By Robert W. Bradford
Last week I had an interesting conversation about the Balanced Scorecard with a friend who works in a large organization. His comments reminded me of so many comments I've heard about Balanced Scorecard and Strategic Planning that I went back through my notes to see what common threads underlie the biggest issues companies have with Balanced Scorecard initiatives.
To begin with, Balanced Scorecard projects are no more Strategic Planning than budgeting is. Sure, you can use a scorecard to drive certain fragments of the Strategic Planning process, but it is still a fragment of what is needed to create the right strategic change for your organization.
Based on feedback from the companies I've met through my Strategic Planning seminars, speaking and client work, here are the main reasons why you might be dissatisfied with your Balanced Scorecard program:
I. You have too many measurementsI've explored each of these in my blog: http://simplifiedstrategicplanning.blogspot.com/, following is a compilation of the main points.
Of course, the best thing to do about getting the strategic change and the results you want is to do good Strategic Planning.
I. You have too many metrics in your scorecard
This is most likely true, if you are doing Balanced Scorecard in your company. Why do I say this? There are four reasons you have probably put too many metrics into your Balanced Scorecard.
IIa. You are measuring things because they are easy to measure
This issue reminds me of the old joke about the man looking for his wallet on the sidewalk.
Passerby: "Did you lose your wallet here? I can't see itů"
Man: "No, I lost it in the alley back there"
Passerby: "So why are you looking out here on the sidewalk?"
Man: "Because the light is much better out here."
There is only one thing to say about this: the easier things are to measure, the harder it is to create real strategic advantage using the measurement. We need to examine the reality underlying our strategy with our measurements, unless we want to see a bunch of obvious numbers without actionable conclusions.
IIb. You aren't measuring things that really matter
There can be lots of reasons for this issue. Perhaps you are measuring something that has little or no impact on your competitive position. Ask yourself: if ONLY this number improved, would we really be better off? In many cases, the numbers you look at overlap with other numbers. To use a simple example from financial measurements, it's somewhat redundant to look at both gross margin and net profit, because net profit is simply gross margin minus fixed costs and a few other expenses. I won't tell you which you should look at in your own company, but I will tell you it's rare that a company should include both numbers in the five to ten core metrics in a streamlined Balanced Scorecard. This means you need to pick on, understand that it (like all metrics) will have the flaw of not being complete, and move on.
Another reason why companies sometimes measure things that don't really matter is that the metric chosen makes the company look good. At worst, this can be a case of throwing in a number because it can be counted on to give us good news even when the other numbers are telling us bad news. Again, if the number does not affect your competitive position or your ability to succeed, consider eliminating it from your scorecard.
There is an even more insidious problem associated with measuring things that don't matter - if this is your company's problem, you are very likely shying away from measuring things that matter very much. Sometimes this is because managers fear the implications of managing to certain metrics. If managers fear measuring profit per employee, for example, because it might lead to staff reductions, you should be asking yourself whether this fear is useful. There are many industries where staff reductions are a vital strategic management tool - failing to consider them when appropriate can be a major strategic error.
The third main reason why you may be disappointed in your Balanced Scorecard program is fundamental to the limitations of the scorecard itself.
III. Your Balanced Scorecard isn't driving action
This is most likely true if you are doing Balanced Scorecard instead of true Strategic Planning in your company. Why do I say this? Because true Strategic Planning focuses attention on the things that will make a difference for your company. Balanced scorecard processes, on the other hand, tend to rely on employee understanding of the links between measurables and reality - and, because of shortcomings I've discussed in earlier posts, these links rarely motivate employees as well as understanding the underlying issues. Granted, your CFO or other technical managers may quickly grasp the relationships - but true strategic competency requires broad participation and support from all parts of the company.
Even if you have excellent training and support throughout the company for Balanced Scorecard, you are likely to have issues if you are not also driving execution through a routine tool for monitoring and accountability on actions (rather than numbers). The action plan process in Simplified Strategic Planning is an excellent approach to doing this, and can be helpful even if you are not using an optimal Strategic Planning process. There are several keys to making implementation work - it is, after all, the sore spot in Strategic Planning for most companies. The most important of these is to have rock solid and unified support for implementation accountability at the top levels of your company. This is a key area where executives must always act as role models for the rest of the organization - failure to do so almost always results in sloppy execution. You are measuring the wrong things.
IV. The change your business needs involves a more fundamental shift in strategy
Simply put, you can't measure your way out of some strategic issues. To use an analogy, let's say you are part of a team of jungle explorers, and you are measuring your efficiency. You might look at "miles traveled per day". Under many circumstances, this might get you where you want to go. But there is no measurement around this that addresses the more fundamental strategic questions - such as "Are we in the right jungle?" and "Should we be in a jungle in the first place?". No matter how well you perform on your measurements, being in the wrong jungle will prevent you from succeeding - and you won't even ask the right questions if you stay completely focused on any set of metrics.
So, to sum it up - a Balanced Scorecard is a very useful tool, one that is quite similar to the "Measures of Performance" we have been teaching since 1981. Even more importantly, measurement can drive strategically useful behavior, so a Balanced Scorecard program can yield excellent results. But - as with any other management process - you need to be aware that no one approach can solve all of your business problems, and there is no substitute for a robust, formal Strategic Planning process.
Robert W. Bradford is President of Center for Simplified Strategic Planning, Inc. He can be reached at
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