What is a Balanced Scorecard, when everything gets called a balanced scorecard?

Mistakes to avoid:

When every performance measurement approach is a “Balanced Scorecard” and every collection of measures is a “scorecard”, it creates a real problem with the language of performance.  The phrase has acquired such a broad meaning that distinctions in the quality of different approaches have been lost.  It clouds what is meant by a balanced scorecard and hides the originators intent and subsequent developments.

What causes this?

The first problem is that every single collection of measures is called a scorecard.  It is worse than that.  The balanced scorecard has become ubiquitous as a phase to describe almost any measurement approach.  The specific brand has become the generic term, the same way that the brand name Biro refers to all ball point pens, iPod means any MP3 player and “to Google” refers to using any internet search.

This is a marketing success, but creates problems with understanding. As a result, in many peoples’ minds, there are no distinctions between a “scorecard”, a “balanced scorecard” and what Norton & Kaplan describe as the “Balanced Scorecard approach”.  Kaplan dismisses many of these scorecards and balanced scorecards as “mere operational scorecards”.

Mistakes to avoid:

Failing to recognise when you will get smeared with the effects of past changes.

Calling every approach a “balanced scorecard” has meant that the approach has been smeared with the reputation created by poor operational measurement systems.  In many communities, performance management has been beset with poor measure design, simplistic implementation, poor target setting and a lack of attention to management and decision making, let alone strategy execution.  In the Public Sector derogatory phrases such as “The tyranny of targets”, measure mania” and “feeding the beast” are frequently used when measurement is discussed.

As a result much performance measurement and management has acquired a bad reputation. When any measurement system is called a scorecard, all balanced scorecards are tarred with the same brush.  This is a problem when you come to implement a Balanced Scorecard based upon the principles of Norton & Kaplan that is richer than this simplistic approach and labelling.

What this means for our clients

There are two solutions to this.  1) Change the name of the approach.  2) Change the perception of the approach.

We don’t change the name of the approach.  We explain the principles that others have missed and emphasise how it has improved.  That is why we refer to fourth generation balanced scorecards, emphasising how the approach has moved on, particularly with our innovations.

I suggest you, like us,  employ many of the techniques we learnt working with Kaplan and Norton, because they work, so we don’t like to suggest that what we do is not a proper balanced scorecard.   For instance we never do a balanced scorecard without first doing a Strategy Map.  We have enhanced and developed the thinking but still rely on much of the original principles, because they work.

We believe changing the perception and re-education is the best approach.   I recommend you do too.  The best way to do that is to give people a different experience that over-writes what they experienced last time, and changes their perceptions.  The approach includes, amongst many other techniques, deeply involving people in the design, making sure measures are useful at the point they are produced and improving the quality of conversation between teams and between layers of management.  We find this works and our clients tell us it works.

We also recognise that, quite often an organisation will have an existing “balanced scorecard” that needs updating and building on.  It is wrong to throw this away as often much time and energy went into its design.  Often it is being used and is useful.  So in the next section we look at some of the types of (so-called) balanced scorecard that are out there, they problems they have and the mistakes they have made, because understanding where they are today, and how they got there, enables you to move forward.

Phil Jones