A balanced scorecard, often called a performance scorecard, is an excellent tool for organizations to focus efforts and communicate priorities and, ultimately, conserve time and resources. Typically, the balanced scorecard is used as a tool to rally an organization around the activities critical to long-term success and short-term survival. It's potential benefits have lured many organizations to implement a balanced scorecard, but along with such benefits, organizations must embrace a handful of challenges that could obstruct well-meaning efforts. Before an organization takes on the task of balanced scorecard implementation, it should prepare to avoid some common pitfalls.

APQC has worked with more than 20 organizations to design scorecards and to share best practices regarding implementation. Our research has revealed exactly how balanced scorecard implementation can miss intended targets. Christine Blagg, director of Performance Excellence for APQC, recently discussed three factors that commonly complicate the balanced scorecard process.

Relevant Measures

First of all, many organizations have difficulty identifying what measures are key. As a result, scorecards either have too many measures or measures that do not yield valuable information. In response to this difficulty, APQC has established the “critical success factor” session, where an organization outlines its strategy and three to five business imperatives or objectives. By discussing what factors are critical to meeting those objectives, an organization can identify what measures will accurately track success in specific goals.

“Examining critical success factors can be a real eye-opening experience,” said Blagg. “The management group can openly discuss the organization’s strategy. And often the result is not only measures, but also a better understanding of where the organization is headed.”

Well-Defined Measures

Another factor clouding success is the fact that some organizations do not define their measures well, leaving them with metrics that are unconvincing and unsupported. If the organization selects a relevant measure, but the calculation or formula used to create the value is unsupported or unclear, a business or process owner will have difficulty accepting the scorecard as a useful tool.

“Data integrity is a core component of measurement design. Take the time upfront to define the scope of the measure, discuss exceptions, and agree on a method of collection and calculation,” said Blagg.

Strategically Aligned Measures

Finally, a disconnect exits between the focus of management and that of employees. Scorecards are often used as a high-level management tool to run business units within organizations. But high-level metrics based on company objectives may be completely different from the operations-level metrics surrounding employees’ responsibilities. The disconnect between the two levels of measurement impede communication as well as the ability to summarize results at a strategic level.

Often the source of the disconnect is a lack of understanding of the different levels of measures: planning, screening or diagnostic, and control. Blagg described the distinction among the levels of measures and how they can be strategically aligned.

“A planning, or strategic, measure applies to the entire organization,” said Blagg. “Because these measures represent overall performance, they comprehensively approach all product lines, divisions, employees, and customers.” Planning measures are used by senior management to gauge the organization’s progress in achieving its strategy or mission. The frequency of planning measures is generally quarterly or semiannually.

The middle level of the organization, such as the director level, uses a diagnostic, or screening, measure. Operational in nature, these measures represent key processes, strategic business units, departments, or divisions. The frequency of diagnostic measures is generally quarterly or monthly.

A control measure is used by a department or work group to monitor subprocesses and departmental operations. Control measures relate to correct work execution, such as number of errors or a percentage completion rate. These measures are designed to provide frequent feedback and are typically administered weekly or monthly.

The key to applying these three types of measures is to disseminate measures according to what can be controlled by each scorecard owner.

Overcoming Obstacles

Blagg summarized how organizations can avoid difficulties in balanced scorecard implementation. “We have found that an organization can more greatly benefit from a scorecard if it selects a few, key measures that are clearly defined and then strategically aligns its scorecards at each organizational level,” said Blagg. “Consequently, the balanced scorecard becomes an effective management tool to guide operations and achieve strategic goals.”