Balancing Scorecards With Reality
How to make Balanced Scorecards work for your organization
CIO — To be at the top of your game in IT, you have to measure results. Most large organizations have implemented some type of Balanced Scorecard initiative, although many are unhappy with the impact of their efforts. Before you jump onto the bandwagon, take a deep breath, pull the research (www.bnet.com has a good list of reference material), and think hard about what you want to achieve.
The Balanced Scorecard is useful because it is grounded in reality. We can't have it all; trade-offs are inevitable among financial contribution, customer focus, operational excellence and organization maturity—the four dimensions of the Balanced Scorecard. Since the CIO job is by definition the management of contending opposites (for example, improving service while reducing expenses, delivering quickly while building a reusable infrastructure, and creating alignment while delivering value and reducing technology footprint), scorecard techniques make sense for IT.
It's important to distinguish between the Balanced Scorecard and the role of operational measurements. A ton of measurements are required to ensure that day-to-day operations are under control. Many of these measurements are the domain of the functional managers; the CIO will see them only when something goes awry.
In contrast, the primary goal of Balanced Scorecard metrics is to help drive and monitor the implementation of strategy. This happens because attention gets focused on achieving the critical outcomes, aligning efforts and resources, and communicating results and implications for the future.
If you don't have a business-aligned IT strategy that helps you allocate scarce resources and create value, then you don't have the clarity of purpose necessary to use a Balanced Scorecard. A good IT strategy can be communicated to the front line of your organization in a way that directs actions, forces trade-offs and establishes behavioral guidelines. In addition, since strategy and scorecards require business commitment, you must ensure that your strategy and scorecard definition processes are participative.
Whereas operational dashboards are comprehensive and relatively static, Balanced Scorecard metrics are more narrowly focused and shift with changes in strategy. Effective scorecard metrics measure outcomes (versus activities or milestones). In my experience, the number of metrics at the enterprise level should definitely be less than 10, while at the individual level the number can be narrowed to two or three. Whereas enterprise metrics are useful in guiding the leadership cadre's actions, individual metrics are essential to focusing frontline contributors on their roles.
To create strategically relevant IT metrics, define your strategic goals within each of these five categories: financial performance, project performance, operational performance, talent management and user satisfaction. Then consider how to measure success within each of the four Balanced Scorecard dimensions. For example: If a strategic goal under financial performance calls for supporting an increase in acquisitions, then a financial contribution metric might be keeping IT integration costs within a certain range; the customer focus metric could be integrating acquisitions within a certain time frame; the operational excellence metric might be to leverage the new scale by reducing the per-seat costs; the organization maturity metric could be the development of a common acquisition integration process that is repeatable and reliable.
