I’ll admit it. Back in 1997, when my employer decided to start using the Balanced Scorecard, we used it as a report card.
What did that look like?
Well, we rolled up indicator results to get a strategic objective performance score. And then strategic objective performance scores were rolled up using a weighting formula to get an overall Balanced Scorecard performance score. We watched that overall score like hawks, looking for improvement from month to month and, if I recall correctly, our executive team even had a goal that was focused on the achievement of a target (improved) Balanced Scorecard score on their performance plans.
Talk about a horribly wrong approach to using the Balanced Scorecard. But, to be fair, my colleagues and I weren’t alone. Lots of other companies adopting the Balanced Scorecard back in those days were doing a similar thing. Heck – the name “scorecard” was right in the tool’s name so who could blame any of us!
Either way, the outcome of our focus on Balanced Scorecard scoring was that we rarely looked deeply at indicator results to explore what was really going on. No time! What we were consumed with was the challenge of improving performance results scores so that we would get a better overall Balanced Scorecard score.
I know – it sounds a little crazy today. And, you might even be thinking “What’s so bad with focusing on improving performance results? Maybe the reason was a bit off but looking at performance sounds about right”.
And while I would agree that focusing on improving performance and results is great, what was really going wrong back in the day was that we were focused on trying to improve our performance results to improve our Balanced Scorecard SCORE – not to improve the way our organization worked (or didn’t work!) to produce better customer, and by extension, financial outcomes.
It’s a subtle but critically important difference.
Thankfully, the Balanced Scorecard scoring concept has gone the way of the dodo. While we may still calculate indicator performance results scores (e.g. actual performance is X% of target), we use this information to figure out the right color-code or icon to signify relative performance levels. And while we still might weight indicators to determine the performance results for a strategic objective, the purpose again relates to performance color-code assignment. No one calculates/should be calculating an overall Balanced Scorecard score any more.
However, just because we don’t do the behavior today it doesn’t mean that the scorecard as report card mentality has also disappeared (maybe it’s the name – unfortunately the word “scorecard” is still there…….).
In fact, I think that many Balanced Scorecard users still see the Balanced Scorecard as a report card. How do I know? Because I see the telltale signs all the time:
- Concern about setting performance targets
- Complaining about the methodology and thresholds used for red-yellow-green color-code assignments
- Freaking out about “red” performance results (and doing anything to change them)
- Fear of taking on the role of indicator or strategic objective owner
- Superficial performance results commentary
- Anxiety about Balanced Scorecard meetings
When you see signs like these you just know that, for your people, your Balanced Scorecard = a report card. The problem is that, for most of us, report cards, thanks to unfortunate school experiences, are loaded with personal judgment - who wants to subject themselves to that?
The good news is that, over time, the approach to the Balanced Scorecard has evolved so that, in smart organizations, the Balanced Scorecard ≠ a Report Card.
Now, the Balanced Scorecard = a Learning and Engagement Tool.
You see, we’ve discovered that the better, more productive approach to the Balanced Scorecard is to make it part of a strategy-focused improvement loop that is focused on collaborative, non-judgmental organizational learning that explores: (1) whether you are doing the right things (i.e. Is our strategy moving us forward and is it creating value for our customers/stakeholders?) and whether you are doing those right things right (i.e. Is our organization executing its strategy to the best of its ability?), (2) when the answer is no, what needs to change and how, and (3) whether the changes we have made have produced the results we wanted (and, if not, why not).
I’m sure glad that the days where we purposely used our Balanced Scorecard as a report card are over.
Why? Because, by growing up and into the Balanced Scorecard, we’ve been able to realize a power in the Balanced Scorecard that I don’t think many of us envisioned back in those early years!