In a recent post I suggested that when initially introduced, frameworks tend to address specific problems with limited scope. If they help successfully address the problem, over a period of time they evolve to address problems across a broader section of the organisation. As a result of this extension of scope, what can happen is that two frameworks that originally intended to solve different problems could end up appearing to address similar sets of problems. When this happens, one needs to choose between alternative frameworks and arguments can break out about which one is better. Often, the final decision is made based on criteria that are incomplete or inappropriate. The effort involved in implementing a framework can be substantial, so if the one chosen is not the most appropriate, much of this investment can go to waste.
The choice of framework is probably the most important determinant of the success or failure of a change initiative. So it’s worth looking at some of the criteria for choosing the right framework for what you want to do with it.
But before that, let’s look at why some organizations make the wrong choice.
One reason organizations choose a particular framework is that certain individuals or groups are already familiar with it, though it may be difficult to resurrect one that is perceived as having failed. Such initiatives rarely survive in the organization beyond the tenure of the initiator. Frameworks can also be selected because of recommendations from people perceived as authorities, such as consultants.
These recommendations are not always for the best because consultants tend, correctly from their own point of view, to think that approach they favour is better suited for the situation at hand than the others. And, given this perfectly understandable bias, the evidence they would have gathered would appear to confirm their position.
Another criterion is popularity. The reasoning for such a choice is based on Darwin’s principle of the survival of the fittest. The most popular framework has stood the test of time and succeeded by getting to the top of the rankings, so it must be the best choice. There are two problems with this. First, there is no ‘standard’ organisational environment in which the competitive battle takes place. Each environment is unique and, arguably. ill understood. So the factors that determine the success of a framework are not necessarily their inherent strengths. Second, there is no consensus on what constitutes fitness in a given environment. There are just far too many factors involved. In the last paragraph the operative phrase is ‘for what you want to do with it’.
In what follows, I have identified some criteria that you may wish to consider using the example of two frameworks in the area of business performance management: the Balanced Scorecard (BSc) and Economic Value Added (EVA). The BSc is well-known and widely applied, but EVA is more specialised, but still very popular. You can get an introduction to the two frameworks here (BSc, EVA).
Choosing a framework is a bit like choosing a direction for travel. Once you have chosen the wrong direction, no how matter competent you are or how hard you try, you will not get to where you really wanted to go. Every framework comes with its own baggage, meaning that it is based on a certain view of the world and certain assumptions. The world view and assumptions associated with a framework tend to be hidden, so this is probably the most difficult of the criteria to use when assessing a framework. One way to address this problem is to consider the origin of the framework, which can also provide clues about its strengths and weaknesses and how well it aligns with where you want to go.
EVA and was originally developed on the premise that the price of a company’s share is the most accurate measure of its performance. The market price of the company’s share is an indicator of the company’s expected future profitability. Share price can therefore be used to guide the company in setting financial performance targets. CEOs remunerated on the basis of share price would naturally be interested in understanding what future financial profitability will justify a certain increase in share price. They can then work towards delivering that level of financial performance.
The BSc was developed because financial indicators reflect only part of the overall financial performance of a company. A more comprehensive set of measures would include those relating to customers, process performance and how well the company leverages intangible assets.
Both EVA and BSc align with the shareholder-as-owner model of business. One difference between them is the BSc explicitly recognises the role of customer value as the key driver of financial performance.
Some frameworks are like general purpose tools and can be applied to solve a range of problems in a variety of environments. Others are more specialised and limited in scope, but possibly more effective within their area of focus. To find out whether or not the framework is a good fit for what you want to, it would help to consider how it works.
EVA is a specialised framework, intended to align the financial performance of the company to deliver the highest possible total shareholder value. It does this by focusing on what are called financial drivers of performance (revenue, gross profit and cost of assets). These drivers of financial performance are in turn driven by non-financial drivers. For example, the development of new products or services can lead to increased revenue. One can build an elaborate driver tree to link all the activities within the company to the financial drivers.
The BSc is more general purpose, intended to represent measures of performance in terms of a network of causal relationships that links intangible factors such as employee engagement to process performance, process performance to customer value and customer value to financial performance. Because the relationships are depicted as a causal network, the map can be seen as representing the strategic focus of the company it is called a strategy map.
Both EVA and the BSc represent areas of priority in terms of causal relationships, EVA in the form of a driver tree and the BSc in the form of a network. If we were to choose an appropriate framework for a diversified conglomerate, it would make sense to use EVA for the corporate office and the BSc for the strategic business units.
Like individuals, organisations go through a learning process as they grow. It may be difficult (though not impossible) for an organisation at a certain level of maturity to take full advantage of a framework suited to one that is much more advanced.
This was brought home to me quite dramatically in an environment in which a balanced scorecard that had been successfully implemented was replaced by a simpler framework. This represented a reversion from the broad-based alignment enabled by the balanced scorecard, to a far more limited one that enabled only vertical alignment. The reason for the change was that the balanced scorecard was seen as too advanced for the organization, meaning the there was a mismatch in maturity between the framework and the organization.
EVA on the other hand is easier to understand and implement – once you get past the specialised accounting involved. Of course, if the company isn’t listed one can’t use market capitalisation as guidance, so that limits the applicability of EVA to ones that are listed.
Let’s say you have been considering several alternatives. If after evaluating alternative frameworks you are left with the ‘none of the above’ option. What then?
This might actually be good news – for several reasons. First, it suggests you have done your homework, that you have thought through your requirements and done a critical assessment. Far better to do this than rely on the collective wisdom supposedly encapsulated in a popular framework. Second, it is very unlikely that none of the frameworks has any overlap at all with your needs. What is more likely is that one or more frameworks is a better fit than the others. That’s an indication that you might need to do some tweaking. The reality is that virtually any framework you choose will require some degree of tailoring.
Selecting the framework with the closest fit and customising it may be the ideal approach because every organisation is unique (see here for reasons why). And you don’t need to design the perfect solution from the word go. It is probably best to make a start with a modest set of adjustments and learn as you go (see here for how).
If you are interested in learning more about organisational alignment, how misalignment can arise and what you can do about it join the community. Along the way, I’ll share some tools and frameworks that might help you improve alignment in your organisation.