Once upon a time there was a company, and its people were unhappy. They had no goals and nowhere to go. They lacked focus and alignment. Then it started to rain. It rained balanced scorecards. There was one for everyone. Now the people were focused and aligned. And they were happy.

This story sounds silly, of course, but it describes the mind-set of many deployers of business intelligence and performance management systems. Companies approach these technologies with the assumption that implementing the Balanced Scorecard will automatically bring organizational alignment. This is a very mechanistic approach to performance management that doesn't reflect how organizations really work.

The Balanced Scorecard is a methodology that helps organizations clearly articulate their strategy and goals, communicate them across the enterprise, and monitor key performance indicators. But the idea that scorecards, by themselves, lead to alignment is a fairy tale. The properly defined set of metrics, based on a deep understanding of the true values of a business, within a scorecard are what truly drive excellence. But to properly define metrics, a company needs to look outside the traditional performance management point of view, in which companies are seen as machines -- entities that have input, processes, and a predictable output.

Running a machine requires buttons and levers and frequent maintenance, but machines that are treated properly can be controlled pretty precisely. That's because machines don't learn but simply do what they are told. It makes much more sense to compare an organization to a living organism. Like people, organizations are born, grow up, and eventually die. Some die young; some are irresponsible. Others mature and grow old and wise. Over time organizations expand and contract, and they create offspring in the shape of new activities and business units. They operate not as an island, but through interactions with an environment that impacts them and that they impact. Most important, organizations have a character; they have values that they hold dear, and they develop knowledge over time.

Recognizing a Company's Sense of Self

By taking a less mechanistic and more organic approach to organizational alignment than that typically associated with the Balanced Scorecard, a company can develop a much better understanding of the drivers of its performance. Consider the definition of "alignment" that's found in the social sciences: A person is considered "aligned" if the self, the person's perception of the self, and the external world's perception of it match closely. In this verbiage, the person's "self" represents who he or she really is, with all the positive and negative behaviors he or she exhibits. An individual's self-perception may be quite different. Ego may stand in the way of an accurate view of the self, or a lack of reflection may inhibit the person's understanding of his or her behaviors, motivators, and values. This state is what psychologists call "dissonance." It can lead to negative emotions such as frustration, anger, and a feeling of helplessness, to name a few.

Such dissonance also affects external perception of the person. People who are not aligned may come across as overconfident, for example, because they are concealing insecurities. When other people sense dissonance, they may lose trust in the individual. When, instead, self-perception is aligned with the self -- that is, individuals accept themselves the way they are, without false pretenses -- they are more likely to be accepted in the outside world. The key to achieving accurate and aligned self-perception as an individual is to understand what drives one's own behavior. Exhibit 1, below, illustrates the difference between someone who's authentic and balanced and someone who's unbalanced and inauthentic, in terms of the overlap of the self, self-perception, and external perception of the person.

It's interesting to consider that companies face similar problems with dissonance. The way an organization is perceived by those around it can be damaged when the values its behavior signals differ substantially from the values it professes to have. Performance management practices should drive positive behaviors and not the games we all know. Games increase the gap between self and self-perception, causing organizational dissonance. For example, suppose an organization requires employees to make a traditional business case before it will fund a new initiative. An employee comes up with a plan to cut costs by replacing an expensive customer service system with a less expensive one. Because she's learned which buttons to press to get approval, the employee writes her business case based on financial goals exclusively. The initiative is approved and implemented. It saves money but leads to massive customer service problems. The company might claim to be focused on customer service, but its process for approving internal projects is clearly driven by other values. This can lead to dissatisfaction among those customers, employees, and others for whom the company's behavior doesn't seem to support its claimed values.

Businesses can benefit greatly from pursuing organizational alignment along the same lines as individual alignment. The goal is to reach an organizational self-perception that closely matches the perception of the company by customers and other external stakeholders such as suppliers, shareholders, and regulators. The result is a customer value proposition that's true and authentic. Only when there is internal alignment can there be alignment with the external perception too. Translated into more accepted business terms, corporate identity and corporate image must closely match, and corporate strategies should aim to bring identity and image closer together instead of devising ways to conceal or explain the differences.

So, What Are Your Values?

An important part of aligning self and self-perception of the organization is to understand the organization's values. Many organizations talk about their values but fail to realize that discussing values in a management retreat does not make them reality. Values cannot be created; they must be uncovered or discovered. Although strategies, marketing messages, and practices change over time, the underlying corporate values do not. Examples of these steadfast organizational values are being quality-driven, ambitious, cost-conscious, compassionate, disciplined, and trustworthy.

