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Complex Balanced Scorecards Work Against Success

by Ryan Englund on October 22, 2019

The upcoming blog series will include step by step suggestions for BSC development, implementation, and execution taken from the whitepaper, “The Balanced Scorecard Refresh – Lessons from 25+ Years in the Field,” authored by Mario Bognanno, Ryan Englund, and Randy Russell This blog series will culminate in the release of the whitepaper and live webinar: What I Wish I knew Before I Started My Balanced Scorecard Program.

Over the years, the Balanced Scorecard methodology has evolved to address many of the prerequisites that contribute to successful strategy execution.

Following the publication of their first book on the subject which described the Balanced Scorecard as a four-perspective model, Drs. Kaplan and Norton went on to describe the five principles of a strategy-focused organization. In their most recent book, they describe the six stages of the strategy-management process.

While this evolution has made the approach more comprehensive, it has added some additional complexity. In the well-intended efforts of some to accommodate all the many details (perspectives, principles, stages, and more) the end result has sometimes become an overly elaborate approach that has been challenging to implement.

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The trap that some have fallen into has been to build a system that is more complex than what is minimally necessary to achieve breakthrough outcomes. In addition, by adopting the design principle of minimal necessary complexity (i.e., relying on only the necessary and sufficient set of interventions), those who adopt the Balanced Scorecard can achieve desired outcomes and are also able to build a strategy management system that is sustainable over the long run.

The recommendations below are provided to help practitioners build an approach they can use to support their initial use of the Balanced Scorecard to execute strategy. One example of unnecessary complexity—especially at the beginning of the journey toward strategy management competency—concerns the selection of performance measures.

How many measures are necessary to enable a successful first implementation of the Balanced Scorecard?

Based on a review of the historical record, it was once said that “50 is nifty” meaning that a set of 50 measures, associated with a full complement of strategic objectives within a single Balanced Scorecard, was not considered to be too many.

Following the first few years of field implementation, that number has revised downward and it was recommended that no more than 25 measures should be used to track about 15-17 strategic objectives in a single scorecard.

During this middle period of field experience, it was said that “twenty is plenty.” Since then, the current recommended level of simplification is that no more than ten objectives and no more than 10-15 lag measures should be used for a single scorecard at the top of an organization.

So, the general trend has been in favor of consolidation and simplification; but only up to a limit. Some have even gone so far down the simplification spectrum to advise organizations to seek no more than three or four measurable objectives with as few as four to six measures to capture their strategy. But this approach suffers from over-simplification and leaves the organization with too narrow a focus (and such a narrowed focus provides too little information to communicate the intent of the strategy across the workforce).

Organizations benefit when they “simplify though focus” to ensure that they separate the strategically relevant objectives and measures from those that are operationally important. The recommendations that follow—for refreshing the approach to initial design and implementation of the Balanced Scorecard—are based on the successes achieved by those who have followed these simple recommendations.

Topics: Balanced Scorecards Business Strategy

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