Putting the Scorecard to Work, Part Two of a Series

The Balanced Scorecard has helped Boeing, Sears and other companies achieve radical improvements in their management systems’ performance. The key to capitalizing on this tool is customizing it for your company’s needs.

Companies that want to rapidly transform their balance sheets often send executives to Balanced Scorecard presentations, where they learn about the hazards and rewards of being on the front lines of an implementation of this performance measurement system. At such a seminar, Rick Quinn, president of Hilton Head, S.C.-based The Quinn Consulting Group Inc., gauges his audience’s enthusiasm about implementing the Balanced Scorecard by shooting them a sharp question: "Are you willing to be fired?"

Quinn knows firsthand what it takes to make a Balanced Scorecard project pay dividends. He was a key architect of Sears, Roebuck & Co.’s successful cultural shift in the mid-1990s, which was based on the Balanced Scorecard’s four perspectives: customer, internal business, financial, and learning-and-growth. Many companies have used the Balanced Scorecard’s combination of financial and nonfinancial measures to evaluate and overhaul their management systems. By learning about the practical applications of the Balanced Scorecard — how companies use its four traditional perspectives and add new measures to suit their needs — corporate finance managers can develop an understanding of how the tool might strengthen their companies’ bottom lines.

A Cultural Shift at Sears

Sears radically improved profitability using the Balanced Scorecard’s four perspectives. However, shortly after Sears’ implementation of the standard Scorecard, Quinn discovered that maintaining the company’s increased shareholder value would require more change. For Sears, sustaining the Balanced Scorecard’s initial improvements required senior management to alter the company’s overall vision and incorporate a new perspective into the company’s Scorecard.

"You can’t look at the Scorecard as just helping you pull a bunch of strategic levers. You have to be willing to go through cultural change," says Quinn, who retired from Sears in 1996 after a 26-year career with the company. "If you’re messing around with cultural change, you have to ask yourself whether you’re ready to fire some of your senior team if they’re not willing to behave differently. Really changing senior management causes some discomfort."

Quinn was vice president of quality when he introduced Sears to the Balanced Scorecard concept in late 1992. Sears had a net loss of almost $4 billion that year, but the company posted the largest profit in its history in 1993. After the company’s financial rebound, Quinn lost most of the audience for his idea. It soon became clear to him that a small group of people had caused the company’s turnaround and that different long-term measures would have to be taken in order to sustain Sears’ renaissance.