To pinpoint its own values, an organization should ask questions, not just of management but also of average employees and customers. It might ask executives questions such as "If you are faced with a difficult business decision -- a dilemma in which you have two options, each of which offers both positive and negative results -- how do you weigh the options?" Established corporate values are likely to guide managers to the right decision.

Then the company might approach midlevel managers with a different set of questions, asking something like "What behaviors help people advance their career in this company?" Be forewarned, though: The path to accurate self-perception may be painful. Questions like this may turn up answers senior management doesn't like. Questions such as "Which people in the organization do you admire for really getting things done, without banging heads?" can help distill operational employees' views. The people who are chosen probably embody the values of the organization. Finally, customers are likely to have another important perspective on company values. To discover it, companies might just ask "What do you think this organization stands for?"

Posing all of these questions to senior management, middle management, operational staff, and customers and then comparing their answers can prove to be a very interesting exercise. The more the answers are the same, the more alignment there is between the organization's self and its self-perception. Conversely, the more the answers are different (or the more cynical the answers are), the more dissonance exists within the organization. Often an organization's official list of values -- those defined by the management team -- contains a few that describe desired behaviors rather than actual behaviors. For example, a company that has traditionally not been team-oriented may want to focus its staff on teamwork. But just because managers name teamwork as a core value does not make it so. Organizations have to be cautious about the chance that they're weaving desired values in with their authentic values. Values that are not intuitively recognized by the staff may lead to a cynical response among employees, which could result in further misalignment instead of better understanding and, ultimately, performance.

Every company has value drivers -- authentic company strengths -- that lead to the behaviors which power its results. Value drivers are the strategies that create a customer value proposition and provide consistency behind the different goals that the company aims for, such as cost leadership, customer intimacy, or product innovation. The value drivers derive from the organization's values, whether or not management is aware of it. Exhibit 2, below, illustrates this relationship.

For example, if a company's strategy targets cost leadership or operational excellence, most likely it is driven by values such as thriftiness, efficiency, and discipline. Employees seek ways to cut costs and create an ever-more-efficient operation. They pride themselves in being the most cost-effective production, which is recognized by customers and leads to healthy financial results. Alternatively, if a company's strategy is all about customer intimacy, its values probably include going the extra mile, flexibility, and empathy.

Negative Values

The connection between values and strategy is true, whether the values are positive or negative. When people work to get into "alignment," they must understand not only the characteristics they're proud of, but also their negative behaviors -- their "dark side," which they must embrace as an essential aspect of the self. Recognizing their shortcomings is a tough task for corporations, which traditionally concentrate on the positive side of themselves, the values that describe principal behaviors at a high level. However, if positive values impact behaviors, the opposite also must be taken into account.

Every organization has negative values; they're often the other side of a positive value's coin (see exhibit 3, below). It is important not to dismiss them. While positive values drive performance for the organization, negative values inhibit the performance of the organization. Exhibit 4, below, shows how both contribute to the company's bottom line. Value inhibitors, from the standpoint of the organization, are the strategies deployed to serve goals other than corporate objectives. Think of suboptimization, in which individual managers maximize their own targets at the expense of the company's overall strategic objectives. Or think of gaming, when employees start underachieving after making their targets or intentionally overspend to secure a higher budget for next year. Negative values obviously shouldn't be published on the corporate Web site, but management needs to pay equal attention to all values if the company is to achieve alignment.

Return on Investment

The juxtaposition of psychology and organizational alignment may seem a bit esoteric, but there's an important lesson in this that organizations can apply immediately. Return on investment and other financial metrics are really bad indicators of the future success of initiatives. So the process of justifying new initiatives by making financially focused business cases is flawed. A good market opportunity is not a good idea if it doesn't match customers' perception of the company trying to take advantage of it.

An initiative that matches the core values of an aligned organization is more likely to succeed. Companies' metrics and performance management processes should increase the connection between customer values and organizational values, bridging self and external perception. A company that succeeds in doing this will have found the killer initiative.

Frank Buytendijk is vice president of corporate strategy for Hyperion. He helps drive strategic direction for Hyperion worldwide. Before joining Hyperion in early 2006, Buytendijk was a research vice president with Gartner.