Balanced scorecard and Six Sigma implementation in organizations

Balanced Scorecard & Six sigma

Six Sigma's focus on defect and cost reduction, and value maximization for customers and the organization as a whole, would initially seem to be harmonious with the Balanced Scorecard (BSC) approach. The BSC quadrants analyze customer satisfaction, financial performance, learning, and business growth (What is the balanced scorecard, 2009, Balanced Scorecard). It would seem that Six Sigma's focus on value maximization could align, for example, with the BSC focus on improved financial performance. However, the two systems often have fundamentally different perspectives upon the future: Six Sigma tends to be focused on improving performance by continually setting internal benchmarks of improvement while BSC approaches focus upon setting benchmarks based upon besting the competition and improving financial performance in a more straightforward, and less strategic fashion (What is Six Sigma, 2009, Six Sigma).

BSC has been criticized for its micro-focused perspective, whereby small-scale business processes in the overlapping quadrants are reformed to improve the organization as a whole. Six Sigma also focuses on improvement of specific business processes, hence its emphasis on zero defects. But the zero-defect goal, for example, is not set with an eye upon improving the business solely in relation to competitor organizations -- it is assumed that continual improvement is demanded, even when the company is 'on top.' While BSC does not discourage improvement, it is much more aligned with conventional business metrics that measure success. Furthermore, Six Sigma is also a highly structured performance measurement style, focusing on defect reduction in a fashion that gives specific responsibilities and Six Sigma titles to different members of the organization. Different managers focus upon different types of processes, and use a variety of Six Sigma methods, such as fishbone diagrams and cost benefit analyses. An easy interchangeability with other systems seems dubious, if an organization is holistically 'Six Sigma.' While BSC is proposed as a streamlining process to 'information overload' it is precisely this level of detailed information that Six Sigma relies upon to realize its goal of continuous improvement.

Question 2

BSC has been criticized for being essentially backward-looking, and thus fails to set goals for the future that can truly push the organization forward. The contention that more than 70 per cent of Balance Scorecard implementations fail should be taken with something of a grain of 'salt' given that this may be due in part to faulty human processes, although a Six Sigma advocate might stress that reducing human error should be a goal of any performance management system, and this illustrates the failure of BSC.