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6 oRganizaTional

TRansfoRmaTion anD The balanCeD sCoReCaRD

Introduction

The purpose of this chapter is to examine the nature of organiza- tional transformation, how it occurs, and how it can be measured. Aldrich (2001) defines organizational transformation along three possible dimensions: changes in goals, boundaries, and activities. According to Aldrich, transformations “must involve a qualita- tive break with routines and a shift to new kinds of competencies that challenge existing organizational knowledge” (p. 163). He warns us that many changes in organizations disguise themselves as transformative but are not. Thus, focusing on the qualifications of authentic or substantial transformation is key to understanding whether it has truly occurred in an organization. Technology, as with any independent variable, may or may not have the capacity to instigate organizational transformation. Therefore, it is important to integrate transformation theory with responsive organizational dynamism (ROD). In this way, the measurable outcomes of orga- nizational learning and technology can be assessed in organizations that implement ROD. Most important in this regard, is that organi- zational transformation, along with knowledge creation, be directly correlated to the results of implementing organizational learning. That is, the results of using organizational learning techniques must result in organizational transformation.

Organizational transformation is significant for three key reasons:

1. Organizations that cannot change will fundamentally be at risk against competitors, especially in a quickly changing market.

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2. If the organization cannot evolve, it will persist in its norms and be unwilling to change unless forced to do so.

3. If the community population is forced to change and is con- strained in its evolutionary path, it is likely that it will not be able to transform and thus, will need to be replaced.

Aldrich (2001) establishes three dimensions of organizational transformation. By examining them, we can apply technology- specific changes and determine within each dimension what consti- tutes authentic organizational transformation.

1. Goals: There are two types of goal-related transformations: (a) change in the market or target population of the organiza- tion; (b) the overall goal of the organization itself changes. I have already observed that technology can affect the mission of an organization, often because it establishes new market niches (or changes them). Changed mission statements also inevitably modify goals and objectives.

2. Boundaries: Organizational boundaries transform when there is expansion or contraction. Technology has historically expanded domains by opening up new markets that could not otherwise be reached without technological innovation. E-business is an example of a transformation brought about by an emerging technology. Of course, business can contract as a result of not assimilating a technology; technology also can create organizational transformation.

3. Activity systems: Activity systems define the way things are done. They include the processing culture, such as behav- ioral roles. Changes in roles and responsibilities alone do not necessarily represent organizational transformation unless it is accompanied by cultural shifts in behavior. The cultural assimilation component of ROD provides a method with which to facilitate transformations that are unpredict- able yet evolutionary. Sometimes, transformations in activ- ity systems deriving from technological innovations can be categorized by the depth and breadth of its impact on other units. For example, a decision could be made to use technology as part of a total quality management (TQM)

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effort. Thus, activity transformations can be indirect and need to be evaluated based on multiple and simultaneous events.

Aldrich’ s (2001) concept of organizational transformation bears on the issue of frequency of change. In general, he concludes that the changes that follow a regular cycle are part of normal evolution and “flow of organizational life” (p. 169) and should not be treated as transformations. Technology, on the other hand, presents an inter- esting case in that it can be perceived as normal in its persistence and regularity of change while being unpredictable in its dynamism. However, Aldrich’ s definition of transformation poses an interesting issue for determining transformations resulting from technological innovations. Specifically, under what conditions is a technological innovation considered to have a transformative effect on the organi- zation? And, when is it to be considered as part of regular change? I refer to Figure 6.1, first presented in Chapter 3 on driver and sup- porter life cycles to respond to this question.

The flows in this cycle can be used as the method to determine technological events that are normal change agents versus transforma- tive ones. To understand this point, one should view all driver-related technologies as transformational agents because they, by definition, affect strategic innovation and are approved based on return on investment (ROI). Aldrich’ s (2001) “normal ebb and flows” repre- sent the “mini-loops” that are new enhancements or subtechnologies, which are part of normal everyday changes necessary to mature a

Mini loop technology enhancementsTechnology driver

Evaluation cycle

Driver maturation

Support status

Replacement or outsource

Economies of scale

Figure 6.1 Driver-to-supporter life cycle.

