A Balanced Scorecard is a great tool to communicate the strategic objectives, measures, and initiatives throughout an organization. It assists in providing focus and alignment at all levels and even facilitates daily decision making.
However, the definition of an effective scorecard changes slightly as it is deployed downward, to meet the needs of the individual scorecard owners and the organization.
The reasons and ways that the scorecards change are as follows:
The Senior Management of any organization is focused almost solely on what the organization must improve to meet next year’s stretch goals. This is their main responsibility and it is also what outside forces, like regulatory agencies and Boards, drive them to do.
Hence, the Senior Management Balanced Scorecard should be focused almost entirely on objectives, measures, and initiatives that drive organizational improvement, based upon the current strategic plan.
By contrast, the front-line supervisors' days and their subordinates’ days are largely spent executing the daily processes to “get the job done.” Some time may be available to focus on a few areas of improvement that align to both the top-level scorecard and their scorecard, but there isn’t too much time for that.
Their scorecards reflect this fact, with much less of the scorecard focused on organizational improvement than is shown on top-level scorecards and much more of the scorecard focused on the ongoing work to run the organization.
I've found that a side benefit of blending the "get the job done" objectives/measures with some improvement objectives/measures is that you actually get more acceptance of the scorecards among front-line employees. This is because a scorecard like this typically has some “green” stoplight indicators that they have already improved, in addition to the “red” measures that are still in need of improvement.
A final reason that scorecards change as you move down in the
organization -- and this reason is really important -- is that someone
has to monitor the key measures that are already “in control” and
meeting the customers’ needs so that they stay that way.
Taking all of these reasons into account, the lowest level scorecards in an organization are usually comprised of 85% “control” measures and 15% “improvement” measures. Some of the measures on these lower-level scorecards should also monitor cross-functional measures that are necessary for success in a given department.
By default, then, the scorecards in between the top and the bottom have a mix of measures, but usually they are more than 50% focused on improvement.
So, the benefits of this changing mix of scorecard content are:
- more scorecard acceptance by the owners
- focus on both improvement and control measures
- the monitoring of interdependencies
All of these are necessary for a healthy organization.
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