Balanced Scorecard Definition and Solutions

• What is a "balanced scorecard"?
• What are the benefits of implementing a balanced scorecard?
• How is it different from other methodologies, such as Six Sigma, activity-based costing and IT governance?
• Does every organization need a balanced scorecard of some type?
• Who is the champion within the organization?
• How can you determine your scorecard measures?
• How is the balanced scorecard implemented?
• Are there software tools that can help?
• What if you choose not to use off-the-shelf software?
• What are the challenges of implementing a balanced scorecard?
• How can you determine ROI?
• Can you dip a toe in the water, or is it an all-or-nothing proposition?
• Is this something a company can do internally, or is external help advisable?
• Even with tools, consultants and books, this is a huge undertaking. Are there general guidelines available?

What if you choose not to use off-the-shelf software?

That's certainly an option. For small companies-those under the Fortune 500, anyway-there are many free sources that can be very fruitful. Using wikis, for example, can be a great way to start. Another option is to learn XML or ACML and put the entire effort on a corporate intranet. There are as many ways to structure balanced scorecards as there are things to measure. Either way, though, the latest way organizations are structuring balanced scorecards is through dashboards. This method of viewing balanced scorecard metrics allows leaders to quickly identify problems and view key performance indicators associated with business processes.

What are the challenges when implementing a balanced scorecard?

Corporate culture changes, and with change can come fear, especially if it is tied to performance standards. Much of that can be abated if you are honest with stakeholders and employees. It can also be a time-consuming process, taking up to a year to fully implement, although the original estimate from Kaplan and Norton indicated a time of 26 months to implement everything down to the level of individual employees. It also requires full top-level support over a long period of time, during which other priorities and emergencies almost certainly will take center stage, at least temporarily. And it's certainly not cheap. Depending on the scope of the project, it can cost from thousands to hundreds of thousands of dollars. Costs include team members and time spent, facilitator cost, software licensing costs, installation and testing costs, and annual maintenance and upgrade costs.

How can you determine ROI?

That's an easy one. You justify the cost by virtue of the measurement itself and the results it presents. That's the ROI.

Can you dip a toe in the water, or is it an all-or-nothing proposition?

It's a good idea to start slowly. Start simple by focusing on just three indicators, and put a few employees in charge who are champions of the effort. Do a pilot program with those parameters, and expand from there. Also, don't jump into expensive software-try the grow-your-own approach first.

Is this something a company can do internally, or is external help advisable?

It's certainly possible to do it internally if you have sufficient executive commitment, if your balanced scorecard leaders are motivated to learn and lead, and if you have the internal bandwidth to do it right. It all depends on how much time you have, how much you can spend, how much time you can afford to take from your employees, and how much internal expertise and willingness to learn you have. Sometimes it does make sense to use an external consultant, such as when your effort or company needs a jump-start, when you don't have the internal expertise or manpower, or when the cultural change is just too difficult to handle without an outside influence.

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