Recently, I’ve noticed a flurry of discussion and debate about the Balanced Scorecard (BSC) versus OKR’s. While some are promoting the idea that the BSC and OKR’s are virtually interchangeable (personally, I’m not convinced that this is really the case but I’ll write more in a future post), others seem to suggest that OKR’s offer a more agile methodology that’s better suited to today’s volatile business environment. On this topic alone, more and more of my colleagues are telling me stories about organizations that, despite having been long time BSC users, say candidly that, if they’d had an alternative back in the day, they probably wouldn’t have started up with the BSC in the first place.
Wow! Having acted as the OSM in a pretty large BSC using organization, where we wouldn’t have traded in our BSC for anything, hearing this from other BSC organizations is frankly perplexing! What could be driving these regrets about the BSC?
It turns out that the primary complaints from these user organizations include the feeling that the BSC is process heavy, slow moving, dogmatic, and restrictive. In addition, these people say that they have been underwhelmed with the value they have received from their BSC with not enough bang being realized for their investment in it.
Would it shock you if I told you that this doesn’t surprise me at all?
However, it’s really too bad that organizations are having this experience because, when done right, the Balanced Scorecard is STILL one of the most comprehensive yet nimble tools for enabling both organizational focus on what matters most and agile, fact-based strategy management.
Here’s something important to think about before you give up on your Balanced Scorecard – if your organization has been using the BSC for a while I know that you have invested a great deal of time, effort, and money into it. And having been in your place, I know that you probably can’t really afford to throw this investment away. But that’s exactly what you might end up doing if you were to trade in your BSC for another approach like OKR’s right now. I get that you might be feeling unimpressed with your BSC however the better, more cost effective approach to fixing your problem, AND getting the strategy results you want in the end, might just be to find ways to re-make your BSC into the strategy management tool you need it to be.
So, assuming that you are on board with this option, let’s explore the FIVE moves you can make immediately to renovate and re-calibrate your Balanced Scorecard to realize the value it can ultimately deliver to you and your organization.
1 Make Measurement Part of Your Every Day Work
When measurement, and BSC data collection activities, become a huge business process on its own, with a separate cottage industry required to support it (all with its own additional resource needs and motivations), you know you are in trouble. This approach turns your BSC into an administrative burden, but I see organizations falling into this trap routinely. If this sounds like your situation here’s what you need to do to turn it around:
Collect data by sticking a “probe” into an existing business process or project/initiative – The more you make performance measurement into a snapshot of the performance of a business process or project AND make the capture of that snapshot an integrated part of process or project activity, the less administrative data collection feels. For example, in most organizations, the number of job vacancies and the number of qualified job applicants are important triggers of activity within a business process called employee recruitment. It’s not a stretch to take the time to capture these data points and report them on your BSC if either are an indicator on your BSC because you’re looking at, and using, the numbers anyway.
Use multi-tasking BSC indicators – Though you want to ensure that you select BSC indicators that are a really good fit with the individual strategic objectives they are meant to represent, it’s always better when performance results and commentary can be used for additional performance management purposes. When a BSC indicator (results and commentary) is also used in the quarterly Board report, the annual report, etc., for example, it becomes VERY attractive. Essentially, having multiple use potential increases the value of any given indicator (and the effort put into collecting it) used on your BSC.
Expand BSC results ownership and match it closely with everyday role accountabilities – Who are you selecting to provide data, results commentary, and corrective action plans to your BSC (100% data collection automation can rarely be achieved and results commentary still requires insights and analysis from the people who are close to the action)? Are you getting this information from a broad group of people who are handling the data, analyzing it, and formulating corrective actions as part of their regular accountabilities? If not, you have just increased the workload associated with your BSC. Making this one adjustment goes a long way to reducing the perceived (and real) imposition of BSC data collection on people in your organization.
It turns out that integrating BSC performance measurement right into the everyday work of both your organization and your people, using the strategies I’ve outlined above, makes it easier to change your BSC processes, and indicators themselves, as your business activities change. When your BSC becomes a part of your work rather than an activity that’s apart from your work, it’s only natural for your BSC to change as the nature of your business, and its work, changes. When this happens your BSC becomes less like the Titanic (slow, hard to steer, and impossible to change on a dime) and as agile as your business is/needs to be.
2 Trim the Scorecard Fat
How many scorecards does your organization have right now? Did you realize that every scorecard you have increases the degree of difficulty and complexity associated with your organization’s use of the BSC? BSC proliferation can creep up on any organization, particularly as it cascades its strategy across and down the organization. Sometimes multiple scorecards are the answer to ensuring optimal organizational alignment but often organizations can still provide business units and teams with a view of their slice of performance and their contribution to strategy success through the corporate BSC alone.