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technological innovation. Thus, driver variables that result from mini- loops, would not be considered transformational agents of change.

It is important to recognize that Aldrich’ s (2001) definition of organizational transformation should not be confused with theories of transformative learning. As West (1996) proclaims, “The goal of organizational learning is to transform the organization” (p. 54). The study of transformative learning has been relevant to adult education, and has focused on individual, as opposed to organizational, devel- opment and learning. Thus, transformative learning has been better integrated in individual learning and reflective practice theories than in organizational ones. While these modes of learning are related to the overall learning in organizations, they should not be confused with organizations that are attempting to realize their performance objectives.

Yorks and Marsick (2000) offer two strategies that can produce transformative learning for individuals, groups, or organizations: action learning and collaborative inquiry. I covered action science in Chapter 4, particularly reflective practices, as key interventions to fos- ter both individual and group evolution of learning, specifically in reference to how to manage ROD. Aspects of collaborative inquiry are applied to later stages of maturation and to more senior levels of management based on systems-level learning. As Yorks and Marsick (2000) state, “For the most part the political dimensions of how the organization functions is off limits, as are discussions of larger social consequences” (p. 274).

Technological innovations provide acceleration factors and foster the need for ROD. Technology also furnishes the potential tangible and measurable outcomes necessary to normalize York and Marsick’ s (2000) framework for transformative learning theory into organiza- tional contexts as follows:

1. Technology, specifically e-business, has created a critical need for organizations to engage with clients and individuals in a new interactive context. This kind of discourse has established accelerated needs, such as understanding the magnitude of alternative courses of action between customer and vendor. The building of sophisticated intranets (internal Internets) and their evolution to assimilate with other Internet operations

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has also fueled the need for learning to occur more often than before and at organizational level.

Because technology can produce measurable outcomes, individuals are faced with accelerated reflections about the cultural impact of their own behaviors. This is directly related to the implementation of the cultural assimilation component of ROD, by which individuals determine how their behaviors are affected by emerging technologies.

2. Early in the process of implementing strategic integration, reflective practices are critical for event-driven technology projects. These practices force individuals to continually reex- amine their existing meaning perspectives (specifically, their views and habits of mind). Individual reflection in, on, and to practice will evolve to system-level group and organizational learning contexts, as shown in the ROD arc.

3. The process of moving from individual to system-level learn- ing during technology maturation is strengthened by the learners’ abilities to comprehend why historical events have influenced their existing habits of mind.

4. The combination of strategic integration and cultural assimi- lation lays the foundation for organizational transformation to occur. Technology provides an appropriate blend of being both strategic and organizational in nature, thus allow- ing learners to confront their prior actions and develop new practices.

Aldrich (2001) also provides an interesting set of explanations for why it is necessary to recognize the evolutionary aspect of organiza- tional transformations. I have extended them to operate within the context of ROD, as follows:

Variation : Defined as “change from current routines and compe- tencies and change in organizational forms” (Aldrich, 2001, p. 22). Technology provides perhaps the greatest amount of variation in routines and thereby establishes the need for something to manage it: ROD. The higher the frequency of variation, the greater the chance that organizational transfor- mation can occur. Variation is directly correlated to cultural assimilation.

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Selection : This is the process of determining whether to use a technology variation. Selections can be affected by external (outside the organization) and internal (inside the organi- zation) factors, such as changes in market segments or new business missions, respectively. The process of selection can be related to the strategic integration component of ROD.

Retention : Selected variations are retained or preserved by the organization. Retention is a key way of validating whether organizational transformation has occurred. As Aldrich states: “Transformations are completed when knowledge required for reproducing the new form is embodied in a com- munity of practice” (p. 171).

