Are Balanced Scorecard implementations for Strategy Execution and for Performance Management actually two different types of projects and balanced scorecard? Do they actually have different agenda, work flow, stakeholders involved, pitfalls, and require different expertise and skills from consultants?
This was a recent question on a forum: Here is my answer:
The cause of the confusion: Mixing operational and strategic performance management
The ambiguity is in the question because you are comparing “Strategic performance management with “Performance management”. So I will assume you mean operational performance management and strategic performance management.
In that case there are differences, but bear in mind that strategy happens at each level in an organisation (so IT have a strategy just as the organisation has as strategy. One is embedded within the other.).
Different types of balanced scorecard ask different questions
The simple answer is that “Strategic balanced scorecards” ask the question, “What are the few things that make the biggest difference, what are we focusing attention on and parts are our strategy rather than the operational detail”. So the process is more selective – and the process is about ensuring that you have consensus over the strategy , articulate it and describe the drivers: “What matters most and will bring about the biggest change” from amongst the mgt team. You are also carefully teasing out the cause and effect relationship across and between the objectives in each perspective.
“Operational” balanced scorecards that are used to manage performance tend to be less discriminating. That is they may look at a process and try to identify ALL the characteristics of that process. This is where you end up with 200 measures rather than 25. Of course if you are seeking to improve performance in that operational area and have a strategy then all of the above applies.
Have a look at my article on the differences between operational and strategic management and different types of performance management.
The distinction I am making is between operational and strategic balanced scorecards
What this means is that, in essence the same approach gets applied where you are looking to change performance: that is the approach is one of selection of the elements that drive performance and that you wish to manage and track.
But if you want operational detail (for instance you want to be sure you know what is going on and have all the facts BEFORE you choose your strategy) then you are likely to apply a wider net and gather operational FACTS non-judgementally without even targets.
Many so called “Balanced scorecards” are really the latter – large collections of operational measures put together in perspectives (if you are lucky) and presented as operational data.
How you can be more selective in the choice and design of your balanced scorecard
More selective strategic balanced scorecards or at least ones that are interested in improving performance will have an EXPLICIT cause and effect model. It is this model across the perspectives that make the biggest difference. See also my article on developments of balanced scorecards by Norton & Kaplan between 1992 and 1994 where the ideas of the cause and effect model first emerged that later turned into strategy maps.
- To learn about cause and effect and strategy maps, watch this Strategy Mapping 101 video.
- Read this to understand how different types or generations of balanced scorecard serve different management needs
- To learn about Modern Balanced Scorecards explore “The Modern Balanced Scorecard Zone“
- Read this, to understand why our clients needed a more expansive Fourth Generation Strategic balanced scorecard