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Although the theoretical principles are well founded, the practical value of a Balanced Scorecard can only be realised if it is successfully implemented. Poor implementation can result in Balanced Scorecard failing to deliver its potential benefits. In the most extreme cases, this could leave an organisation with something that is a burden rather than an asset. This FAQ highlights best practice in implementation. To find out more about the potential benefits from use of the Balanced Scorecard, see 2GC FAQ What are the main benefits of the Balanced Scorecard?

Four things to focus on

When implementing Balanced Scorecard in organisations four areas present particular challenges:

1 Getting the Design Right

Using the right design and design process is extremely important – making poor choices can reduce the inclination of the management team to use the new system. Four factors underpin success:

  • Establish realistic expectations for the Balanced Scorecard: The management team involved in the project need to have a reasonable understanding of the concepts behind the process and the reasons for implementing the Balanced Scorecard, for it to succeed. This understanding will help the internal sponsor to realise the importance of being involved in the design and suitable facilitation processes;
  • Design process used: The design process to develop a Balanced Scorecard can take many forms from very basic questionnaire style development to complex multi-workshop management team facilitation, as favoured by 2GC. The best way of building ownership is to involve the managers who will use the Balanced Scorecard in its design. Not only does this ensure that they understand the content of the Balanced Scorecard, but also that the design adopted is relevant to the issues they are managing (rather than what someone else thinks they are managing). It is important that the design process is ‘owned’ internally as well - to ensure that the capability to develop and maintain Balanced Scorecard is retained even as managers come and go. A good approach is to use mixed project teams that combine the management team and some key support personnel (and maybe an external expert consultant) in the development process. The current best practice design process for most applications is used in 3rd Generation Balanced Scorecard - see 2GC FAQ What is State of the Art Balanced Scorecard design?
  • Strong management of the design process: A major influence on the quality of the output is the ability of the process facilitators to manage and deliver the project. Key to successful process facilitation is depth of understanding of the concepts behind Balanced Scorecard. For success you need facilitators that are both informed and experienced.
  • Keeping continuous focus on the Implementation: Whilst design is important it is essential to continually remind managers of the goal - an effective, usable Balanced Scorecard. It is sometimes necessary to compromise during the design process so as not to use up all the team’s energy BEFORE the design is complete. Remember usage of the Balanced Scorecard is a ongoing management activity for years to come!

2 Aligning Balanced Scorecard with other processes

There are strong/frequent links between Balanced Scorecard and Planning, Budgeting and Risk Management - the link to risk management is increasing (perhaps an indicator of economic troubles having an impact). In addition, individual goal setting, rewards and quality management also relate strongly to the Balanced Scorecard.

Goals and objectives in these other processes need to be aligned with those in the Balanced Scorecard and the calendar for updating all the processes needs to be harmonised. It is easy to underestimate both the effort required to do this (this is where senior sponsorship is essential) and the importance of doing so.

3 Embedding Balanced Scorecard thinking within the organisation

The Balanced Scorecard should be fully supported within the organisation by the management team in order to meet its objectives. Key to this support are:

  • Ownership: Managers are more likely to use, and support the use of a Balanced Scorecard if they feel some ownership of it. A continuous plan of communication is essential in order to further this ownership which will have been established in the design process with the participating group but which will require buy-in from other managers;
  • Culture: The Balanced Scorecard works by building consensus within a management team about shared goals, and focusing their attention on the status of activities being carried out to achieve these goals. This approach requires an organisational culture that fosters co-operative working, and recognises the need for shared responsibilities and accountabilities. The Balanced Scorecard approach also requires clear and concise communication of objectives and expectations within the organisation. It is always sensible to think through the cultural issues during the Balanced Scorecard design process and continuously thereafter;
  • Rewards: Embedding objectives contained in the Balanced Scorecard in the ‘owner’s’ performance appraisal objectives is an important link in making Balanced Scorecard work - this will really embed your Balanced Scorecard.

4 Encouraging managers to use the Balanced Scorecard

A Balanced Scorecard will only help organisations control and implement strategy if it is fully used and regularly updated. However management teams have busy schedules and it is not wise to assume simply because a Balanced Scorecard has been designed that the target management team will find time to review it. Discussion of when and how the Balanced Scorecard will be used should be an essential part of the design process. One approach is to insert Balanced Scorecard into the agenda of a regular meeting the management team already have; getting agreement to discuss it near the beginning of the agenda is also helpful.

Putting Balanced Scorecard on the agenda will ensure it gets reviewed initially but to guarantee it stays there, it is important that the management team find the discussions of Balanced Scorecard useful. Having a good design will help; ensuring that the measures and targets chosen for the Balanced Scorecard are reported ahead of the meeting is also necessary. Many organisations underestimate the effort required to complete the design of a Balanced Scorecard, and to subsequently collect and report on the data needed. During the latter part of 2GC supported projects, we encourage the management team to discuss the resourcing and reporting activity needed to ensure that their meetings are fully informed about progress on objectives.