It is important to understand why scorecards never start with measures. It seems the obvious place, just put some measures on the balanced scorecard and we are done. However it is more important to understand why you want to measure something, and how that supports decisions, than simply choosing measures.
Why projects to create balanced scorecards never start with measures
As you read this, just imagine you are in a workshop developing measures for your scorecard. Lets take a simple area like project management. You’ll know there are standard measures for managing projects that usually revolve around time, cost, quality, and delivery. When you get a group of project managers in a room, there are lots of ways to measure this. I one case I had about 20 project managers and asked them to suggest measures we could use. They generated over 60 measures in less than 5 minutes. I could have kept them going and probably got to 100, but that was enough to prove the point.
Imagine what happened when I said, “OK we need just 12. Which ones shall we choose?” Well, of course, the arguments started.
The problem is, people will disagree on why the measures should be used. Which one is better for this or for that? Of course much of the reason for their choice is implicit and unstated. I simply asked them to give me measures we could use for project management.
You will see this again and again. How often do you hear people ask for “a standard set of measures” for say, logistics, sales, manufacturing, retail, health, child protection, employee motivation, customer satisfaction, or whatever.
Diagnosis has different data needs, to performance management
In other articles we distinguished between diagnosing what is going on in an organisation and finding the few key points of motivation that will change the way people behave. When you are diagnosing what is going on, you measure all the characteristics that are useful or potentially informative. To understand how diagnosis needs different information to ‘performance management’, see our six step decision model
So, why are you not measuring your heart rate at the moment? Its vital to your survival, it’s a great diagnostic if you are ill and it if fails you and anyone else near you will know very quickly.
The answer is that you have left it your deeper systems to manage and warn you if anything is going wrong. Its called your autonomic system. You have delegated it.
So why would you choose to put the organisation’s equivalent of its heart rate on a scorecard? Only if you were ill or expecting a heart attack. Alternatively you would if you could not trust your autonomic system to warn you if something does go wrong.
The question is, which measures are important and should be focused on?
I’m sure you will agree that all those standard measures are really very useful: For diagnosis. However you will have recognised that if you are trying to change performance and motivate the organisation I suggest that balanced scorecards never start with measures.
“Never, never, never, ever start developing a strategic balanced scorecard with measures”
If you start with “What can we measure?” you will get the corporate equivalent of the output of the brainstorming of those project managers. Only it will take longer, cost a great deal more and be harder to stop.
If you start with, “What are we trying to achieve?” or even, “What behaviours are we trying to encourage?” you will get a completely different set of answers. That is why balanced scorecards never start with measures.
Ask, “What do we want to measure” before we worry about how to measure it
Now at this point I usually get, “So how can we measure Customer satisfaction, culture, behaviours, values, team morale, motivation, knowledge?”. The simple answer is, don’t worry about that yet. You see, if you start to think about how to answer the question before you have finished answering it you will never be brave enough to ask the question.
In fact there are lots of ways to measure all the things listed above. But most people start by believing it is either difficult or impossible. (As a hint ignore everything you ever learnt about SMART measures). It is this sort of thinking that stops people developing really useful measures that will alter behaviour.
You see people can measure these sorts of things and we have lots of clients who do. If you have any doubts, just think of someone who is feeling alienated from an organisation and looking to leave. How do you know? You do know, because you do. Yet I suspect you are not using a traditional measure, are you?
So many organisations are finding “innovative” and really informative measures that tell them what is really going on in the organisation.
So many so called “balanced scorecards” and unbalanced for this very reason
Unfortunately, most people start off by believing that you can’t measure these things. So they don’t try. Take a look at the research. 80% of organisations have some form of “balanced scorecard”. Yet of 2,400 companies surveyed, 70% of scorecards are failing their organisations because they do not provide concise, predictable, actionable information. Of these, the Average Senior Exec has 132 measures (83 financial, 49 operational): 62% of measures are financial. 76% are lagging (historic) measures. They are too late, lack customer information, make little use of the “Learning & growth” perspective and have lost focus on strategic goals and underlying drivers of performance. These organisations are trapped in this sort of thinking. Their scorecards are certainly not balanced. I bet they started with measures.
Unfortunately, what Einstein said rings true, “The type of thinking that created the problem, can’t be used to solve it”.
You will appreciate the difference our approach makes when we tell you that we have clients that have maintained their strategy maps and scorecards for over 5-6 years. The creation of the scorecard is only part of the problem. Do it poorly and you will create a bigger maintenance problem.
As you think about the measures in your organisation, the mix and how they are used, you’ll probably start to notice where they could be improved, enriched and that they could cover a wider perspective on the organisation. You are probably also aware of the praise our clients give us when we run such workshops for them, how quickly we have reached suitable measures. People who have already decided to bring our experience in, realise how much we transfer our skills to them as well as help them deliver results quickly.
Please please please, never let your balanced scorecard projects start with measures. You will just end up with an unbalanced collection of measures, that probably do not inform decisions.
Take a look at “The Modern Balanced Scorecard Zone” and the “The Improving Performance Management Zone“. Using this sort of information in your organisation can help you to convince people of the best way forward and win support for making improvements and delivering results, won’t it?