In my role as a Strategy and Performance Consultant, I see a lots of ‘balanced scorecards’. In over 20 years, from my early days working for Norton & Kaplan I have seen most variations and alternatives.
I have a set of tests for the balanced scorecard I see. A set of tests that tell me a lot about how they were designed and how they are being used. Many of these tests I can run quickly in my head, such as how they are talking about and measuring the customer perspective. Other tests involve conversations with the client about their strategy, their underlying problems and how they want to manage.
The most useful test of a balanced scorecard
However, I have one overall test. A test that usually reveals how the balanced scorecard has been designed and how the balanced scorecard is being used. The test is very simple.
I look at the measures and indicators on the scorecard, usually some sort of spreadsheet, and I ask myself: Ask yourself:”Given this information, what decisions could I, or should I, now take?”
“Given this information, what decisions could I, or should I, now take?”
What I generally find is that there are a collection of measures. However there is often little structure to them. There is rarely a real cause and effect story or any drivers linked as a set to create change. So there is no story and little suggestion of the decisions that should now be taken.
Even rarer do I find the information about what previous decisions may have been made about the situation I am looking at. Has someone already taken any remedial action?
Most often the scorecard is simply a set of things that are easy to measure, put together in a report.
A slightly more subtle test of a balanced scorecard
The more subtle test is about the story of your strategy.
“If you described your strategy, and then looked at your balanced scorecard, can you see the story of your strategy in your scorecard?.”
Ask yourself: “Can you see the story of your strategy in your balanced scorecard?”
Of course if the management team are not looking at your balanced scorecard, it has failed a very basic test of relevance and usefulness.
Try this test yourself
I recommend you take a look at your scorecard or balanced scorecard and ask yourself, or a colleague, whether it informs decisions and whether it tells the story of your strategy?
If it fails these two core tests, you should probably think about getting something that does.
To learn more, clients find these articles interesting:
- Understand the different types of performance management
- To see how balanced scorecards have developed over time, serving different purposes
- How Fourth generation strategic balanced scorecards address today’s problems
And of course we can help – so give us a call.