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Misconceptions about the Balanced Scorecard
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In the past decade, the Balanced Scorecard (BSC) concept
has gained widespread popularity. The Harvard Business Review
stated that it was one of the most important management concepts
of the last 75 years. Yet, many people share some common misconceptions
about the Balanced Scorecard. Those misconceptions can cause
people to dismiss the BSC as just another management consulting
fad. This article examines two of those misconceptions and
why a deeper understanding of the BSC reveals its true power
and future.
The Balanced Scorecard is a report card of measures To most casual observers, the Balanced Scorecard is
a report card for your company that provides a balanced look
at both financial and non-financial measures in four categories.
This view fails to recognize that as the Balanced Scorecard
evolved from an academic concept to a proven strategic management
methodology, the actual scorecard became just one piece of
a much larger puzzle. The creators of the concept, Norton
and Kaplan, currently describe the Balanced Scorecard as “a
system of linked objectives, measures, targets, and initiatives
which collectively describe the strategy of an organization
and how the strategy can be achieved.”
Dr. Norton recently stated, “The biggest mistake that
organizations make is thinking that the scorecard is just
about measures. Quite often they will develop a list of financial
and non-financial measures and believe they have a scorecard.
This, I believe, is dangerous.”
The defining quote of the Balanced Scorecard thought leaders
has shifted from “You can’t manage what you can’t
measure” to “You can’t manage something
that you can’t describe.” The emphasis on strategy
execution, rather than performance measurement, has resulted
in valuable new developments that go beyond the initial concepts
that Norton and Kaplan described in the early 1990s. To accomplish
the desired objective of creating a strategy-focused organization,
people should look at the full spectrum of tools and best
practices that fit under the umbrella of the Balanced Scorecard
approach. Norton & Kaplan’s second book, The Strategy
Focused Organization, reflects this revised thinking (and
it is a much easier-to-read book). Norton and Kaplan are not
alone in reflecting this broader more evolved view of the
Balanced Scorecard. Many of the best-known consultants for
the Balanced Scorecard (such as Howard Rohm of the Balanced
Scorecard Institute
and Nils-Goran Olve, co-author of Performance Drivers) also
emphasize the importance of communication, organizational
integration, and the management of strategic initiatives as
critical to success with the Balanced Scorecard approach.
The Balanced Scorecard is
just for the Executives
People often tell us, “Our executives have been using
a Balanced Scorecard for years. They get a quarterly scorecard
of measures based on the Balanced Scorecard categories. It
doesn’t have much visibility beyond the executives though.”
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