VideoThe problem is that companies still have trouble making those connections. Using the six key principles outlined in the book The Strategy-Focused Organization—including tying budgeting and incentives to scorecard measures and tracking performance over time—the survey asked 193 companies whether they saw any benefit from their systems. Only 50 percent of respondents said they did.
One barrier is that executives are slow to accept scorecards as a vehicle for managing strategy, rather than another measurement tool, says David Norton, co-author of the aforementioned book, along with Harvard Business School professor Robert Kaplan. "There is no generally accepted structure to describe a strategy like innovation," he explains. The companies that benefit from scorecards, he adds, develop them with input from the executive team; inform the whole company, including shareholders, about the strategy; and manage the scorecard by making the necessary links.
Brendan Colgan understands the importance of using scorecards to provide feedback for managers. The CFO of Anderson Group uses a scorecard to monitor sales lost to competitors at one subsidiary. "It helps us identify where our competitors stand," says Colgan. "For example, if we have 60 percent of market share, we should have at least a 60 percent success rate each month."
Norton predicts that, as they did with quality management, companies will routinely incorporate strategy into their scorecard systems, probably within five years. —Laura DeMars
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There was a lot of squawking this fall after European CFOs received comment letters from the Securities and Exchange Commission demanding additional information—sometimes lots of it—about how their International Financial Reporting Standards (IFRS)–based filings translate into U.S. generally accepted accounting principles. AstraZeneca CFO Jon Symonds was among the most vocal, accusing the SEC of setting itself up as "judge and jury" over international companies' financial statements.
The SEC's actions, says Mark S. Bergman, an attorney in the London office of Paul, Weiss, Rifkind, Wharton & Garrison, further fueled the perception among some Europeans that the compliance costs of listing on U.S. exchanges are just too high. "If companies feel that compliance costs have gotten out of control, they may well be considering delisting and deregistration," he says.
Back in the United States, however, regulators suspect a different motive for the complaints. Earlier this year, U.S. and European regulators agreed to use the SEC's comment letters as part of a process aimed at eliminating the reconciliation of accounting standards altogether. It ought not to have caught anyone by surprise. In November, U.S. Financial Accounting Standards Board chairman Bob Herz went so far as to speculate that European firms that protest too much might be trying to "hide" something.
Former SEC chief accountant Lynn E. Turner, now managing director of research for Glass Lewis & Co., agrees that the outrage may have less to do with principled opposition to the SEC's extraterritorial reach than with concern that its questions could reveal that companies have not been complying with IFRS. "The real issue is whether companies are really going to comply with either international or U.S. rules and provide a clear picture to investors," says Turner. "This could indicate that some European companies aren't complying with either set of accounting and disclosure standards."
Symonds of AstraZeneca, as well as a representative of the Confederation of British Industry, declined to comment, but the impact of the controversy may become apparent soon. The SEC is finalizing a new rule that will make it much simpler for foreign firms to delist from U.S. stock exchanges. The markets will find out how European companies really feel if they start voting with their feet. —Rob Garver
Are Your Workers Engaged?
Labor statistics indicate that U.S. workers are more productive than ever. What they aren't is inspired.
According to Sibson Consulting's 2006 Rewards of Work Study, only 52 percent of employees are fully "engaged," defined as knowing what to do and wanting to do it. One-third of them are actually disengaged.
Such a disconnect, says Christian M. Ellis, a senior vice president in Sibson's Los Angeles office, results from "a lack of investment in important people processes." In the last few years, he explains, many companies have focused on technology and cost containment at the expense of human-capital initiatives. "But value creation is a function of productivity," he says, "and productivity doesn't come from cost management."
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