Feedback and Learning
“With the balanced scorecard,” a CEO of an
engineering company told us, “I can continually
test my strategy. It’s like performing realtime
research.” That is exactly the capability
that the scorecard should give senior managers:
the ability to know at any point in its implementation
whether the strategy they have
formulated is, in fact, working, and if not,
why.
The first three management processes—
translating the vision, communicating and
linking, and business planning—are vital for
implementing strategy, but they are not sufficient
in an unpredictable world. Together they
form an important single-loop-learning process—
single-loop in the sense that the objective
remains constant, and any departure from
the planned trajectory is seen as a defect to be
remedied. This single-loop process does not require
or even facilitate reexamination of either
the strategy or the techniques used to implement
it in light of current conditions.
Most companies today operate in a turbulent
environment with complex strategies that,
though valid when they were launched, may
lose their validity as business conditions
change. In this kind of environment, where
new threats and opportunities arise constantly,
companies must become capable of what Chris
Argyris calls double-loop learning—learning
that produces a change in people’s assumptions
and theories about cause-and-effect relationships.
(See “Teaching Smart People How
to Learn,” HBR May–June 1991.)
Budget reviews and other financially based
management tools cannot engage senior executives
in double-loop learning—first, because
these tools address performance from only one
perspective, and second, because they don’t involve
strategic learning. Strategic learning consists
of gathering feedback, testing the hypotheses
on which strategy was based, and making
the necessary adjustments.