Some studies say as many as two thirds of US companies have a Balanced Scorecard, yet other studies show that fewer than 20% have been able to drive true results.
Why such a gap? Like any tool, success versus failure depends on how well the Balanced Scorecard is used. You can't blame the hammer for shoddy construction practices. Yes, you need good tools. That's a given. But the best hammer in the world can't make up for unskilled workers, poor building design, or an insufficient supply of nails.
What are the biggest usage problems that keep this tool (the Balanced Scorecard) from succeeding?
Here are the top issues that we see hinder success:
- The Balanced Scorecard is setup just a single, top-level "flat" report - Executives take their
strategic plan and chunk it into the four Balanced Scorecard
perspectives, group a few measures that they've always measured into
these more balanced buckets, and expect things to change.
A single top-level BSC will not drive change. It's through the process of cascading scorecards that the cause-and-effect linkages are made, allowing you to work on lower-level drivers of high-level problems earlier and more effectively.
- It reports far too many measures - We've seen "Balanced
Scorecards" with more than 100 measures on the top-level BSC. This is
far too many upon which to focus at any given time. Most often these
BSCs are overloaded with internal financial measures. So the Scorecard
is neither balanced, nor strategic.
To drive real change, the BSC should focus on strategic areas, particularly those that have significant performance gaps. It should not try to be the operational and financial reporting system for the organization.
- Managers don't manage with the Balanced Scorecard - As stated in #2, you'll still need operational and financial reports to manage day-to-day business. But the monthly strategic business reviews
should be conducted using the Balanced Scorecard. If the Scorecard is
seen as just a report that managers fill out to comply with a boss's
request and is not used to manage strategic improvement, the Scorecard
will be quickly become irrelevant, out of date, and a source of
- Senior executives aren't truly bought into and involved in the Balanced Scorecard. They may have become bored with it, forgotten about it, or never really understood it to begin with. A successful BSC implementation truly requires that an organization is run differently. This can't be accomplished without full and complete support from all the key execs.
- The Balanced Scorecard is missing key initiatives (or has too many initiatives). Initiatives are the projects that drive real change. They are the things that can turn a stoplight indicator on your BSC from yellow to green. Since every organization has more projects they'd like to accomplish than they have resources, aligning the right projects to the right performance gaps is essential.
- Poor Business Review methods- This is the most likely culprit and the one that -- if fixed -- will most quickly drive change. Executives and Managers fail
to drill down into causal issues. They review the top-level objectives
and measures, typically spending most of the time highlighting those
with green stoplights (since we all like to showcase our successes and
-- unless pressed to do so -- will avoid talking about our problem
areas). These types of superficial "dog and pony show" reviews accomplish virtually nothing.
Instead, executives and managers must learn to focus the review on the most important performance gaps (red or yellow stoplights), not let scorecard owners off the hook, and instead ask why as many times as it takes to understand what's truly going on (and to determine if appropriate counter measures are in place).
See Jack Steele's posts (Building Accountabilty and Balanced Scorecard-Based Business Reviews: What to Look For) for more ideas on what a good Scorecard-based business review entails.