Though this topic, and the methodology for keeping the number of scorecards under control, is a little too complex to cover off here (check out my blog post on strategy cascading), the key, when you find yourself with multiple scorecards in your organization, is to explore whether it’s possible to reduce the number without significantly sacrificing (1) organizational alignment; and (2) the ability of parts of your organization to have a window into their own performance. A reduction in the number of active scorecards in your organization can go a long way to making your BSC more agile and adaptive when required just because the implications of a scorecard change are simpler to manage.
3 Simplify Your Approach to Measurement
Is your organization over-invested in the indicators you have right now on your BSC? In other words, do you find yourself hesitating to change an indicator even when it’s pretty clear that it isn’t really doing the job or meeting your information needs? In most of these situations, the hesitance to change is almost always related to the hours and hours that went into creating a “perfect” indicator. Quite simply, abandoning that indicator would mean that the time invested was a waste (though it’s really a learning opportunity).
Here’s the thing – your BSC indicators are MEANT to change! After all, they are just indicators and as conditions, and your business, change, it only makes sense that the indicators on your BSC will change as well. The BSC was ALWAYS built to change so, when leaders tell me that the BSC is hard and slow to change, it’s really (in my experience) a reflection of their investment in the indicators they have selected for their BSC (sorry for the pop psychology but this happens ALL the time).The only solution is to change your mindset and embrace the idea that BSC indicators will, and must, change when necessary.
And, by the way, the best way to make it easy to change indicators is to select simple ones – the ones that don’t involve complex and convoluted calculations. In addition to taking less effort to pull performance results together for these indicators, it’s easier for you and your team to relate and respond to simple indicators versus complex ones. For example, the number of patient infections makes more sense to, and is more actionable for, a doctor or nurse than an indicator like infection rate (the number of patient infections per 1000 patient days). Simple indicators often have higher informational and action-ability value AND they are easier to collect and change to (and/or from).
4 Build Agility into Your Strategy/BSC Governance Processes
Most organizations are giving up the practice of looking at their strategic plan every three to five years (when it’s time to renew it). As the pace of change in the business environment has accelerated, most have switched to an annual review process, though they should probably move to a quarterly review schedule if they wish to be truly agile. The bottom line is that the frequency with which your organization looks at, and considers making changes to, its strategy and BSC is really up to you.
So, if you want to think about, and look at, your strategy and indicators and make changes more frequently than you do now, just go ahead and do it! Plan to make this change right away.
You also have the ability to decide what the processes are for putting together your BSC, looking at and reviewing your results and strategy, and changing your strategy and/or BSC. They can be as tightly or loosely scripted as you like – but you have to have something defined and in place. Without established indicator change processes that include how the need for change is determined, who is involved, how new indicators are selected, and how an indicator change is rolled out across your organization, any BSC indicator change will be hopelessly messy and hard. So take the time now to create and document as much or as little process as you want in this regard but make sure that there’s enough of a script in place to make indicator (and strategy) change as easy and seamless for your organization as possible.
5 Make the BSC your own
In the end, I know that many people think that the BSC is a highly structured and rigid approach to strategy and performance measurement – it’s easy to believe that. But the truth is that there are only a few “must have” core principles that make the BSC a quality strategy management tool. There’s actually a lot of room for customization and that customization often makes all the difference when it comes to organizations, and people, feeling like their BSC is serving them – not the other way around.
Don’t want to call your BSC the Balanced Scorecard? No problems – name it anything you want. Want to change the name of the Internal Process perspective to Our Core Business? Done – if that speaks to your people. See what I mean? As long as your BSC indicators are linked to organizational strategic objectives in each of the BSC perspectives and you are selecting reflective indicators that help you measure and manage your strategy, the change you are making, and the progress you are achieving through the work you are doing (i.e. processes and projects/initiatives), you are well on your way to creating a solid BSC that will help you organization navigate successfully in a changeable business environment.
Some people and organizations are toying with the idea of trading in their BSC for another, seemingly more agile approach to performance and strategy measurement and management. The current darling appears to be OKR’s but there have been others and there will be more. I often hear people say that the BSC is yesterday’s tool and that it just wasn’t built to keep up with today’s fast rate of change. Well I, frankly, say nonsense! I think that the true problem has been with us users. That is, the BSC was always built to be an agile management framework – it’s just that many of us practitioners have chosen to turn it into a slow moving dinosaur of a tool.
So, if you have been a long time BSC user, are feeling underwhelmed with its performance, agility, and value, and are thinking about making a change, I’d encourage you to try changing your approach to your BSC, using these five moves, BEFORE investing in changing to an entirely new approach to strategy and performance management.