What’s it all about?
A technique for monitoring your organisation’s performance by focusing on the most important measures.
What you measure is what you get.
What gets measured gets managed.
What gets measured gets manipulated.
Introducing the concept.
Short introduction with an illustration from practice.
An American, so some differences in terminology, but these two videos go into the four perspectives in a bit more detail.
Notice the reference to KPIs, that is, Key performance Indicators – the things we measure to see if we are on track to meet our objectives.
Balanced Scorecard. Key Performance Measures.
Discussion in this podcast of the most important metrics in a real small business. thw hole podcast is interesting, but the practical examples are around minute 18 onwards.
Problems in practice with the Balanced Scorecard.
Time and time again these issues come up in research and reports on the use of the Balanced Scorecard.
- Too many measures. It is getting easier and easier to measure things automaticaaly. This means organisations have access to a great deal of data. The temptation is to use it all as it all must be important. It can be important without being important enough to be on the Balanced Scorecard. Overwhelming the Board with data means porr decision making, more doesn’t always mean better.
- Focusing on the measure (metric) rather than what it means for the business as a whole. This can lead to measures being reported that are not actually important to the business as a whole (sometimes just because they look good!).
- Not producing the information in a manner that will be understood by those making the overall decisions. You can’t assume everyone is going to understand the data in the same way as the people generating it. The whole point of the Balanced Scorecard is to ensure that those making the decision shave the information they need to make the best decisions. It had better be in the way they need it, even if it does mean that the raw information has to be processed first rahter than just plugged into the Balanced Scorecard.
We (me) tend to be enthusiastic about the Balanced Scorecard. This research identifies the weaknesses.
Not just financial
Discussion of research here which shows the Balanced Scorecard might fail as a tool if there is insufficient emphasis on Corporate Responsibility in it.
Do the wrong things get emphasised in the Balanced Scorecard?
Evaluators of Employees Tend to Favour Financial Performance Over Contributions to Corporate Ethics
A Johns Hopkins Carey Business School study finds evaluators using a Balanced Scorecard tended to award high ratings and bonuses to employees who performed well financially, rather than to those who scored well in corporate social responsibility.
Using the Balanced Scorecard to improve company performance.
Endorsement for the method from this company.
Constructing a Balanced Scorecard.
The organisation behind the Balanced Scorecard has a favoured approach for developing a BS in an organisation.
From the Balanced Scorecard Institute (consultants) on linking company objectives and measurements. Includes a practical example of choosing the best measures.
How you can construct a Balanced Scorecard Dashboard (visual representation of the BS) in Excel.
An example of an Internal Business Perspective Scorecard.
Linking measures to objectives.
The measures (KPIs) need to be closely linked to your objectives. Failure to do this is a common mistake.
What’s measured gets managed …… and the problems that can cause
Police control phoning 999
Here is a recent example of how setting targets/performance measures can adversley effect actual performance. By penalising performance below a certain level, an organisation can encourage dysfunctional behaviour. A police control room phoning 999 to improve their own response rate!
Airlines deliberately leaving luggage behind….
Another example of how setting targets can lead to dysfunctional behaviour. To avoid fines for late departures airlines deliberately leave luggage behind! It is cheaper to compensate a few for the delayed arrival of luggage than all the passengers for the flight delay.
See how Key performance Indicators (Balanced Scorecard measures) are considered by these online marketers. Discussion around minute 37. Note the proxy measure (one that tells you mkore than one thing).
Organisations (here the UK Government) can use a Balanced Scorecard to evaluate possible suppliers.
An example of a detailed Balanced Scorecard for an organisation.
How the Government is using the Balanced Scorecard in making purchasing decisions.
“The guidance, developed by the Crown Commercial Service, introduces a balanced scorecard approach, which government departments should use in designing major works, infrastructure and capital investment procurements where the value is more than £10 million.”
How a consultancy helps non-profits with the Balanced Scorecard.
See how in their advert they describe how a Balanced Scorecard wil help.
Video lecture on Balanced Scorecards that emphasises the strategic role of the Balanced Scorecard.
Balanced Scorecard for evaluating performance.
An example of using the Balanced Scorecard to judge organisations. Here an award granting body uses performance against an external Balanced Scorecard to judge caterers.
An example of just the Internal Business Perspective given as a Balanced Scorecard.
Journal article outlining how the Balanced Scorecard could be used in an unusual context.
Examples of Balanced Scorecards.
There are plenty of organisations that have adapted the Balanced Scorecard, here is an example. Interesting to read there analysis of the original BS and their explanation on why their variant is an improvement. Things can always be improved of course.
Use of a Balanced Scorecard within a Department.
It doesn’t just ahve to be the companys Balanced Scorecard as a whole, as long as they are in line with a company’s objectives, areas of the business can have their own.
An interesting example of how a school in America has used the Balanced Scorecard. Look at the issues that are important to them.
How Many Types of KPIs Are There?
Using the standard Kaplan and Norton model we would say twenty; five each a cross four perspectives. An article that considers different approaches to KPIs.
Manipulation of University data in the Balanced Scorecard going to happen?
‘What gets measured, gets managed’ is what we are told is one of the justifications for Balanced Scorecard measures. It’s also said that what gets measured, gets manipulated’. This is particularly the case when the consequences of meeting certain levels are significant.
You may be aware that there is discussion of universities that teach well (as measured under the Teaching Excellence Framework, will get to charge higher fees.
There is concern that there will eb manipulation of data as the rewards of high performance are so significant (being able to charge higher fees).
Possible Written Questions.
(No indication of marks – the more marks a question gets, the more you are expected to write – detail that is, not just words!) If you can’t answer these, you need to do some more reading. I do ‘find’ questions elsewhere, so these aren’t all questions I have used myself.
Discuss the rationale behind the development of the Balanced Scorecard and how it is used to overcome some of the problems associated with traditional performance measurement.
Describe Kaplan and Norton’s Balanced Scorecard approach to performance measurement.
With regard to the Balanced Scorecard framework, highlight possible objectives which could be utilised in measuring the performance of a university.
What are the weaknesses in using a Balanced Scorecard approach?
Discuss the use of Kaplan & Norton’s Balanced Scorecard approach to performance measurement and how it could benefit an organisation to adopt a Balanced Scorecard.
Briefly explain the main principles of the Balanced Scorecard and the four perspectives.
List and explain the areas of a business covered by the four perspectives of the Balanced Scorecard.
Journal articles etc. related to this topic.
Here’s the original idea..
Discussion of the use of a Balanced Scorecard in evaluating a transport system