Leadership Strategy
The Balanced Scorecard: Overcoming the Challenges to Implementation
By Brian Ward
Feb 18, 2007 - 8:13:25 AM

Developing and implementing strategy is a messy affair. In an attempt to put some workable structure and process around strategy development and deployment, and also as a response to the need for a systematic approach to measuring and managing strategy, in 1993 Kaplan and Norton introduced the concept of the Balanced Scorecard.

Since then, organizations of all types have adopted, or more appropriately adapted this concept to help them get a grip on strategy, accountability and organizational alignment.

Governing Beliefs

More than a report card, the Balanced Scorecard is a collaborative approach, aimed at helping an organization achieve success at strategy development, implementation and evaluation.

The Balanced Scorecard is based on a number of governing beliefs, including: 

1. ‘Management for results', which is forward looking, will outperform ‘management by results', which has been likened to driving your car by looking in the rear view mirror

2. Financial outcomes alone will not tell you whether your organization is or will continue to be successful. There are other perspectives to consider, including customer outcomes (satisfaction, market share, etc.), process excellence and learning & growth.

3. An organization is a system, and understanding mission critical cause-and-effect relationships, especially between the four perspectives on a scorecard, is key to crafting and re-crafting successful strategies

4. Strategy development and implementation requires the active involvement of all stakeholder groups to be successful

Challenges in adapting the Balanced Scorecard

At first glance, the logic in a Balanced Scorecard seems self-evident. In fact, it really is a process model (or for those of you who manage programs, a logic model) that looks at an entire enterprise, and attempts to illustrate a strategic or forward looking managerial hypothesis. 

The difficulties that organizations experience include: 

• Swimming in a sea of data, with no site of the shore. Organizations have great difficulty in pulling information together into a Balanced Scorecard format that will demonstrate the strength or weakness of many of the cause-and-effect relationships proposed in such a managerial hypothesis. Very often, a significant realignment or overhaul of management information systems, and the thinking that goes with them, is required.

• Leaving it to the ‘measurement experts'. While it is essential for any measurement system to have integrity, leaving it to ‘experts' takes it out of the hands of those who can effect the changes that are necessary for any strategy to succeed. The scorecard system needs to be owned and understood by those responsible for strategy implementation. More than just a measurement system, it is a management system that tells the story of your strategy.

• Too many measures. Kaplan and Norton suggest that successful scorecard implementations tend to have around 20-21 measures, with the majority concentrating on the Internal Process perspective…not surprising, since that's where the action is. But even this many measures can be overwhelming. It really is a case of ‘less is more'.

• Over reliance on software solutions. There are over thirty commercial balanced scorecard software packages on the market. While software can help ease the number crunching and communications tasks, it is no substitute for the hard work of convincing people that strategy development and implementation is necessarily messy. Don't be fooled by the fancy graphics and gee-whiz capabilities of such technology based ‘solutions'.

• Culture shock. Shifting to a Balanced Scorecard approach very often requires a dramatic shift in attitude and behaviors. For example, experimentation and hypothesis testing will help you refine your scorecard and strategy, but if your organization has a history of command-and-control or management by results style of leadership, then get ready for one big culture shock.

Overcoming the challenges

The senior leadership team need to buy-in fully to the concept of a balanced scorecard. To do that, they need to approach the exercise with their eyes fully open. It's no walk in the park. If you are such a team, here are some basic tips to help you over the hurdles: 

1. Don't expect perfection from day one. Hypothesis testing requires that you face reality. If your initial strategic thinking is flawed, face it squarely and revise it so that your strategy, and your credibility, are enhanced.

2. Build your management information systems around the cause-and-effect paradigm of the scorecard.

3. Throw out your tired old performance management systems that attempt to focus attention on the individual performer. We live in an interconnected world, where none of us are so detached that our personal contribution to organizational success can be reliably isolated and measured. Performance appraisal systems that focus on individual performance are notoriously ineffective at improving overall organizational performance.

4. Learn from others.  More and more organizations are using balanced scorecards as a tool for communicating their stratgy. Find the ones in your indsutry and outside it, and learn from them.
   

5. Use the correct balanced scorecard framework for your type of business. Not-for-profit models are different than for-profit in the cause-and-effect relationships they seek to explore…don't get them confused. Firms difffer depending on the type of business they are in. A law firm is fundamentally different than Wal-Mart.
   

6. Understand that strategy is not a spectator sport. Engage your entire organization in developing tactics to support the strategy and feed into the scorecard system.

7. Integrate the scorecard into functional areas. Don't stop at the C suite. In particular, integrate your strategy and scorecard into your Project Management office.
   

The Balanced Scorecard is an effective, dynamic process for making strategy everyone's job. It requires hard work, lively debate, innovative thinking and a willingness to challenge and discard old ways of thinking about performance management. 

Above all, it requires focused and courageous leadership. Are you up to the challenge?