The Unbalanced Scorecard - Part 1
The Balanced Scorecard has been around since Norton and Kaplan conceived it in 1992. Since then, almost every major company has implemented, and re-implemented some form of a balanced scorecard as a disciplined, focused effort to understand and articulate a set of metrics that effectively measure the performance of an organization.
According to most of my clients though, the balanced scorecard is failing---becoming a truly unbalanced scorecard. This isn't because the idea of a central set of key metrics, which looks at the organization in a balanced way, is wrong. The balanced scorecard as a process and a vessel isn't failing. The metrics are failing. Organizations of every size are finding it difficult to define a robust set of measures that are a true proxy of the business condition. And some companies are so enraptured with the process that they lost sight of the primary objective: employ metrics that are truly relevant to the business.
Refreshing the Balanced Scorecard
I have worked with clients in past years to buff up their existing scorecards and find metrics that represent a strategy that is really working. Most companies pursue this scorecard re-write with some very basic principles in mind:
- Metrics must measure what we really care about---and nothing else.
- Focus of our process must be on ease of implementation and relevance to the organization...not reinventing the wheel.
- We should take the opportunity to stop tracking metrics that aren't serving us well.
- Really important measures should be central to a philosophy of "Plan->Do->Measure". If it's worth measuring, it's worth setting a target.
- Metrics should be integrated horizontally at each level of our plans (the numbers that match the words).
- Metrics must be integrated vertically with each other at various levels (no orphan measures).
- Some measures should be impacted by both projects and operations (this may be the glue we are looking for).
- Metrics and their targets should drive accountability and empowerment.
- Recognize that in practice, metrics are part art and part science----there is no perfect alignment between our metrics and everything that we do.
With a few basic principles in place, an organization can take a pragmatic, no nonsense approach to determining which measures are most relevant and create their balanced scorecard. Above all else, the scorecard refresh needs to be light on process, and heavy on relevance. People love to get wrapped up in process, usually at the cost of real results. A scorecard that looks pretty, and has some sexy sounding metrics won't help if it isn't measuring what is really important to the organization. So, how do we measure what is really important? That's the topic for our next newsletter.