There are some very common problems cascading balanced scorecards, that are regularly encountered, and easily avoided. If you have ever tried to cascade measures in a balanced scorecard you will likely hit problems that are common to many starting down the cascading balanced scorecard route.
What typically happens and how that creates problems cascading balanced scorecards
When developing the scorecard you look for the right measures that will cascade as meaningful drivers of the behaviours and results of others. However, in making those steps the gap between strategy and action widens. What is the right measure? Will this be meaningful? Will it encourage the right results? Will it encourage the right behaviour? The uncertainty grows. The meaning starts to disappear. The worries build: will these measures be meaningful and create the right behaviours?
The starting point of problems cascading balanced scorecards
The problem of cascading starts when people start their balanced scorecard design by searching for measures . They immediately start looking for those measures which make sense at multiple levels in the organisation. You know you want them to be meaningful three levels down. Yet also to be meaningful at the top. So what happens? Well two things:
- People add more and more measures at the top level, because they need they think they need the level of detail that these extra measures provide. As a result the top level scorecard ends up with a hundred or so measures.
- When this does not work, they start thinking “We should combine these in some form of weighting”. Here are three articles about why you should never do weighting on measures. This just obscures the detail and makes it difficult to manage.
Neither of these approaches work. First let us look at the two other reasons, and the solution will emerge.
The underlying origins and mistakes, cascading balanced scoreacrds
Let me explain where some of these problems lie…Back when I started working for Norton & Kaplan in 1994, soon after their first book was published I would look at old projects and cases on the servers and talk to people about them. I realised three important things:
- The scorecards and its measures are the last piece you develop.
- It was about engaging managers and how they were thinking. That is what needs to be communicated.
- There is one piece that almost everyone misses. YOU DO NOT CREATE A BALANCED SCORECARD FOR AN ORGANISATION!
Insight 1: Never start with measures: start with the strategy maps
The first insight helps you realise that BEFORE to think about any measures you have to develop a strategy map for that team. You also need a view of the future and how the strategy will change the organisation. This is where 90% of so called “Balanced scorecards” go wrong. Only when this strategy map has captured the strategy, the business model and the thinking of the management team do you even think about starting the scorecard. If you miss out capturing the strategy you have mere operational measures.
Insight 2: The balanced scorecard is not a technical tool
The second insight is that it is about how managers think and talk about their strategy. Strategy maps help you tell the story of the strategy so people get it. (That is why my first book was “Communicating Strategy”). Mere scorecards don’t do this. Strategy maps and scorecards together do achieve this (If you develop them by engaging the hearts and minds of the team). This way they can tell the story of their strategy (backed up with the scorecard). When you track progress you use both. That way you can tell whether things are working operationally and the strategy is working as well. Developing a balanced scorecard is not an intellectual exercise. Balanced Scorecard design, implementation and use is a social process.
You are trying to improve how teams make decisions.
Insight 3: Never do a balanced scorecard for an organisation
The third insight. Yes really! You do not create a balance scorecard for an organisation, What you do is create a strategy map and scorecard for each management team. The problem is that in Norton & Kaplan’s books, to simplify the story, they tend to show a strategy map for the executive team and describe it as the organisation’s strategy map. It is, but there are others beneath it. I know because I worked on a few of those cases and examples. It is this cascade of strategy maps (before you develop scorecards) the solves the problems you are facing. Miss this out and you will have one strategy map and 120 measures! Precisely the problem that the balanced scorecard approach was designed to solve.
Solving the balanced scorecard cascade problem
The trick to avoiding the problems cascading balanced scorecards is to recognise the scope of control of each team. What is relevant to them. The higher level strategy maps and scorecards can select from these lower level measures for their detail. You can always navigate through the layers of the cascade to find the more detailed measures if you want.
The approach is to design the cascade of balanced scorecards by designing the cascade of strategy maps. Only then to develop the scorecard part of your balanced scorecards with measures on, from these cascaded strategy maps.
So what can you do? Read more modern Balanced Scorecard design and use
- Our series of articles dedicated to Cascading balanced scorecards and organisational alignment.
- Learn more in our Modern Balanced Scorecard Zone: a practical guide:”
- Learn about the Fourth Generation Strategic Balanced Scorecard
There are whole chapters on cascading scorecards (or rather strategy maps) in my book, “Strategy Mapping for learning organizations”. It introduces the cascade map that solves your problem at source. David Norton said, It is a must read book for anyone doing a strategic balanced scorecard based performance management system. That was very kind given he has written five balanced scorecard system books with Bob Kaplan. How to buy Strategy Mapping for learning organizations
If you have problems cascading balanced scorecards, you can contact me for some help. My contact details are at the top of the page and here