Written by Rentia Muell.
THE BALANCED SCORECARD
The Balanced Scorecard was developed as an answer to broader concerns about the use of both financial and non-financial measures in performance measurement systems. (Kaplan & Norton, 1992:71). The Balanced Scorecard model incorporates four major perspectives: finance, the customer, internal business processes, and innovation (learning and growth) (Kaplan & Norton, 1992).
A.G. Laffey and Roger Martin (2013) designed a strategic framework based on Strategic Choice Cascade. The first cascade level represents the higher-order sets of choices which determines the overall longer-term ‘goals and aspirations’. The second level supports clear definitions of ‘where to play’ and ‘how to win’ which stakes out the competitive position. The final two levels focus on the activation, it basically represents the required articulation of what is needed to guarantee that the strategy can be operationalized.
As graphically illustrated, choice options cascade down from the higher-order choices. The aim for the higher-level cascade is to provide context and to constrain the lower-order choices. The model assists in choices becoming inter-related ensures that choices fit in context and constraints from the higher-level. Difficulty in fit is an indicator that the higher order requires urgent revisiting. The cascading effect is therefore a constant, dynamic two-way flow.
Cognitive tensions, also known as cognitive contradictions, occur when the mind is confronted with two or more contradictory ideas that come together. This stimulates the mind and forces us to think which leads us to making new connections or insights. In business, organizational tools are used to purposefully create cognitive tensions to motivate reframing (Doz and Kosonen, 2008). Stretch goals, such as ambitious vision statements, can be used to challenge the usual organizational practices and services. When these visions are reinforced in a ‘burning-the-bridges’ approach, leaders commit themselves and their organizations to major change or transformation.
Cognitive tensions increase when contradictory goals and multidimensional structures are introduced. These goals and structures force employees to search for new solutions that stretch beyond routine responses and take multiple perspectives into account.
COGNITIVE TENSIONS AND THE MATRIX
According to recent research, organizations require governance structures or frameworks that have the capability to contain their complexity. Fortunately, matrices are a great way to solve complexity since matrix structures facilitate rich information flows, innovative solutions and allow for fast resource transformation.
Since the beginning of time, the structure of the matrix has appealed to the human mind. A matrix is simple, powerful and accessible to everyone. It enables us to filter out noise and construct brilliant solutions through cross-functional collaboration.
In 2003, Scientrix pioneered the use of a matrix architecture for complex problem solving. Complex problems have more than one dimension, a dimension being a concept that can be broken down into variables. A matrix architecture enables us to integrate multiple dimensions within a problem statement, to subdivide the problem into parts and to master one part at a time within the context of the whole.
Normally our minds can only deal with 3 to 5 concepts at a time, but in a matrix we can deal with multiple concepts, and the interrelationships between these concepts, simultaneously. We can also construct solution architectures that enable broader participation, while maintaining the cohesion of the different parts. These architectures require a combination of engineering, architecture and practical solution construct.
‘Matrix thinkers are creative, visionary problem-solvers’ (Regan, 2014). Matrix thinkers do not think in a linear manner, as in, a leads to b, leads to c. Rather, matrix thinkers think in a 3-dimensional manner. Well-known matrix thinkers include Albert Einstein, Steve Jobs, John Lennon and Bill Gates, to name a few. These individuals are innovators who significantly impacted the way we do things today. They have the ability to make connections between concepts that seem unrelated, which often leads to revolutionary new solutions and ideas (Regan, 2014).
Likewise, matrices are a great way to help us make the connections between concepts and to blend these concepts into something new.
EXPLORING COGNITIVE TENSIONS
Let’s explore if the balanced scorecard and cascading choices can be used in a different way to discover interrelationships between seemingly unrelated concepts. What will happen if our strategic priorities or cascading choices (dimension 1) are connected with the perspectives of the balanced scorecard (dimension 2)?
We used this approach to map our own strategy and were pleasantly surprised how much clearer our plans became. Making the connections between each aspect of the balanced scorecard and our strategic priorities enabled us to create a focus on how to achieve each of our outcomes, highlighted the cause-effect relationships and enabled us to see our strategy from multiple perspectives, all in one holistic view. However, in order to translate back to the balanced scorecard, we had to drop one dimension but we were still happy with the fact that the matrix helped us to derive better concepts and insights.
This whitepaper has demonstrated how cognitive tensions increase when contradictory goals and multidimensional structures are introduced. When we start combining traditional methodologies, such as the balanced scorecard, with matrices, imagine the possibilities we would have to master our strategy and execution. In the end, cognitive tensions between these methodologies help us to make sense of chaos within organizations, and enable the design of structures that unleashes the full potential of the people and resources within.
Doz, Y. and Kosonen, M. (2008). Fast strategy. 1st ed. Harlow, England: Pearson/Longman.
Kaplan, R. and Norton, D. (1992). The Balanced Scorecard – Measures that Drive Performance. Harvare Business Review, January–February 1992 Issue.
Lafley, A. and Martin, R. (2013). Playing to win. 1st ed. Boston, Mass: Harvard Business Review Press.
Regan, H. (2014). How to Identify and Utilize Matrix Thinkers. [online] thoughtLEADERS, LLC: Leadership Training for the Real World. Available at: https://www.thoughtleadersllc.com/2014/02/how-to-identify-and-utilize-matrix-thinkers/[Accessed 26 May 2017].