Integration of Balanced Score Card into EA Framework addressing Metrics Issue
The following article is a simulated discussion about integrating Balanced Score Card Scheme and the EA Framework. The challenge is to address some of the issues in achieving an integrated framework from which the metrics for performance measurement can be accurately derived. Furthermore, from the integrated framework overall perspective can be gained emerging from all the cross sections of the enterprises with both tangibles and intangibles considered.
This paper examines the business conundrum that GTE found itself following the passage of the 1996 Telecommunications act. The telecommunications market is driven by ‘economics of scale’. This had lead to oligopoly in the market. Almost the entire telecommunications market was controlled and managed by few companies and regulations protected them. Owing to this the advents in the technology was not finding its way competitively to the customers. In 1996 FCC passed a new act that both deregulated and introduced newer acts. The effect of this act was to introduce more competition in the market that would take advantage of the technological innovations, such that the companies could offer integrated services and compete in each other’s market. Following the 1996 Telecommunications act companies began consolidating their market by mergers to achieve economy of scale. This in someway was counterproductive to the Telecommunications act. Nevertheless, the consolidated market to find newer impetus to growth had to offer bundled integrated services competitively. The competition in the market also triggered high turnover in the customer and employees. During this time that the unemployment rate was among the lowest and it became difficult for the companies to find qualified people. The human resource (HR) department at GTE found itself up-against the challenges in aligning the HR to the company’s strategic goal such that it met measurable performance metrics.
For GTE to define its problem accurately, such that it could lead to effective application of the solution, a new method was necessary that could discern the enterprise problem from business perspective. One such method was found in Balanced Scorecard devised by Robert Kaplan and David Norton. Balanced score card is a conceptual framework for measuring the organizations performance both in financial and non-financial measures, that form both lagging and leading indicators. As the businesses moved away from the industry era, where the performance was based on the capital investments and scientific management of employees, into the era driven by technological revolutions, the performance was more determined by the aspectual nature of the intangible assets. Balanced scorecard attempts to bring these aspectual characteristics into more ordered form, such that it provides an empirical perspective.
To realize the Balanced Scorecard a framework for measurement was necessary. A group of GTE personnel was formed to outline the five strategic thrusts into a meaningful measurement model for the HR department. The GTE group devised measurable framework based on balance scorecard1 such that it allowed the managers to view performance in several areas simultaneously. Initially there was resistance from HR managers for they believed that one could not quantify these issues and that the HR managers would lose control of what they were doing. Nevertheless the balance scorecard went live and was able to combine the performance on unlike measures into quantitative results.
The challenges of the balance scorecard at GTE were to map the thrusts (talent, leadership, customer service and support, organizational integration and HR capability) to strategic initiatives, provide effective overall performance improvements company wide and to link business data so employees can look at data from the top down or from the bottom up. After being in operation of six months the scorecard added more challenges to the GTE group with the changing of the business strategy and direct relationships between non-financial measures and financial outcome.
Although an approach based on Balanced Scorecard was discovered, issue still remained in implementing the conceptual framework that would provide perspectives covering both vertical and horizontal integration. The challenge was in creating a system that would help in assessing and evaluating the human skills that would be effectively be used to create integrated services. This was critical, as in the past companies operated in silos. Integration meant to achieve cross functional networked organization. And, this posed the problem of accurately creating a linked HR model covering all the thrusts areas; namely ‘Talent’, ‘Leadership’, ‘Customer service and support’, ‘Organizational integration’ and ‘HR Capability’. Furthermore, these thrusts areas were necessary to be mapped to the strategic initiatives, providing perspectives on the effective performance improvements cascading from the various operational units, such that a linked ‘value chain’ is formed from the layers of the hierarchical business data that is fulfilling the strategic desires. The mapping was desired such that it would offer a meaningful measurement model.
Particularly the Challenges in Creating the Framework were as follows:
- Indexing the Scorecard
- Creating Linked Hierarchy of the Data
- Linking the structured data with the unstructured data (video, audio, pdf etc)
- Reviewing the scorecard
- Measuring successes (financial payoff)
- Linking certain behaviors to financial impacts
- Linking Scorecard to Pay
- Putting them all together (all the thrusts)
- Designing perspectives (Strategic, Customer, Operations, Financial,
- Demonstrated Benefit of Using the Scorecard
- HR Linkage Model – Linking Scorecard across Functional lines to achieve integrated success
The problem discussed above can be addressed by creating Data Warehouse model, from which customized data marts can be created supported by business analytics based data mining or business intelligence solutions. Data Marts can be designed to offer accurate reports for various perspectives, namely ‘Strategic’, ‘Operations’, ‘Customers’ and ‘Financials’.
To create an effective Data Warehouse that captures the integrated data across the enterprise, an overarching Business Information Framework is necessary that is derived from the Enterprise Architecture perspective. Enterprise Architecture provides behavioral description of the enterprise based on its structure, the structural elements and the relationships among them. Furthermore, to accurately align the data to business such that the linked data covers and provides the aspects of the cross functional integration, various cross sections of the enterprise architecture needs to be created that captures the problem domain clearly. The two main cross sections of the Enterprise Architecture in the problem domain are the Business Architecture and the Information Architecture. These architectures need to be designed in a layered way such that at the upper layer it is higher ordered to provide strategic perspectives, which are less detailed but more horizontal. And, at the lower layer it provides more detailed information covering Financial, Operations and Customers perspectives. The Enterprise Architecture Framework captures the Balanced Scorecard in its strategic area and its framework helps in establishing linked business information centric architecture, such that the cross sections of the architecture maps to one another tracing back to the capability and the measurement model derived for the enterprise strategy.
Note: Kalido and Metamatrix are popular solutions that help in achieving integrated Information Meta Model, which provides holistic information management and perspective for enterprises. The framework above is designed based on Zachman framework, which is very popular among the data warehouse designers.
Refer : Building Enterprise Information Architectures: Reengineering Information Systems by Melissa Cook
Kaplan, R.S., & Norton P. (1996a, January-February): Using the Balanced
Scorecard as a Strategic Management System. Harvard Business Review, 75-85.
Datar, S & Epstein, M.J. (2001): Verzion Communications, Inc.: Implementing a Human Resources Balanced Scorecard. Harvard Business School, 1-23.
This case analysis and recommendation covers one of the state of art in data-warehouse design based on MetaModel derived from Enterprise Architecture perspective for large corporations riddled with disparate systems.
1 A new approach to strategic management was developed in the early 1990’s by Drs. Robert Kaplan (Harvard Business School) and David Norton. They named this system the ‘balanced scorecard’. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to ‘balance’ the financial perspective.
2Website: http://www.bscol.com: Balance Scorecard, A Palladium