Because of the importance of knowledge creation as the basis of transformation, communities of practice are the fundamental struc- tures of organizational learning to support organizational transforma- tion. Aldrich (2001) also goes beyond learning; he includes policies, programs, and networks as parts of the organizational transformative process. Figure 6.2 shows Aldrich’ s evolutionary process and its rela- tionship to ROD components.

Thus, we see from Figure 6.2 the relationships between the pro- cesses of creating organizational transformation, the stages required to reach it, the ROD components in each stage, and the correspond- ing organizational learning method that is needed. Notice that the mapping of organizational learning methods onto Aldrich’ s (2001) scheme for organizational transformation can be related to the ROD arc. It shows us that as we get closer to retention, organizational learn- ing evolves from an individual technique to a system/organizational learning perspective. Aldrich’ s model is consistent with my driver- versus-supporter concept. He notes, “When the new form becomes a taken-for-granted aspect of every day life in the organization, its legitimacy is assumed” (p. 175).

Hence, the assimilation of new technologies cannot be consid- ered transformative until it behaves as a supporter. Only then can we determine that the technology has changed organizational biases and norms. Representing the driver and supporter life cycle to include this important relationship is shown in Figure 6.3.

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Technology

Variation Strategic integration– assess value of technology

Cultural assimilation– assess extent of what to implement and determine effects on structure

Strategic integration– determine which technologies best fit corporate needs and provide highest ROI

Corresponding organizational learning methods

Individual reflective practices

Group-based reflective practices

Social discourse using

communities of practice

Communities of practice and knowledge

management

Validation of organizational transformation– technology has provided strategic outcomes and modified structures and processes

Selection

Retention

Figure 6.2 Stages of organizational transformation and ROD.

Individual reflective practice

Group-based reflective practice

Communities of practice

Knowledge management

Organizational transformation

Mini loop technology enhancementsTechnology driver

Evaluation cycle

Driver maturation

Support status

Replacement or outsource

Economies of scale

Figure 6.3 Organizational transformation in the driver-to-supporter life cycle.

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Methods of Ongoing Evaluation

If we define organizational transformation as the retention of knowl- edge within the body of communities of practice, the question to be answered is how this retention actually is determined in practice. The possibility often occurs that transformations are partial or in some phase of completion. This would mean that the transformation is incomplete or needs to continue along some phase of approach. Indeed, cultural assimilation does not occur immediately, but rather, over periods of transition. Much of the literature on organizational transformation does not address the practical aspects of evaluation from this perspective. This lack of information is particularly prob- lematic with respect to technology, since so much of how technology is implemented relates to phased steps that rarely happen in one major event. Thus, it is important to have some method of ongoing evalua- tion to determine the extent of transformation that has occurred and which organizational learning methods need to be applied to help continue the process toward complete transformation.

Aldrich’ s (2001) retention can also be misleading. We know that organizational transformation is an ongoing process, especially as advocated in ROD. It is probable that transformations continue and move from one aspect of importance to another, so a completed trans- formation may never exist. Another way of viewing this concept is to treat transformations as event milestones. Individuals and communi- ties of practice are able to track where they are in the learning process. It also fits into the phased approach of technology implementation. Furthermore, the notion of phases allows for integration of organiza- tional transformation concepts with stage and development theories. With the acceptance of this concept, there needs to be a method or model that can help organizations define and track such phases of transformation. Such a model would also allow for mapping outcomes onto targeted business strategies. Another way of understanding the importance of validating organizational transformation is to recognize its uniqueness, since most companies fail to execute their strategies.

The method that can be applied to the validation of organizational transformation is a management tool called the balanced scorecard. The balanced scorecard was introduced by Kaplan and Norton (2001) in the early 1990s as a tool to solve measurement problems. The ability

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of an organization to develop and operationalize its intangible assets has become more and more a critical component for success. As I have already expressed regarding the work of Lucas (1999), financial measurement may not be capable of capturing all IT value. This is particularly true in knowledge-based theories. The balanced score- card can be used as a solution for measuring outcomes that are not always financial and tangible. Furthermore, the balanced scorecard is a “living” document that can be modified as certain objectives or measurements require change. This is a critical advantage because, as I have demonstrated, technology projects often change in scope and in objectives as a result of internal and external factions.

