The Engine That Powers Balanced Scorecards

Ever wonder why some organizations are so excited about the results of their Balanced Scorecards and others decry the tool as ineffective?

Clearly, there are a number of reasons why scorecards fail, such as not having senior management buy-in, not having the top-level scorecard aligned to the strategic plan, not deploying the scorecards to all key departments, and not performing scorecard reviews on a monthly basis to drive accountability for the proper actions.

However, even when an organization avoids all of the above pitfalls,they must have the right "engine" in place, or Balanced Scorecards still won't work.

The engine behind the scorecard framework is a well-designed system of correlated, cascaded measures. These begin with top-level lagging (or outcome) measures that track performance of the strategic plan. They cascade through to mid-level measures, on to lower-level measures, and even all the way to identified root causes of under-performing measures.

With such a meaningful measure network undergirding it, the scorecard framework accurately maps to the organizational hierarchy, and provides a quick snapshot of which correlated measures each manager, director, or executive owns.

Since correlation is the key here (and what differentiates this type of strategic framework from a basic measure reporting system), how do you achieve correlation from one measure to the next?

Here are some of the best techniques:

1. Use a structure tree, which is a form of cause-and-effect diagram, to map out correlation of lagging to leading (early warning) measures.

2. Map out the business processes and then identify output measures and input measures, since leading measures actually reside in the business processes of an organization.

3. Use problem solving tools like Pareto Charts and Histograms, which can show correlation.

So what can you do to build an effective scorecard framework that won't be abandoned?

Deploy scorecards to all of your key departments based on your organizational hierarchy and use some of these tools to identify scorecard measures that have strong correlation from the bottom of the organization to the top, as well as across silos in your organization.