Empowering the Knowledge Worker
Today, companies face the same pressures as 10 years ago, but in a radically different economic landscape. A new pressure, then barely on the horizon, has revolutionized the way many businesses must operate—the Internet. The Internet’s impact is ubiquitous. Among other impacts, it has lowered entry barriers to many markets; empowered the customer with information and choice; brought new distribution channels; and spawned entire industry sectors around activities such as customer relationship management, supply chain integration, security, and the marketing of information.
The economy has transitioned to what some call the Age of Information—an economy in which Gross Domestic Product is increasingly dominated by services. In this service economy, the knowledge worker has replaced the production assembly line worker as a key factor of production. Knowledge workers use and process data or information, and in collaboration with other workers, create knowledge and take action, thereby increasing value.
This value creation process is predominantly intangible in nature. In 1998, over 75% of the market value of the S&P 500 was captured in intangible assets. Intangible assets, like any other asset, are factors of production that should be used to generate value. These intangible factors of production are used in ways that may be many times removed from revenue generation or cost reduction; they are frequently indirect contributors to production of a product or service. For example, IT investments involve extensive use of knowledge workers and capital, and are a powerful service facilitator with significant impacts on costs and internal and external customer relationships, but rarely are there direct correlations between IT projects and increased revenue or reduced cost.
So, organizational financial performance is increasingly contingent on generating returns on intangible factors of production. Therefore, organizations must apply the knowledge worker’s expertise in ways that serve a defined corporate strategy to achieve a return on that worker. It follows that organizations must both empower the knowledge worker and measure their performance in relation to strategy.
However, organizations are finding it extremely difficult to implement strategy and measure effectiveness of that strategy. According to Fortune Magazine, only 10% of the strategies that are effectively created get effectively implemented. A related finding by Norton and Kaplan is that without the Balanced Scorecard, 85% of executive teams spend less than 1 hour per month discussing strategy. So even when companies invest a lot of time in refining their values, mission statements, and strategic initiatives, those ideas rarely trickle down to truly transform an organization, and the average employee does not have a clear understanding how his or her actions influence ultimate performance measures such as stock price or earnings per share.
The Balanced Scorecard is a proven way to align an organization with strategy, harness knowledge workers’ efforts to strategic ends, and ultimately deliver improved financial returns on employees, technology investments, business processes, and customer relationships.