Balanced Scorecard Implementation Pitfalls to Avoid (part 3)
There are many Balanced Scorecard implementations where companies don’t seem to get all the benefits described above. Research and experience have identified various traps and pitfalls main ones to avoid are listed below.
- Inflating the Balanced Scorecard with Externally Imposed Indicators. There is an increasing amount of performance indicators which are imposed on organisations by external regulators or stakeholders such as the government. It is important to separate these indicators from the Balanced Scorecard unless they match the strategic objectives identified in the BSC. Otherwise, they will dilute the strategic message and inflate the amount of indicators. This in turn causes a lack of focus and confusion and runs the danger of making the BSC seen as irrelevant and an administrative burden.
- No Resources for the Balanced Scorecard Implementation and Maintenance. There are organisations which assume that a Balanced Scorecard can be developed and maintained with no additional resources. It is important to give people the time and financial support to make it work. Best practice would be to create an internal team that facilitates the implementation and maintain the system over time. This team needs allocated time and resources to fulfil this role, which usually includes revising and cascading the BSC, collecting the performance indicators, analysing performance information, facilitating performance reviews and reporting performance.
- Not up-dating the Balanced Scorecard. The strategy of any organisation is not static; it has to be revised and changed as the external and internal environments change. It is therefore recommended that depending on dynamics of your environment, the Balanced Scorecard is reviewed as part of your planning cycle – usually every 12 months.
- Lack of IT support. Many organisations still rely on spreadsheet applications such as Microsoft Excel to collect, analyse and report their Balanced Scorecard information. Research has shown that organisation wide implementation clearly benefit from more sophisticated performance management software applications designed specifically for the purpose of managing and reporting performance.
- Running Parallel Systems. The Balanced Scorecard should be the main tool for managing and monitoring the strategy implementation and the success of the organisation. It is therefore important to align other internal processes with the BSC. Typical processes which need to be aligned include budgeting, project management and risk management. There is a clear danger of misalignment if budgets are created outside the BSC framework and if risks and projects are managed which might or might not be aligned with the corporate strategic objectives identified in the Balanced Scorecard.