The ultimate value, then, of the balanced scorecard, in this con- text, is to provide a means for evaluating transformation not only for measuring completion against set targets but also for defining how expected transformations map onto the strategic objectives of the organization. In effect, it is the ability of the organization to execute its strategy. Before explaining the details of how a balanced scorecard can be applied specifically to ROD, I offer Figure 6.4, which shows

Mobilize change through executive

leadership

Balanced

Translate the strategy to

operational terms

Scorecard

Make strategy a continual processStrategy

Align organizational to

the strategy

Make strategy everyone’s job

Figure 6.4 Balanced scorecard. (From Kaplan, R.S., & Norton, D.P., The Strategy-Focused Organization , Harvard University Press, Cambridge, MA, 2001.)

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exactly where the scorecard fits into the overall picture of transition- ing emerging technologies into concrete strategic benefit.

The generic objectives of a balanced scorecard are designed to cre- ate a strategy-focused organization. Thus, all of the objectives and measurements should be derived from the vision and strategy of the organization (Kaplan & Norton, 2001). These measurements are based on the fundamental principles of any strategically focused orga- nization and on alignment and focus. Kaplan and Norton define these principles as the core of the balanced scorecard:

1. Translate the strategy to operational terms : This principle includes two major components that allow an organization to define its strategy from a cause-and-effect perspective using a strategy map and scorecard. Thus, the strategy map and its corresponding balanced scorecard provide the basic measure- ment system.

2. Align the organization to the strategy: Kaplan and Norton define this principle as favoring synergies among organiza- tional departments that allow communities of practice to have a shared view, and common understanding of their roles.

3. Make strategy everyone’ s everyday job: This principle supports the notion of a learning organization that requires everyone’ s participation, from the chief executive officer (CEO) to cleri- cal levels. To accomplish this mission, the members of the organization must be aware of business strategy; individuals may need “personal” scorecards and a matching reward sys- tem for accomplishing the strategy.

4. Make strategy a continual process: This process requires the linking of important, yet fundamental, components, includ- ing organizational learning, budgeting, management reviews, and a process of adaptation. Much of this principle falls into the areas of learning organization theories that link learning and strategy in ongoing perpetual cycles.

5. Mobilize change through executive leadership: This principle stresses the need for a strategy-focused organization that incorporates the involvement of senior management and can mobilize the organization and provide sponsorship to the overall process.

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Using the core balanced scorecard schematic, I have modified it to operate with technology and ROD, as shown in Figure 6.5.

1. Evaluation of technology: The first step is to have an infrastruc- ture that can determine how technology fits into a specific strategy. Once this is targeted, the evaluation team needs to define it in operational terms. This principle requires the stra- tegic integration component of ROD.

2. Align technology with business strategy : Once technology is evaluated, it must be integrated into the business strategy. This involves ascertaining whether the addition of technology will change the current business strategy. This principle is also connected to the strategic integration component of ROD.

3. Make technology projects part of communities of practice : Affected communities need to be strategically aware of the project. Organizational structures must determine how they distrib- ute rewards and objectives across departments. This principle requires the cultural assimilation component of ROD.

4. Phased­in technology implementation : Short- and long-term project objectives are based on driver and supporter life cycles.

Executive interfaces

Balanced

Evaluation of technology

Scorecard

Phase technology implementation

Responsive org

dynamism strategy

Align technology

with business strategy

Make technology project part of

communities of practice

Figure 6.5 Balanced scorecard ROD.

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This will allow organizational transformation phases to be linked to implementation milestones. This principle maps onto the cultural assimilation component of ROD.

5. Executive interface : CEO and senior managers act as executive sponsors and project champions. Communities of practice and their common “threads” need to be defined, including middle management and operations personnel, so that top- down, middle-up-down, and bottom-up information flows can occur.

