International Process and Performance Institute

When Balanced Scorecard first descended upon the business world in the late 80’s and early 90’s, it was a fresh and needed perspective that promised to help our organizations rise above the decidedly one-sided financial performance measures used up to that time.  Frankly, most organizations who have tried to implement a Balanced Scorecard have not reached the success they were looking for and the reasons are varied.  Balanced Scorecard has served a purpose to help us understand we need other ways to monitor and measure the outcomes which are linked to organizational success.  However, I’d like to talk about why it often fails and offer some suggestions for success in your scorecard efforts.

Most of the reasons Balanced Scorecard implementations fail are centered on the measures themselves.  One of the top reasons is picking the wrong measures; but includes unrealistic goals for the measures, lack of alignment with the real objectives, and the measures themselves being too difficult or expensive to effectively gather.  Next are issues such as conflicts with the legacy reward systems, measures losing relevancy over time, and failure to use the measurements to initiate corrective actions. Other reasons center on management issues such as poor project management, lack of senior management support, and lack of internal promotion.  Yes, implementing a Balanced Scorecard has some challenges.

I’d like to share with you another challenge I see with Balanced Scorecard.  While Balanced Scorecard has helped us set our sights on other ways to measure our organizations, when we look at what really matters, it is not truly a balance we should look for.  Peter Drucker prophetically told us years ago the customer is the foundation of every business; indeed, the customer is the business itself.  If we take care of the customer, we take care of the business and all stakeholders benefit.  We often give lip service to the customer.  In reality, the shareholders get primary deference in most publicly traded organizations, and even privately held organizations can be myopically focused on profits, ROI, ROC and the like. 

 The customer is our rallying point without question.  If all stakeholders agree the customer is the most important stakeholder in our organizations, there is no argument what our focus should be.  Even the stakeholder whom we call the customer agrees with this point of view.  It is inarguable.  Why do we take any other position?  Frankly, the truth is, we often do exactly that. 

While I wholly endorse the direction Balanced Scorecard has taken us from the narrowly focused financial measures, let’s not get hung up completely on the “balance” part.  The measures our organizations need to be keenly focused on are primarily related to our customers.  The companies who are leading their markets are using metrics correlating to what delivers successful customer outcomes, and that makes all the difference.

I can hear some muttering, “But satisfying the customer without a profit does no one any good.”  My response to that kind of thinking is to say if you can’t figure out how to deliver what your customers want and also make a reasonable profit, then based on Drucker’s definition of a business, you don’t have one.  All you have is an exercise in futility or perhaps a non-profit.  If profit is your motive, you need to rethink your approach or quit and end your suffering.

Creating a scorecard for your organization could be the right idea; here are some things to consider before you embark on that journey.  Hold off if your organization is in any situation that resembles a crisis, is struggling, or currently involved in any other large projects.  Projects of that magnitude are steep; if your organization is already on a hefty climb, it will most likely prove to be too much.

Consider looking at some of your organization’s most customer facing processes.  Perform a CEM Alignment analysis; you’ll get clarity on what customers really want while developing the KPI’s to measure your delivery.  This analysis is critical to discovering the right measures for your scorecard.

But don’t get hung up on balance.  A customer leaning scorecard is ideal.  Metrics related to your customers (by whatever name you call them), and their satisfaction, should be more prominent and weighted more heavily than any other measures you implement.  Nothing provides the opportunity for greater satisfaction for all stakeholders than raving customers.  That feels good and is good for everyone involved.  And remember, most scorecard efforts fail around the measures themselves.  Your measures truly need to gauge the delivery of outcomes the customers perceive successful to them.