The balance scorecard is a terrific tool. Unfortunately, as is the case with many things, companies often try to pick and choose which parts of something to use, while the creator of the tool designed the tool to be used in totality. In the case of the balanced scorecard, many companies are enthralled by the wisdom of a well-balanced set of both forward and rear looking metrics. They are intoxicated by the concept of metrics beyond financials, to include customer facing metrics, employee facing metrics, and process-oriented metrics. And then they wonder why they are disappointed that developing a balanced scorecard doesn’t result in extraordinary business performance.
The answer is simple: They do half the job – the easy half -- and ignore the hard part. They develop business metrics but have no plan to make the metrics actionable.
The developers of the balanced scorecard were driven by science. They recognized the relationship between metrics and would often test those relationships mathematically. They understood that the metrics in a top-level balanced scorecard were not actionable—they were merely indicators of effectiveness—and that to deliver results, the balanced scorecard must be driven beyond the corporate offices, down past a business unit, to the level of people who actually do things on a day-to-day business. Without those added steps, any expectation that the balanced scorecard will drive meaningful changes in performance is a fallacy.
At BMGI, we generally use Hoshin Planning to drive balanced scorecard metrics down through the organization. The marriage of these tools—Hoshin Planning and the Balanced Scorecard—has proven a winner time-and-time again.