visualize and put into practice that integration and come up with a new paradigm for effective policing.

The Execution Premium framework is not just about strategy execution, but more broadly strategy management.

Why did you think it was important to expand on the original Balanced Scorecard concept?

This has been a natural evolution grounded in practical experience. Bob Kaplan and I began looking at a problem with measurement, and from that we developed the original Balanced Scorecard idea. From that we realized that the framework was most powerful when the strategic objectives were laid out as a map showing cause and effect,
and this took us to Strategy Maps. There was an evolution from how we measure to how we manage. The Balanced Scorecard also became a bridge to the management system – as examples, how we set performance objectives for
individuals and how we align investments in ways that best show the organization is delivering results. Measurement
itself does not guarantee results; for this to happen metrics have to be integrated into a broader management
system. We also realized early on the important of leadership in using the Balanced Scorecard.
This takes us to the role of leadership, which along with Bob Kaplan you have repeatedly highlighted as the critical
determinant of successful strategy execution and was deemed as such by a recent global survey by the Palladium
Group. When it comes to strategic leadership, what must organizations do right?
The success of the Balanced Scorecard is always linked to the visible usage by and buy-in of leadership. Leaders
will see it as a tool and they have lots of tools to choose from. Those leaders that get the most from a Balanced
Scorecard really use it as an agent of change, and strategy is just another word for change. I need to build effective
teams at the senior level – how do I do that? I have to get the organization to support a change of direction – how
do I do that? I need to build a high-performing culture across the globe – how do I do that? So the CEO or equivalent
sees the Balanced Scorecard as their framework for describing critical strategic goals and a tool for managing
that change.
© 2015 Palladium Group, Inc. |
To do this, a good leader has to combine both right brain and left brain thinking. The right brain is unstructured and
about intuition and creativity - seeing opportunities, inspiring others, etc. The left brain is about structure – using
management tools, measuring performance, etc. Both sides of the brain are important and together deliver change.
For good reasons, defense and police organizations tend to be much more hierarchical than others in the public
and private sectors. Does this lead to any unique challenges when implementing the Balanced Scorecard or the
Execution Premium framework?
Absolutely. Strategy is horizontal in nature and not vertical. Strategy is about delivering solutions to common challenges
that the organization is facing and this is at odds with a vertical structure.

This is why a Strategy Map and in particular strategic themes are powerful within organizations with fairly rigid
hierarchies. By indentifying and laying out strategic themes on a map, these organizations are able to overlay a
horizontal form of management onto the necessary hierarchical structure. The themes enable the organizations to
more effectively drive and manage cross- and intra-organizational teamwork and pursuit of common goals.
How do you see the Balanced Scorecard/Execution Premium framework evolving over the next 3-5 years and are
there any particular implications for those organizations in the defense/police sectors?
The Balanced Scorecard and Execution Premium framework will become increasingly used to manage complexity.
And this complexity has two main drivers that are greatly impacting all fi rms and military and police agencies in
profound ways: globalization and technology.
First there’s globalization. As I have stressed, defense agencies now have to cooperate with other agencies across
the world to tackle increasingly globalized security and criminal activities: the Balanced Scorecard will help them
better manage the inherent complexities in doing so.

And then there’s technology. Obviously technology has changed the world in ways we were not able to even
comprehend a few decades ago and is further changing the world as we speak. This is having signifi cant impacts
on military and police agencies: think about how social media and video are now used to both prevent and solve
complex crimes. Technology is enabling more seamless interaction within and among government agencies across
the world and is becoming more integrated into the structures of these organizations. The need for a framework
that allows the focus on managing such complexity will become increasingly mission-critical.