5 Balanced Scorecard Implementation Challenges
As I became a senior consultant several years back, I frequently faced the challenge of helping senior executives translate their Strategy into action. From the different options Kaplan-Norton’s Balanced Scorecard emerged as the best way to perform the translation. Even back then it was clear to me that a well developed Balanced Scorecard can provide the bridge from Strategy to Execution. Since then I have read most of the books written by Kaplan-Norton on the subject: “The Balanced Scorecard”, “Strategy Maps”, “The Strategy Focused Organization”, “The Execution Premium”, and several Harvard Business Review articles and case studies.
Armed with knowledge I was eager to implement the BSC on my engagements. But as it turns out it is easier imagined than done! One of my first findings is the lack of a clear implementation methodology. The literature and research gets you in the right frame of mind and gets you thinking, this makes a lot of sense. But the frustration settles in when you start and you don’t know where to begin.
Over time my struggles in helping clients through this process resulted in valuable insights to develop effective Balanced Scorecards. This blog shares, from a practitioner perspective, the top 5 challenges of implementing Balanced Scorecards and possible remedies.
- Vague Strategy: Some strategies tend to be high-level, future looking with ideals and aspirations. While valid to fuel the soul of the organization, they run the risk of diluting the ability for translation into an effective Balanced Scorecard. The best remedy for these situations is to revisit and refine the strategy with the owners and get clearer direction on the aspirations of the business. Some of the key components required for an effective translation include financial targets over the medium and long-terms, markets and customer segments, aspirations for brand perception, and customer value. These should be statements of the desired organization’s end state for the planning horizon (5 or 10 years).
- Absence of a Common Vocabulary: It’s common to have different definitions for strategy elements across the organization. The meaning of Vision, Mission, Objectives, Goals, Tactics, Initiatives, and other elements has to be communicated and agreed upon by stakeholders across the enterprise. Without the common vocabulary the risks of misalignment across the enterprise are amplified. The best remedy for this situation is to create the definitions of this common vocabulary, publish it, and remind participants of those definitions at the start of planning meetings.
- Complicating the initial implementation: There is a high tendency to get lost in the details and technicalities of the Balanced Scorecard. The Strategic themes, Strategy Maps, and Cascading to individual level could cause a lot of confusion around the initial approach. The best remedy is to phase the approach by starting with articulating the BSC across the four perspectives by developing the Strategy Map (Objectives with cause and effect relationships). This provides a sense of clarity for the action plan and can be communicated across the organization. Later phases can introduce more sophistication with Themes and cascading down to the organization.
- Cascading to individual level is a challenge: Cascading to Individual level requires engaging the hearts and minds of your workforce. This entails getting their agreement and commitment to set targets. If that engagement is not achieved the Individual Level BSC becomes nothing more than a documentations exercise at the end of each reporting period. The behavior of your workforce will not change. The best remedy for this is to engage the team in formulating the Balanced Scorecard (objectives & targets) and have them participate in setting targets.
- Getting lost in the mechanics of tracking: The absence of automation to record and roll-up results early in the implementation can severely derail your team into the mechanics of recording actuals vs. targets. This will be compounded when the team tries to build sophisticated formulas to roll-up to an overall result by objective or department across the four perspectives. The best remedy for this is to remind your team during the initial implementation that the spirit is to use the Balanced Scorecard as a navigation compass to steer the ship and not to get 100% accurate and weighted results.
From experience I can attest to the amazing power of the Balanced Scorecard to achieve Strategy and Business alignment and to build high-performing organizations. By cascading the scorecard to individual level you can go a step further and build highly performing teams where people feel empowered and can reach their full potential.