There – I’ve said it. And I can hear the howls of outrage from here! I know that there are many people and companies out there that have implemented an excel version of their balanced scorecard (BSC) out of the gate – some even continue using excel over time. Many BSC practitioners will tell you that excel is the perfect solution for your first scorecard for a variety of reasons (which I will go into shortly), however, as a seasoned BSC practitioner who has been in your shoes, implementing and growing their company’s BSC and strategy management system, I feel that it’s time for someone to talk about the real reasons why you should never even think of using excel as your BSC solution. Not even as a first solution.
Savvy organizations implement the BSC to: (1) measure their progress with strategy execution; (2) learn more about how their business works to produce results (and then leverage that learning to make targeted investments designed to produce very specific business results); (3) manage and improve their business strategy (and the workings of the business that contribute to and support the strategy) in “real time”; (4) transform the way people and the elements of the business align/work together/integrate to deliver exceptional business results; and (5) build a strategy-focused organization.
Why has your organization implemented the BSC?
For those of you who said that you want to achieve all of the objectives listed above but over time, I want to challenge you – WHY ARE YOU WAITING? The truth is that you should start working on achieving all of these objectives for your BSC right from the start. The sooner you do, the sooner you will realize the business transformation that can be achieved with BSC use.
A good BSC application will help you achieve all of the objectives outlined above primarily because the framework for doing so is built right into it. Excel frankly can’t do this for you, no matter how expert your programmer is. At its best, a scorecard in excel can help you measure your progress with strategy execution and start you down the path to learning about and managing your business strategy. However, these are significant limitations that make excel an incomplete BSC solution – this should be enough to dissuade you from choosing excel as your first BSC/performance management application. However, if you need more evidence, let’s look at the top 3 arguments organizations use when choosing to go with excel for their BSC and my take on why they aren’t really viable pro arguments:
Reason: Excel is a less expensive solution.
Reality: While there may be no new licensing costs associated with using excel as your BSC platform, significant people investments in creating, maintaining, using, and improving your excel database will be required on an ongoing basis. Organizations often forget about, or feel more comfortable with, these costs because they are hidden in staffing budgets (and don’t show up as a new expense item). The good news is that most BSC/performance management applications are now available as SaaS solutions (software as a service) – avoiding costly initial investments and making them very affordable for most organizations. Also the time and resources required to create, maintain, use, and improve these BSC databases are usually reduced, freeing up valuable business resources to be deployed on other projects/tasks. Over a relatively short period of time, using a BSC-specific application can be more cost effective than using excel.
Reason: Our BSC indicators will change a lot over our first year of BSC use.
Reality: Up to 90% of your BSC indicators will change over the first year of BSC use – a really good reason to NOT use excel. The fact is that all excel BSC databases are set up with your initial BSC indicator hierarchy in mind. Indicators are hard wired to related indicators and strategic objectives. A change in the actual indicators, the relationships between indicators and strategic objectives, and/or results display parameters requires a foundational change in the BSC hierarchy. All of these changes to your BSC, when it is in excel, require time and resources to implement –making your BSC database inflexible and not very agile. BSC/performance management applications on the other hand treat each indicator and strategic objective as its own entity (an object), making re-positioning them in the BSC hierarchy flexible, fast, and easy. In essence, a BSC/performance management application actually supports greater experimentation with, and dynamic change in, your BSC over its lifetime – allowing it to always remain relevant to the information needs of the business.
Reason: Our programmer is an expert and can make excel do what it needs to show both data and commentary.
Reality: Your excel programmer may be the best there is but why are you asking them to make excel do something it wasn’t made to do/can’t do well in the first place? The truth is that excel cannot display data dynamically in user preference-based ways, integrate data and commentary into information, and act as a strategic knowledge management hub. Only a BSC/performance management application can.
By now, I hope that I have convinced you that excel isn’t a good option as your BSC solution. Need more reasons to begin with a BSC/performance management application right from the start? Let’s look at the top 3 reasons why you and your organization should launch your BSC using an off the shelf BSC/performance management application.
(1) BSC/performance management applications are scalable, flexible, and can provide easy to navigate, user driven displays of information with relatively little effort.
New indicators and additional databases can be added to your BSC/performance management application as your organization, and its use of the BSC, changes and grows. This ensures that your BSC is always current and relevant to its users – a critical success factor for sustained BSC use in any organization. BSC/performance management applications also offer customization of results display so that if one viewer wants to see data tables while another wants to see the same results displayed in graphical format, they can do so easily with the click of their mouse. The greatest news is that all of this can be done efficiently and with relatively little work effort.
(2) BSC/performance management applications help you build a strategy management knowledge hub.
BSC/performance management applications integrate data, narrative information, cross-functional business performance analysis, important strategic documents (e.g. the charters and milestone plans of key strategic projects), and relevant internal and external links/url’s into one consolidated view by indicator and/or strategic objective – this facilitates more effective, company-wide strategic discussion and learning. An exciting future direction is the addition of business community capabilities (e.g. blogs, chats, wikis, etc.) into BSC/performance management applications giving users a greater ability to interact with each other, and contribute to, strategic learning. The ability to look at your business through an accessible lens of integrated strategic information and knowledge ultimately transforms the way your business works and significantly improves the results it achieves.
(3) BSC/performance management applications help you build an accountable, strategy-focused organization.
Strategy execution is one of the biggest problems in business today. Building a culture of accountability for following through on strategy-focused action is one of the primary keys to strategy execution excellence. BSC/performance management applications make accountability for all elements of strategy execution and management transparent and can facilitate the distribution of accountabilities (e.g. strategic objective, data, and results commentary ownership) more widely and deeply across an organization. This greater attachment to, and responsibility for, the business strategy and achieving targeted business performance results via BSC accountabilities has the effect of building a more accountable, strategy-focused organization.
If you are thinking of introducing the balanced scorecard in your organization or are currently using the BSC, you need an application to support its use and to successfully achieve your objectives for your BSC. I hope you will take my advice: skip the excel route and go straight to the BSC/performance management application option because the associated advantages and benefits include: solution affordability/enhanced cost-effectiveness and organizational productivity; relatively lower labour costs (versus an excel solution) on an ongoing basis; faster creation ofa strategy-focused organization; business transformation and the achievement of enhanced business performance results; and achievement of a relatively high return on investment ($$ investment versus business results achieved).
There are many excellent BSC/performance management applications out there – you will be able to find one that meets your functionality needs and cost structure with just a little comparison shopping!