This is still the biggest question I get from people who have discovered the balanced scorecard and want to introduce this powerful tool in their organization. Sometimes they simply want to get their organization using measurement to obtain performance results feedback. However, sometimes their challenge is a bit bigger - they want their business leaders to take a second look at the way they actually use business performance results in their company.
Regardless for their reason for wanting to implement the balanced scorecard in their organization, these folks need to focus on pitching their decision-maker on the balanced scorecard by helping them see how the balanced scorecard can solve significant business problems and enable the achievement of critical top and bottom line business results.
However, before pitching the balanced scorecard to decision-makers, it’s critical that you yourself are clear on what the balanced scorecard is – and isn’t. Many people believe that the balanced scorecard is just a measurement tool, however, this couldn’t be further from the truth. While measurement is one of the roles of the balanced scorecard, it’s almost a disguise it wears to achieve its real purpose and deliver its real value to any organization that adopts it. What I mean is that the balanced scorecard is actually a strategy management system and philosophy that uses measurement as the catalyst for organizational dialogue, discovery and learning, targeted improvement, the forward acceleration of value proposition delivery, the development of loyal customers/stakeholders, and the achievement of desired business performance results and outcomes.
The balanced scorecard is a powerful communication tool that highlights to everyone what’s important in relation to your business strategy (after all, as they say, what gets measured gets done!). It also provides your organization with a valuable repository for information about its strategy, and enables knowledge and best practice creation and sharing. The balanced scorecard is focused on a company’s business strategy so it requires some sort of recognized strategy to serve as the foundation for the indicators included in it. Equally important is the fact that the balanced scorecard isn’t a diagnostic tool. Its purpose is to provide you with an early warning when something has changed in the strategy management system and stimulate further investigation and organizational dialogue about what’s going on and what, if anything, needs to happen next to maintain forward strategic progress.
The most often overlooked aspect of the balanced scorecard though is its philosophy element. The balanced scorecard offers organizations a new approach to strategy, business, and organizational management. In fact, for balanced scorecard adoption to be successful and have its greatest impact on organizational performance, customer/stakeholder results, and business outcomes, business leaders must be prepared to manage in a way that engages others in a dialogue about the business and how to move forward, and actively supports employees in participating in that discussion. The balanced scorecard should be a catalyst for business leaders, employees, and, in some organizations, stakeholders, to collaborate and co-create the business strategy. Finally, successful balanced scorecard use requires business leaders to engage in a more dynamic strategy management process that is focused on measuring and talking about what’s relevant, accepting the truth of the situation based on what performance results and dialogue are telling them, and then using that information to learn and improve their business strategy as needed.
Is this what your decision-maker thinks the balanced scorecard is?
If not, your first step in pitching the balanced scorecard is to engage your decision-maker in a discussion about the real purpose of the balanced scorecard. And while your company’s initial purpose behind adopting the balanced scorecard may be to bring a little more measurement discipline into the mix, it’s important to open your decision-makers eyes up to where the balanced scorecard can really take your organization. Why? Because the real promise of the balanced scorecard can only be achieved if your organization goes the extra mile and implements (and uses) the balanced scorecard the way it was meant to be used.
I believe that much of the dissatisfaction many business leaders feel about the balanced scorecard happens because it ultimately underdelivers and underwhelms. That is, decision-makers get sold on the powerful benefits of an optimized balanced scorecard and then they are disappointed that these results don’t materialize. In my experience, this usually happens because the decision-maker’s definition of the balanced scorecard was "measurement tool or report". Here’s the thing - a simple measurement tool alone absolutely cannot deliver the transformational business results you are probably going to pitch to your decision-maker. As a result, it’s important that you make sure that you and your decision-maker are on the same page about what the balanced scorecard is, AND the management commitment required to achieve the promised results, before you have a discussion about the business problems the balanced scorecard typically solves and the results it can enable.
Getting through this first step in the pitching process is absolutely critical and, based on my experience, unless your organization measures absolutely nothing today (and could therefore benefit from adopting the balanced scorecard for its measurement aspects alone), don’t proceed with your balanced scorecard pitch until your decision-maker sees its true potential and accepts that the balanced scorecard is a strategy management system (not just a measurement tool and report). Your decision-maker doesn’t need to fully understand what is going to be required of them to fully implement the balanced scorecard - it’s hard for them to fully appreciate what this commitment looks like until they are actually in it. The key is that they need to be open to the balanced scorecard being something bigger than they might have previously thought.
What if you can’t get your decision-maker to get on board with the big picture definition of the balanced scorecard?
