on 6 October 2005
Why do as many as half of all balanced scorecard users not achieve the results they hoped for? Doesn't the balanced scorecard work in practice?
David Niven is an expert on Balanced Scorecard and his first book was an easy-to-read, well-structured manual of how to make scorecards work: "Balanced scorecard - step-by-step" (2002). It bridged the gap between practice and theory - especially for newcomers to the concept.
In this new book, Niven tries to bridge another emerging gap. It is the gap between those questioning the usefulness of balanced scorecard, based on the many unsuccessful implementation attempts, and what people like Niven (and I) believe to be reality: that the scorecard framework remains sound, but must be instituted with rigor and discipline if you expect to get results.
Why aren't many scorecard users happy?
Niven believes that the trouble lies in the methods used to implement the Balanced Scorecard. Many firms have been lured by the seductive simplicity of the scorecard model, believing it could be easily implemented and produce results with a minimum of care and feeding. According to Niven, troubled implementations stem from many sources, e.g.
- A lack of executive sponsorship to reinforce the Scorecard's value within the organization,
- Tired [lagging] metrics reflecting the past with no regard to the drivers of future success, and
- Management systems that continue to reward unbalanced, largely financial, performance
How do we solve it?
Niven's approach is basically to put Kaplan and Norton's five principles of the "Strategy-Focused Organization" (2001) into a more practical approach. The messages, obviously, are the same. But Niven manages to make it easier to comprehend. And he challenges the reader throughout the book. The diagnostics dimension of the book is furthermore incorporated at the end of each of the nine chapters where we find self-assessment questions.
This week I went to a conference in Copenhagen where Harvard-professor Robert Kaplan spoke about the balanced scorecard. Kaplan, being one of the inventors, acknowledged that too many balanced scorecards did not succeed. It is a paradox, since the balanced scorecard was incepted to overcome to problem that strategies weren't properly implemented. But if the system (or scorecard) to finally make the strategy implementation work doesn't work either, then we're in real trouble. So is the concept, of course.
Kaplan's suggestion to make a successful implementation of the scorecard is - like Niven's - to view it as a change project. The change programme goes thru three phases: mobilization (unfreezing), alignment (change), and sustainment (re-freezing). Kaplan specified the details as described below:
1st phase: MOBILIZATION ("the case for change"):
Principle: #1 Mobilize change thru Executive leadership
Leadership objective: Achieve commitment at the top, build the executive team, and build the case for change
Core competency: The catalyst's role is to be a missionary. The action list includes to advocate, to educate, and to sell a new way of managing.
Management role: Executive education (the need for strategic execution) via conferences, in-house workshops, and readings.
2nd phase: ALIGNMENT ("early wins")
Principle: #2 translate the strategy into action, #3 align the organization.
Leadership objective: Define and clarify the strategy, specify long-term targets, and communicate to workforce
Core competency: The project team's role is as consultant and change agent. The action list includes to design strategy maps, to design scorecards/targets, to create alignment/cascade, and to overcome resistance.
Management role: Strategy maps, balanced scorecards, First Report, Link business and support groups to the strategy, and to rationalize initiatives
3rd phase: SUSTAINMENT ("irreversible momentum")
Principle: #4 Motivate the staff, #5 Govern the Organization
Leadership objective: Reinforce strategic message: Employees follow the leader, Enforce a performance-based culture: get results, and Lead the new management meeting
Core competency: The office of strategy management's role is to be the "chief of staff" (like in the military and government). The action list includes to install accountability, to shape the executive agenda, and to integrate governance.
Management role: Scorecard reporting system, HR processes aligned, Accountability and rewards aligned, and meetings focused on scorecard objectives and measures.
If you're interested in Balanced Scorecard, you should obviously read the original work by Kaplan and Norton. But I also recommend a very capable book by the Swedes Olve et al (2003) - "Making Scorecards Actionable: Balancing Strategy and Control" - that also focuses on why balanced scorecards go wrong - and what to do about it.
If you're even more interested in performance measurement systems, then do also consider "Performance Prism" by Neely et al (2002) that takes performance systems to the next level. Personally, I don't believe they've designed balanced scorecard's successor, but they have many interesting perspectives on stakeholders, choice of measurements, and the relationship between cause and effect.
MSc in International Business (Marketing & Management) and Graduate Diploma in E-business