The balanced scorecard ultimately provides a framework to view strategy from four different measures:

1. Financial : ROI and risk continue to be important components of strategic evaluation.

2. Customer : This involves the strategic part of how to create value for the customers of the organization.

3. Internal business processes : This relates to the business pro- cesses that provide both customer satisfaction and operational efficiency.

4. Learning and growth : This encompasses the priorities and infrastructure to support organizational transformation through ROD.

The generic balanced scorecard framework needs to be extended to address technology and ROD. I propose the following adjustments:

1. Financial : Requires the inclusion of indirect benefits from technology, particularly as Lucas (1999) specifies, in nonmon- etary methods of evaluating ROI. Risk must also be factored in, based on specific issues for each technology project.

2. Customer : Technology-based products are integrated with customer needs and provide direct customer package inter- faces. Further, web systems that use the Internet are depen- dent on consumer use. As such, technology can modify organizational strategy because of its direct effect on the cus- tomer interface.

3. Internal business processes : Technology requires business pro- cess reengineering (BPR), which is the process of reevaluat- ing existing internal norms and behaviors before designing a

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new system. This new evaluation process addresses customers, operational efficiencies, and cost.

4. Learning and growth : Organizational learning techniques, under the umbrella of ROD, need to be applied on an ongo- ing and evolutionary basis. Progress needs to be linked to the ROD arc.

The major portion of the balanced scorecard strategy is in its initial design; that is, in translating the strategy or, as in the ROD scorecard, the evaluation of technology. During this phase, a strategy map and actual balanced scorecards are created. This process should begin by designing a balanced scorecard that articulates the business strategy. Remember, every organization needs to build a strategy that is unique and based on its evaluation of the external and internal situation (Olve et al., 2003). To clarify the definition of this strategy, it is easier to consider drawing the scorecard initially in the form of a strategy map. A generic strategy map essentially defines the components of each perspective, showing specific strategies within each one, as shown in Figure 6.6.

Perspective:

Financial

Customer

Process

Learning and growth

Improve technology

Improve staff skills

Establish new markets

Increase customer

service

Increase efficiency

More satisfied customers

Improve profitability

Stronger finances

Increase customer

base

Figure 6.6 Strategy map. (From Olve, N., et al., Making Scorecards Actionable: Balancing Strategy and Control , Wiley, New York, 2003.)

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We can apply the generic strategy map to an actual case study, Ravell phase I, as shown in Figure 6.7.

Recall that Ravell phase I created a learning organization using reflective practices and action science. Much of the organization transformation at Ravell was accelerated by a major event— the relo- cation of the company. The move was part of a strategic decision for the organization, specifically the economies of scale for rental expense and an opportunity to retire old computers and replace them with a much needed state-of-the-art network. Furthermore, there was a grave need to replace old legacy applications that were incapable of operating on the new equipment and were also not providing the competitive advantage that the company sought. In using the strategy map, a balanced scorecard can be developed containing the specific outcomes to achieve the overall mission. The balanced scorecard is shown in Figure 6.8.

The Ravell balanced scorecard has an additional column that defines the expected organizational transformation from ROD. This model addresses the issue of whether a change is truly a transformation. This method also provides a systematic process to forecast, understand, and

Perspective:

Financial

Users

Process

Learning and growth

New technology products

New ways of staff interaction

Establish new organization

structure

Improved systems

Provide accurate and timely

information

More satisfied users

Improve return on project

investments

Reduce technology overhead

Increase user IT support

Figure 6.7 Technology strategy map.

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present what technology initiatives will ultimately change in the stra- tegic integration and cultural assimilation components of ROD.

