Creating Balanced Scorecards People Actually Use








Balanced Scorecard

The balanced scorecard approach represents a significant improvement in how organizations are approaching strategic planning and performance management. And yet, many organizations are getting a poor ROI on their time and investments. Why?

Cumulus Resources has worked with numerous organizations around the world on their balanced scorecards. These five techniques were used consistently by those that reported the best results from their balanced scorecard efforts.



Focus the balanced scorecard on strategic change, not operational improvements



Common Practice
Out of a desire to include everyone equally in the scorecard and strategy map, organizations include everyone’s improvement targets in the strategic plan.

The Problem

Once the scorecard and strategy map grow in size to include something for everyone, it loses its ability to focus people on critical strategic activities.

The Implication
All goals now look equal. People get confused about what is merely important and what is truly strategic. The strategic plan fails to produce promised results.

What’s Needed
A strategy map that is a clear plan that can be relied on to lead an organization to its strategic goals.

Example
This strategy map was created by Cumulus Resources to show the strategic leverage point used by an airline to reach a position of sustainable competitive advantage.

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Show, with cause and effect links, where cooperation and communication are required for maximum results


Common Practice

Strategy maps are usually constructed with only general indications of how the four balanced scorecard perspectives support each other.

The Problem

People will see their efforts as separated from other departments and only loosely tied to the strategic goals of the organization.

The Implication
Departments and individuals will work on their piece of the puzzle in isolation. The cross boundary communication and close coordination needed for success will be at a minimum.

What’s Needed
The most useable strategy maps are systems maps that show how higher-level results are dependent on coordinating work across the organization. Cause and effect links show clearly where coordination and communication is needed for success. The links show how each person’s efforts are directly linked to the strategy.

Example
This section from the airline's strategy map shows the critical processes and programs that must be closely coordinated to achieve their “ground turnaround” and “on time” departure goals.









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Simplify performance metrics to “prime” targets


Common Practice

In an attempt to be thorough, the planning team defines success with multiple metrics. The final balanced scorecard can grow to have scores or even hundreds of performance targets.

The Problem

If time and resources are limited, and they usually are, people will look at the large number of goals and count themselves lucky if they can reach half or more. People begin expecting to fall short

The Implication
While they agree all of the goals are unlikely to be met, people will disagree on which ones are the most important. The situation leads to the inefficient use of resources and a sense of muddled results.

What’s Needed
To be the most useful in fostering strategic success, balanced scorecards need to insure the goals are clear and fully subscribed to by everyone. After looking at their balanced scorecard each person should say, “I know exactly what is being required of me, and I know exactly how I’m going to do it.”

Example
The airline example shows a “prime” metric that defines success clearly, precisely and simply. The metrics are so simple and clear, that disagreements about where resources should go are drastically reduced. Everyone is aligned perfectly around what should be achieved and at the end will be in complete agreement as to whether results were achieved or not.











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Create views that limit details to just what is needed by particular groups


Common Practice

The comprehensive balanced scorecard document and strategy map include both high-level and low-level information. People often try and work from this combined detail-laden view.

The Problem

Too many details cause people to lose focus. Example: The driver of a car only needs a dashboard light that says “Check Oil.” The mechanic needs further details to troubleshoot the systems and make repairs. Giving the driver all the mechanic’s details can confuse them and contribute to them delaying taking the critical actions needed.

The Implication
Overly complex views of the balanced scorecard can confuse people and slow things down. Einstein said, “Make things as simple as possible, but no simpler.” Complexity requires more effort to identify critical information. People can be left with the impression, “someone has done a lot of work here, it looks very impressive, but I’m not certain exactly what I should do with it.”

What’s Needed
Cascading views should be created that show the results for which a particular group is being held accountable, and precisely what the group is going to do to succeed. Coordination and communication links within the group are clearly displayed. (See Appendix for an example of an executive view.)


Further details are departmental and individual scorecards

The next level of scorecards and strategy maps start at the top with one or more of the “boxes” from their “boss’s” strategy map. They include the specific contributions needed from this part of the organization and show specifically how results will be achieved.





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Create simple dashboards that galvanize action


Common Practice

Detailed and complete information displayed in beautifully formatted dashboards.

The Problem

High volumes of information obscure critical areas that need immediate attention.

The Implication
Managers don't ask the right questions and fail to take decisive action.

What’s Needed
Good dashboards grab a leader’s or manager’s attention and help them ask insightful questions about critical areas. Too many dials, indicators and graphics can actually divert people’s attention away from what’s important, and allow critical situations to go unaddressed.

Balanced scorecard should be a tool that helps managers quickly diagnose the cause of performance problems.

The strategy map and balanced scorecard should provide a logical structure to diagnose the causes of poor performance. If a leading business metric is falling short – look at project performance. If lagging or higher-level results are not being achieved, the fault will either be found in poor results lower on the strategy map or in the cause and effect logic of the strategy map itself. A cause and effect strategy map combined with a clear, simple dashboard leads to the earliest diagnosis and action.

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Intervening quickly in the "Spoke and Hub" project may have prevented marginal route structure.

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