What is the effectiveness of a Balanced Scorecard?

Dear Darryan,

I am glad that you want to use the Balanced Scorecard method as it is a key tool for not only monitoring but more importantly for improving business performance.  I have done several Balanced Scorecard projects for both small and established businesses particularly when in need of restructuring and change management.  

It is highly practical if the strategy is well in place beforehand.  It is useful for the company's internal stakeholders and assessing the potential for a strategic change or a tactical operational initiative.

Very few companies do manage to use this tool successfully. The main reason is that it is falsely perceived as a monitoring tool. It has so many different aspects.

The more SMART measures you put following a clear strategy and a forward-looking vision, the more effective the Balanced Scorecard will be for you.

It is a myth that only big businesses use this. It is universally applicable.

 

It really depends on the size of the organization, the lenght of planning as well as the time and people resource you are ready to put in this. I have used BSC years ago for a big national non-profit organziation planning. To be honest it was hard to use it,a s it is not thta easy to be understood by everyone who was participating in the process of planning. Lately I am using Busness model canvas, although tehy present it as a busnes modeling tool and a snapshot of your organization, i am modifying it and using it as a planning tool, presenting the future desired situation we want to achive. Still this is for a francaise organziation, we are a team of 5, but do work with more than 60 partners and are antional based. 

A Scorecard is in my experience a great tool... when used as a component of a strategy management system.

The BSC is a very effective way of communicating in one page a strategy with its strategic goals and strategic initiatives.

It shows on the left side "golden whats" and on the right side "golden hows" (strategic initiatives). Measures and accountabilties can be added (but are not primary in my view).

I also use the 4 dimensions in a different order: customers are on top, then processes, employees, and financial resources. But it is up to you to define how you want to describe how your organization delivers value.

A BSC at a certain level does not consolidate all the BSCs from lower levels. Yet, each level creates its proper BSC that explains how to contribute to the higer level BSC.

A BSC only supports the strategic loop. It is not a dashboard that supports the operational loop.

I recommend to read the Kaplan & Norton's last book: The Execution Premium, to get an in-depth understanding of the entire management system.

 

Darryan

I've helped over 30 organisations go down the Scorecard route - with varying degrees of success from manufacturing, telecomms, finance, utilities to police and mental health services!

I don't know of a better approach to linking your strategy with your KPIs - but beware as there's a lot of hype around the Scorecard and some of those "selling" it don't properly understand the logic/theory behind it.

Also realise that you can't pull a scorecard off the shelf - it has to be built by your own organisation and requires a lot of time, input and a lot of honesty.

When going down the scorecard route people start to realise that what's in place already - strategy, plans and KPIs - aren't fit for purpose and this can be VERY embarrassing for those concerned.  

Based on my experience the effectiveness - if achieved - is as follows:

1. you end up with a joined-up set of strategies, plans (both strategic and operational) and KPIs

2. senior management get a real understanding of the key drivers of that organisation's performance 

3. you have the ability to cascade the scorecard down to shop floor level so everyone can see where they make a contribution

3. it's an effective communication tool to show all stakeholders how you're doing (and why)

Hope that helps