There are two other important factors embedded in this modified balanced scorecard technique. First, scorecards can be designed at varying levels of detail. Thus, two more balanced scorecards could

Strategy map perspective

Financial

Measureable outcomes Strategic objectives

Organizational transformation

Combine IT expenses with relocation and capitalize entire expense

Combination of expenses requires formation of new communities of practice, which includes finance, engineering, and IT

Improve returns on project investments

Reduce technology overhead costs

More satisfied users

Increase user IT support

Users

Process

Learning and growth

Provide accurate and timely information

Improved systems

New technology products

New ways of staff interaction structure

Establish new organization

Integrate new telephone system with computer network expenses

Leverage engineering and communications expenses with technology

Retire old equipment from financial statements

Increase access to central applications

Integrate IT within other departments to improve dynamic customer support requirements

Provide new products to replace old e-mail system and make standard applications available to all users

Establish help desk personnel

Process of supporting users requires IT staff to embrace reflective practices. User relationship formed through new communities of practice and cultural assimilation with user community New culture at Ravell established

Startegic integration occurs through increased discourse and language among communities of practice engaged in making relocation successful. New knowledge created and needs knowledge management

Improve decision support for improved reporting and strategic marketing

Upgrade new internal systems, including customer relationship management (CRM), general ledger, and rights and royalties

Investigate new voice-messaging technology to improve integration of e-mail and telephone systems

Physically relocate IT staff across departments

Modify IT reporting structure with “dotted line” to business units

IT becomes more critically reflective, understands value of their participation with learning organization. IT staff seeks to know less and understands view of the “other”

·

·

·

·

·

·

·

·

· ·

·

·

·

·

·

·

·

·

·

·

·

·

Figure 6.8 Ravell phase I balanced scorecard.

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be developed that reflect the organizational transformations that occurred in Ravell phases II and III, or the three phases could be summarized as one large balanced scorecard or some combina- tion of summary and detail together. Second, the scorecard can be modified to reflect unexpected changes during implementa- tion of a technology. These changes could be related to a shift- ing mission statement or to external changes in the market that require a change in business strategy. Most important, though, are the expected outcomes and transformations that occur during the course of a project. Essentially, it is difficult to predict how organizations will actually react to changes during an IT project and transform.

The balanced scorecard provides a checklist and tracking system that is structured and sustainable— but not perfect. Indeed, many of the outcomes from the three phases of Ravell were unexpected or certainly not exactly what I expected. The salient issue here is that it allows an organization to understand when such unexpected changes have occurred. When this does happen, organizations need to have an infrastructure and a structured system to examine what a change in their mission, strategy, or expectations means to all of the com- ponents of the project. This can be described as a “rippling effect,” in which one change can instigate others, affecting many other parts of the whole. Thus, the balanced scorecard, particularly using a strat- egy map, allows practitioners to reconcile how changes will affect the entire plan.

Another important component of the balanced scorecard, and the reason why I use it as the measurement model for outcomes, is its applicability to organizational learning. In particular, the learning and growth perspective shows how the balanced scorecard ensures that learning and strategy are linked in organizational development efforts.

Implementing balanced scorecards is another critical part of the project— who does the work, what the roles are, and who has the responsibility for operating the scorecards? While many companies use consultants to guide them, it is important to recognize that bal- anced scorecards reflect the unique features and functions of the com- pany. As such, the rank and file need to be involved with the design and support of balanced scorecards.

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Every business unit that has a scorecard needs to have someone assigned to it, someone accountable for it. A special task force may often be required to launch the training for staff and to agree on how the scorecard should be designed and supported. It is advisable that the scorecard be implemented using some application software and made available on an Internet network. This provides a number of benefits:

It reduces paper or local files that might get lost or not be secured, allows for easy “roll-up” of multiple scorecards, to a summary level, and access via the Internet (using an external secured hookup) allows the scorecard to be maintained from multiple locations. This is particularly attractive for staff members and management individuals who travel.

According to Olve et al. (2003), there are four primary responsi- bilities that can support balanced scorecards:

1. Business stakeholders : These are typically senior managers who are responsible for the group that is using the score- card. These individuals are advocates of using scorecards and require compliance if deemed necessary. Stakeholders use scorecards to help them manage the life cycle of a technology implementation.

2. Scorecard designers : These individuals are responsible for the “look and feel” of the scorecard as well as its content. To some extent, the designers set standards for appearance, text, and terminology. In certain situations, the scorecard designers have dual roles as project managers. Their use of scorecards helps them understand how the technology will operate.

