Trends & Insights: Keeping Score

OLAP and balanced scorecards

No, I'm not talking about whether Oracle or SQL Server has more market share—nor about the latest baseball or soccer statistics. I'm talking about the balanced scorecard—a performance measurement system your CEO and CFO may have heard about if they read journals such as the Harvard Business Review (www.hbsp.harvard.edu).

Even CIOs are likely to know something about balanced scorecards if they track the high-end OLAP market, so you too will want to think about balanced scorecards. You undoubtedly realize that SQL Server 7.0 ships with what some are belittling as a low-end, entry-level OLAP server. With a little common sense and help from your business analysts, you can adapt some of the balanced scorecard concepts on a SQL Server shoestring.

Balanced Scorecard—What's the Score?

As OLAP guru Nigel Pendse observes, "The cynics would say that balanced scorecard is just another management fad, like discredited business process reengineering (BPR)." BPR refers to the now mainly discredited business process reengineering which Michael Hammer and James Champy popularized in their bestseller, Reengineering the Corporation: A Manifesto for Business Revolution (HarperBusiness, 1994). BPR is only one of several recent fads Pendse finds annoying. Others include the quality fad (e.g., ISO9001) and the Baldrige awards. In Geoffrey Moore's (www.chasmgroup.com) books Crossing the Chasm and Inside the Tornado, Moore refers to the life cycle of new technology-based products in the gulf, or "chasm," between the markets for early adopters and more pragmatic buyers.

So much for a somewhat jaundiced view of some hot management fads of the '90s. The truth is, most of them rely on common sense. I can say the same for the balanced scorecard, which Harvard Business School professor Robert S. Kaplan and consultant David P. Norton first described in "Balanced Scorecard—Measures That Drive Performance" (Harvard Business Journal, January-February 1992). A subsequent Harvard Business School Press book, The Balanced Scorecard, popularized the balanced scorecard approach.

In a nutshell, balanced scorecards provide organizations a way of grading themselves. As Kaplan explains in his author's posting on www.amazon.com, "We originally developed the balanced scorecard to improve performance measurement systems." It includes straightforward financial measures such as return-on-capital-employed and economic value added, and adds fuzzier measures that reflect trends in customer satisfaction and loyalty, the quality of internal processes, and the organization's ability to learn and improve.

To do it right, you theoretically need solid management buy-in and the ability to weave in a lot of external financial and benchmarking (relative to your competitors, not in the TPC sense)—and deep pockets. Vendors such as Gentia Software and CorVu Corporation can easily command six figures to help you set up a business scorecard. Gentia Software co-developed Renaissance Balanced Scorecard (RBSC) 3.0 with the consulting firm Renaissance Worldwide. In late 1998, Gentia and Renaissance also co-founded the Balanced Scorecard Technology Council (BSTC at www.balancedscorecard.com).

Of course, many organizations don't need, or even want, a formal (some would say rigid) balanced scorecard framework. The overhead associated with setting up high-end balanced scorecard software is likely to be prohibitively expensive overkill for small firms, or, for example, firms that market only one product line. However, most organizations can use the basic metrics, especially if they're agent-delivered. Does this discussion remind you a bit of '70s-era exception reports or Executive Information Systems (EISs)? One can make the point that EISs are better at analyzing trailing indicators, compared to the balanced scorecard's strength with leading indicators. The point is, you can use just about any OLAP engine, including Microsoft's SQL Server OLAP Services, combined with the built-in functions and alerts that are part of a good OLAP client, to craft a bargain-basement balanced scorecard.