I personally would say “do not pass go” because, if you do, there’s a high probability that it’s going to end badly with the disappointment I outlined earlier. Some people would suggest starting by implementing the balanced scorecard as a measurement system and then trying to bring decision-makers along in their thinking over time with balanced scorecard use. The problem with this approach is that if you initially pitched the optimum balanced scorecard benefits, they will not materialize without implementing the balanced scorecard as a strategy management system and philosophy. When the promised results don’t materialize, your decision-maker will be less inclined to get on board with investing more time and effort into the balanced scorecard - and there is actually a high degree of risk that they will walk away from it seeing the balanced scorecard as another failed business management tool that didn’t deliver.
Now, in an effort to help your decision-maker understand the difference in the results achieved with the different balanced scorecard definitions, you will probably want to talk them through the benefits of the balanced scorecard, the typical business problems it helps solve, and the key business impacts realized with proper use. Here are just a few examples of the elements you might want to highlight in this discussion:
Balanced Scorecard Benefit #1: It keeps your organization always focused on, and investing in, the things that really move your business strategy forward
Balanced Scorecard Benefit #2: It gives you information that helps validate, and adjust if necessary, your theory about how your business works to deliver business results (allowing you to make targeted investments that will produce the desired results)
Balanced Scorecard Benefit #3: It enables your organization to be more agile and responsive/competitive in your market place (by allowing you to identify changes early and giving you the information you need to improve or adjust your operations and/or business strategy as required and quickly)
Sample Business Problems Addressed:
Wasted $$ on inappropriate capital expenditures and other purchases and investments (benefits #1 + #2)
Misallocation of resources (i.e. time, people, $$) (all benefits)
Slow decision-making = lost business opportunities (benefits #1 + #2)
Poor customer/stakeholder actions and decisions = lost customers/poor stakeholder satisfaction and support (all benefits)
Old actions/doing the same things the same old way isn’t producing the same results anymore = under-performance on key performance indicators in all areas (i.e. people, process performance, customer/stakeholder outcomes, financial results) (benefit #3)
Root cause problems are not clearly identified (benefit #3)
Sample Business Impacts/C-Suite Metrics Impacted with Balanced Scorecard Use:
ROA, ROE, Earnings, Budget Performance, Net Profit, Sales Revenues, Funds Raised, Operating Costs, Organizational Efficiency/Productivity, Stakeholder Satisfaction
However, be sure to use these examples to illustrate the impact of using a balanced scorecard with the expanded (true) definition. In some instances, I have contrasted these results with what can be achieved by only using the balanced scorecard as a results reporting tool. This approach can be very powerful in making a decision-maker become more open to exploring an alternate definition of the balanced scorecard.
The balanced scorecard has been existence as a management tool for some time now. This means that (1) many people are aware of it and (2) they have developed their own perspective on what it is. Interestingly, you’ll find that there is a high degree of variability in the perspectives of business leaders regarding the definition of the balanced scorecard. Unfortunately, some of those definitions are limiting, seeing the balanced scorecard as just a measurement tool and this limited view hampers the ability of the balanced scorecard to deliver to its potential. As a result, when you are pitching the balanced scorecard to a decision-maker, your first goal must be to discover how they define the balanced scorecard and, if necessary, invest the effort required to optimize their definition of the balanced scorecard before trying to sell them on the benefits of balanced scorecard adoption.
Taking this step is critical for ensuring that when you successfully persuade your decision-maker and organization to adopt the balanced scorecard, it lives up to its potential and exceeds their performance expectations.
Hi Colin: I absolutely agree with you. It is critical that an organization define its strategy and strategic objectives (including strategic objective definitions) before selecting indicators.
I personally think that the strategy map is the best tool for doing this. Once an organization has a strategy map, you're right, the indicators almost fall out of it. The beauty of taking this approach is that you end up with a well aligned indicator set, giving you a powerful tool to actually measure and manage your strategy - providing you implement the processes, culture, and conversations you need to do a good job with this!
Posted by: Sandy Richardson | 09/26/2012 at 07:48 PM
In my opinion the power of the balanced scorecard concept really comes to life when the 4 perspectives are used as a framework for capturing the strategic objectives and targets the business wants to achieve. The process of establishing these objectives by working through the perspectives using a cause-effect approach is very logical and very accessible. The result is a truly cohesive plan and the business measures almost fall out of this automatically. Hence I would say that the achievement of a well structured set of objectives is also a great benefit which we can pitch to decision makers. Colin Barr www.stratile.com
Posted by: Colin Barr | 09/26/2012 at 07:17 PM