Updated: May 22, 2020
The balanced scorecard is a management framework. It is widely adopted by many Organisations in both South Africa and globally.
Research has shown that companies who have implemented the balanced scorecard system have achieved a high level of performance improvement compared to those organisations without a strategic management framework in place.
If your organization chooses the balanced scorecard to manage and measure its strategic growth, there are some common pitfalls that you should be aware of.
1. Lack of Management Support to Drive the Project
We already know that the balanced scorecard is an intensive process that involves the most intimate aspects of an organization. It is also a lengthy process that will consume significant financial and human resources. Therefore, it is crucial that the executive team is on the bus, and you need the support of the entire executive team (particularly the CEO) for the project to be successful.
2. Lack of communication on the project implementation
To get employees’ support for this new way of measuring results and achieving success, they need to know why the organization has chosen this tool. How will it help them in their day-to-day jobs? What benefits will they see? How will their job responsibilities change?
3. Lack of Competent People on the Project
Most organizations find that having a full-time consultant with a balanced scorecard experience makes the process a lot easier and reduces re-work and frustration. When chosen properly, consultants and experts can provide a wealth of knowledge and save you from making others’ mistakes. As well, they can train employees on various aspects of the balanced scorecard and its related tools.
4. Lack of Project Focus
A balanced scorecard initiative needs to be approached like any other major project. You will need a project manager to build a plan, assign tasks, monitor work, and motivate the team. This is especially true in larger organizations, but even small companies can benefit from a well-laid plan. A balanced scorecard consultant can help with this task, particularly since they should be awfully familiar with the various tasks that the project will require.
5. Lack of foundation
There are a few things that need to be created before the balanced scorecard is created, including a values assessment, a vision statement, a mission statement, and a strategy map. You also need the right people and the right resources in place, and a good idea of why you are attempting this project in the first place. Without these key building blocks, your balanced scorecard initiative will not get far.
6. Project is Not Made a Priority
The balanced scorecard needs to be given top priority throughout the organization. This means that if certain department members are part of a strategy workshop, for example, that workshop must be mandatory, and it must take precedence over other meetings and tasks. If all organization members understand the importance of the balanced scorecard and understand why it is a key initiative, this will be much easier.
7. Teams Are Poorly Chosen
Remember the word balance in the term “balanced scorecard.” The scorecard process will require input from many different departments at many different levels. A team made up of two managers, in an organization with 10,000 entry-level employees and 20 departments, is not much of a team.
8. Scorecard and Related Tools Not Customized Properly
No balanced scorecard tool can be taken out of the box and used right away. You need to customize it for your organization, its vision and mission, and for your employees. Even the four perspectives discussed earlier are not set in stone and can be amended to suit your organisation.
9. Scorecard Not Applied Throughout the Organization
The balanced scorecard should not be used solely as an executive dashboard or as a tool for measuring manufacturing targets. It needs to apply to every individual in the organization for it to truly reflect progress and areas of concern.
10. Measuring Too Much, Too Little, or the Wrong Things
We all heard the famous saying: “What gets measured gets managed.” We can also interpret that what we measure is what we get. If we measure the right things, our balanced scorecard will show us the metrics that we need to achieve success. If we measure the wrong things, our scorecard will be ineffective.