MORE THAN TWENTY FIVE YEARS OF THE BALANCED SCORECARD... why do people view it with caution if not with cynicism & suspicion .

BALANCE SCORECARD 

THE RIGHT STEPS IN IMPLEMENTATION

 

MORE THAN TWENTY FIVE  YEARS OF THE  BALANCED SCORECARD... why do people view it with caution if not with cynicism & suspicion . Their main objection is that it does not provide practical guidance for deployment, and some executives view it as a "quick fix" that can easily be installed in their organizations. The fault lies in making it a one-shot adventure when if fact Implementing a balanced metrics system is an evolutionary process, not a one-time task that can be quickly checked off as “completed”. If executives do not recognize this from the beginning and fail to commit to the long term, then the organization will realize disappointing results. Here are some of the key point on data and metrics a critical step in the balance scorecard implementation; I have seen over the past several years that can cause a Balanced Scorecard initiative to fail

The business needs a framework to define and communicate strategic direction and plans. Ensure that the measures you create add value. Metrics need to be relevant and clear. They should be depicted with visual indicators that are easily understood. In addition, metrics need to be collected at the ideal frequency for making decisions, and defined in such a way that the measurement can be consistently applied across the firm, even if their targets of performance differ (and they should). A system that has sloppy or inconsistently defined metrics will be vulnerable to criticism by people who want to avoid accountability for results.

 

KISS FORMULA (KEEP IT SHORT AND SIMPLE)

 

 We had to temper our excitement for creating our own fancy composite-type measures. When we started going through the review meetings for target setting, we found we didn’t have the data we needed, which complicated things. You have to keep in mind that even though the balance scorecard is a big initiative, it’s okay to set basic measures that can evolve into something more meaningful as time progresses. This makes me think of the quote, “Perfect is the enemy of good enough.” Many times, people try to craft elaborate measures—but sometimes it’s best to keep it simple. You don’t want to overburden everyone on the team so they start thinking a scorecard will be more work than it’s worth. In a sense, you have to collect data and be okay with the 75% solution. As you go on throughout the years and collect more data, you will be able to determine the best information to collect and you’ll become better at the measure-making process.

 

EFFICIENT DATA COLLECTION AND REPORTING

A primary reason that companies overemphasize financial metrics at the expense of other important operating variables is the simple fact that systems already exist for collecting and reporting financial measures. Companies that deliberately plan to define the vital few metrics and commit the resources to automate data collection and subsequent reporting tend to achieve good results. Unfortunately, in most organizations, if collecting metrics data consumes too much time and energy, they will not be captured. That is why it is important to prioritize key performance indicators so you can be confident that your investment in metrics is spent on the information that will be most relevant to improving organizational performance.

The mantra in business intelligence is to provide the “right information to the right people at the right time.” Based on the key measurements involved, analysts can dissect the information needs through techniques such as data modeling and dimensional modeling. Those approaches support the analysis, extraction and integration of the right information to support the key measurements. The information provided could be historical, actionable and/or predictive. It would typically reinforce or change the course of action or behavior of the people performing the business process.

 

GATHER THE RIGHT DATA

One major criticism of the Balanced Scorecard is that it encourages an internal focus. This is not as much an indictment of the principle as it is the way companies put the principle into practice. To help overcome this problem, you should ALWAYS start with an external focus – the view of your organization’s  external environment . The goal is to achieve a balance of enterprise level metrics as you assess the organization’s market, shareholders, competitors, employees and stakeholders. Executives will use data about their external environment to assess Strengths, Weaknesses, Opportunities and Threats (SWOT). This will then guide them to gaps in their enterprise level metrics. Then, all other levels of metrics are tested for alignment with the enterprise level metrics, thereby ensuring that even internal metrics link to external performance drivers.

HOW MUCH DATA CRUNCHING IS GOOD?

Kaplan and Norton’s balanced scorecard framework recommends no more than 20 key performance indicators (KPIs) within 4 perspectives: financial, customer, internal, learning and growth. Some other experts suggest  enhancing key measurements by removing the traditional budget process recommend less than 12 KPIs. Some recommend the 4 balanced scorecard perspectives plus 2 more related to employee satisfaction and environment/community. Regardless of the approach you select, you should adopt and communicate a strategic planning framework that will fit your business and help identify the key measurements.

 

TIME TABLE  THE PROCESS: AVOID THE OVERKILL

Regardless of the size and complexity of the organization, 12-16 weeks is sufficient time to establish key performance metrics. The exact implementation of the key indicators is rarely right the first time, so it is better to establish a time table  and reserve the opportunity to provide subsequent iterations beyond the initial 12 weeks.

 

With best wishes

Dr Wilfred Monteiro

 

 

 

 

 

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