The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.

 

A balanced scorecard is often proposed as a method for measuring and reporting progress. Frequently, organizations use a balanced scorecard as a mechanism for proving performance and claiming a share of rewards. Regardless of the context, it can be a useful tool for many purposes. However, if the metrics reported are not clearly defined and if the specific commitments are not reasonably achievable, then balanced scorecards are of little long-term use and often lead to more problems and disputes than they resolve. SPR can assist both during the formulation of a balanced scorecard and after the implementation of one.

All too often, metrics and associated scoring systems that organizations agree to at the outset of a relationship quickly diminish in value and significance. What can go wrong?

1.       When metrics are only generally defined, or if the components of performance (e.g., deliverables, response time, problem and severity levels, etc.) are not easily measurable, confusion can arise. The risk is that contents of the balanced scorecard reports do not contain useful or meaningful data. This will erode confidence in the objective nature of the balanced scorecard as a tool for management direction-setting. Objectivity enables decision-making based upon quantified facts and metrics and is the only real means of establishing improvement strategy. Opinion (often driven by limited viewpoints or political influence) without metrics should be avoided, as it defeats the entire purpose of the balanced scorecard.

2.       Even when metrics are meaningful and well defined, if the targets set are not within the realm of possibility, there is no benefit. Improvement is held hostage to unreasonable expectations and/or foolishly optimistic promises. Confidence and harmony are almost always the casualties under such circumstances.

How to avoid these problems? SPR can help before and during the process of establishing a Balanced Scorecard. SPR can draw upon our industry experience and knowledge base of project data to clarify what metrics to use and what commitments make sense relative to your organization’s performance capability. If you are already operating under the implicit expectations of a balanced scorecard, SPR can help optimize your position by reviewing and strengthening your metrics data gathering capability. In addition, SPR can advise on how to make the required metrics more than just contract management overhead and turn them into valuable knowledge capital.