Your Balanced Scorecard should be more than KPIs
The Balanced Scorecard is an incredibly flexible tool to track organizational performance. Organizations use the BSC to track operations, strategy, and project management. Those performance management systems manifest themselves in many forms such as PowerPoint slides, Excel files, Sharepoint, or dedicated BSC software.
One of the greatest downsides of solely using Excel-based KPI tracking is a tendency to focus too heavily on the quantitative part of the BSC. For many organizations, the BSC is just an Excel file with status colors, actuals, and targets.
While any best-practice BSC contains those components, they are only half of the puzzle. Many Balanced Scorecards take the shape of the above Excel example without taking the next step. Key performance indicators only tell you whether or not you are on or off target. In this approach, KPIs become blinders that do not foster any analytical thinking in advance of strategy review meetings.
In an ideal strategy review meeting, objective or KPI owners come prepared with a short performance analysis and list of recommendations to explain the performance of KPIs. In other words, managers need to explain why a KPI is off target, and how to fix it.
Yes – this is more homework for management in advance of regular strategy review meetings. Yet, if leadership is not asking these uniquely strategic questions before and during strategy review meetings, then the value of the BSC has already been diminished.
Performance analysis and recommendations fields provide more information
Common approaches to solving the overemphasis on actuals and targets include adding two fields to the updated process: “performance analysis” and “recommendations.”
The performance analysis field provides owners with an opportunity to –
- Explain current performance
- Analyze important trends
- Justify a status color
- Identify key risks
The recommendations field is a logical follow-up where owners can explain how they want to correct a given problem. An effective recommendation should include multiple options for management to discuss. Each option should include the following characteristics –
- A clear deliverable that must be accomplished
- Who should complete a deliverable
- When the deliverable should be achieved by
By providing detailed recommendations, the senior leadership team can generate discussion from a thoroughly thought-out starting point.
Even if at the conclusion of the discussion, no recommendation is accepted as the consensus next step, the goal is to have fostered useful strategic conversation. Ultimately, if solely relying on KPI actuals/targets to track the BSC process, strategy review meetings can easily lose out on the value of effective dialog.