3. Information providers : These people collect, measure, and report on the data in the balanced scorecard. This function can be implemented with personnel on the business unit level or from a central services department. Reporting informa- tion often requires support from IT staff, so it makes sense to have someone from IT handle this responsibility. Information providers use the scorecard to perform the measurement of project performance and the handling of data.

4. Learning pilots : These individuals link the scorecard to organi- zational learning. This is particularly important when measur- ing organizational transformation and individual development.

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The size and complexity of an organization will ultimately deter- mine the exact configuration of roles and responsibilities that are needed to implement balanced scorecards. Perhaps the most appli- cable variables are:

Competence : Having individuals who are knowledgeable about the business and its processes, as well as knowledgeable about IT.

Availability : Individuals must be made available and appropri- ately accommodated in the budget. Balanced scorecards that do not have sufficient staffing will fail.

Executive management support: As with most technology proj- ects, there needs to be a project advocate at the executive level.

Enthusiasm : Implementation of balanced scorecards requires a certain energy and excitement level from the staff and their management. This is one of those intangible, yet invaluable, variables.

Balanced Scorecards and Discourse

In Chapter 4, I discussed the importance of language and discourse in organizational learning. Balanced scorecards require ongoing dia- logues that need to occur at various levels and between different com- munities of practice. Therefore, it is important to integrate language and discourse and communities of practice theory with balanced scorecard strategy. The target areas are as follows:

• Developing of strategy maps • Validating links across balanced scorecard perspectives • Setting milestones • Analyzing results • Evaluating organizational transformation

Figure 6.9 indicates a community of practice relationship that exists at a company. Each of these three levels was connected by a concept I called “common threads of communication.” This model can be extended to include the balanced scorecard.

The first level of discourse occurs at the executive community of practice. The executive management team needs to agree on the

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specific business strategy that will be used as the basis of the mis- sion statement for the balanced scorecard. This requires conversations and meetings that engage the CEO, executive board members (when deemed applicable), and executive managers, like the chief operat- ing officer (COO), chief financial officer (CFO), chief information officer (CIO), and so on. Each of these individuals needs to represent his or her specific area of responsibility and influence from an execu- tive perspective. The important concept is that the balanced scorecard mission and strategy should be a shared vision and responsibility for the executive management team as a whole. To accomplish this task, the executive team needs to be instructed on how the balanced score- card operates and on its potential for accomplishing organizational transformation that leads to strategic performance. Ultimately, the discourse must lead to a discussion of the four balanced scorecard perspectives: financial, customer, process, and learning and growth.

From a middle management level, the balanced scorecard allows for a measurable model to be used as the basis of discourse with

Executive community of practice

CEO Americas

Executive board Consultants

CEO AmericasNew ideas

and adjustments

Senior management

Operations

Middle management

Middle management

Adjustments as a result of discourse with operations community

Operations management community of practice

Implementation community of practice

Figure 6.9 Community of practice “threads.”

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executives. For example, the strategy map can be the vehicle for conducting meaningful conversations on how to transform execu- tive-level thinking and meaning into a more operationally focused strategy. Furthermore, the scorecard outlines the intended outcomes for strategy and organizational learning and transformation.

The concept of using the balanced scorecard as a method with which to balance thinking and meaning across communities of prac- tice extends to the operational level as well. Indeed, the challenge of making the transition from thinking and meaning at the executive level of operations is complicated, especially since these communi- ties rarely speak the same language. The measurable outcomes section of the scorecard provides the concrete layer of outcomes that opera- tions staff tend to embrace. At the same time, this section provides corresponding strategic impact and organizational changes needed to satisfy business strategies set by management.

An alternative method of fostering the need forms of discourse is to create multiple-tiered balanced scorecards designed to fit the language of each community of practice, as shown in Figure 6.10. The diagram in Figure 6.10 shows that each community can maintain its own lan- guage and methods while establishing “common threads” to foster a transition of thinking and meaning between it and other communi- ties. The common threads from this perspective look at communica- tion at the organizational/group level, as opposed to the individual level. This relates to my discussion in Chapter 4, which identified individual methods of improving personal learning, and development within the organization. This suggests that each balanced scorecard must embrace language that is common to any two communities to establish a working and learning relationship— in fact, this common language is the relationship.

Knowledge Creation, Culture, and Strategy

Balanced scorecards have been used as a measurement of knowledge creation. Knowledge creation, especially in technology, has signifi- cant meaning, specifically in the relationship between data and infor- mation. Understanding the sequence between these two is interesting. We know that organizations, through their utilization of software applications, inevitably store data in file systems called databases.

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The information stored in these databases can be accessed by many different software applications across the organization. Accessing multiple databases and integrating them across business units creates further valuable information. Indeed, the definition of information is “organized data.” These organized data are usually stored in data infrastructures called data warehouses or data marts, where the infor- mation can be queried and reported on to assist managers in their decision-making processes. We see, in the Ravell balanced scorecard, that decision-support systems were actually one of the strategic objec- tives for the process perspective.

Organization-level balanced scorecard

Common discourse threads

Executive-level balanced scorecard

Management-level balanced scorecard

Operational-level balanced scorecard

Common discourse threads

Common discourse threads

Figure 6.10 Community of practice “common threads.”

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Unfortunately, information does not ensure new knowledge cre- ation. New knowledge can only be created by individuals who evolve in their roles and responsibilities. Individuals, by participating in groups and communities of practice, can foster the creation of new organizational knowledge. However, to change or evolve one’ s behav- ior, there must be individual or organizational transformation. This means that knowledge is linked to organizational transformation. The process to institutionalize organizational transformation is dependent on management interventions at various levels. Management needs to concentrate on knowledge management and change management and to act as a catalyst and advocate for the successful implementation of organizational learning techniques. These techniques are necessary to address the unique needs of ROD.

Ultimately, the process must be linked to business strategy. ROD changes the culture of an organization, through the process of cul- tural assimilation. Thus, there is an ongoing need to reestablish align- ment between culture and strategy, with culture altered to fit new strategy, or strategy first, then culture (Pietersen, 2002). We see this as a recurring theme, particularly from the case studies, that busi- ness strategy must drive organizational behavior, even when technol- ogy acts as a dynamic variable. Pietersen identifies what he called six myths of corporate culture:

1. Corporate culture is vague and mysterious. 2. Corporate culture and strategy are separate and distinct

things. 3. The first step in reducing our company should be defining our

values. 4. Culture cannot be measured or rewarded. 5. Our leaders must communicate what our culture is. 6. Our culture is the one constant that never changes.

Resulting from these myths, Pietersen (2002) establishes four basic rules of success for creating a starting point for the balance between culture and strategy:

1. Company values should directly support strategic priorities. 2. They should be described as behaviors. 3. They should be simple and specific.

161orGAnIzAtIonAl trAnsForMAtIon

4. They should be arrived at through a process of enrollment (motivation).

Once business synergy is created, sustaining the relationship becomes an ongoing challenge. According to Pietersen (2002), this must be accomplished by continual alignment, measurement, set- ting examples, and a reward system for desired behaviors. To lead change, organizations must create compelling statements of the case for change, communicate constantly and honestly with their employ- ees, maximize participation, remove ongoing resistance in the ranks, and generate some wins. The balanced scorecard system provides the mechanism to address the culture– strategy relationship while main- taining an important link to organizational learning and ROD. These linkages are critical because of the behavior of technology. Sustaining the relationship between culture and strategy is simply more critical with technology as the variable of change.

Ultimately, the importance of the balanced scorecard is that it forces an understanding that everything in an organization is con- nected to some form of business strategy. Strategy calls for change, which requires organizational transformation.

Mission : To accelerate investment in technology during the reloca- tion of the company for reasons of economies of scale and competitive advantage.