Many Balanced Scorecard implementations fail because they focus only on performance measurement. Learn why this is a dangerous pattern and how to shift to a strategy-first paradigm.
Why Balanced Scorecard Implementations Fail
The Balanced Scorecard is a popular strategy execution framework. Despite its popularity, why do so many Balanced Scorecard implementations fail?
The answer is simple:
What is often implemented isn’t the Balanced Scorecard, but a limited performance measurement framework based on an early version of the BSC concept.
In these cases, the only element borrowed from the Balanced Scorecard is the four perspectives, which are used to group KPIs. However, performance measurement is not the primary purpose of the K&N Balanced Scorecard.
When implemented solely as a performance measurement system, the Balanced Scorecard does not clarify strategy, positively impact performance, or improve accountability.
The Root Cause of KPI-Centric Implementations
The Balanced Scorecard gained popularity in business literature as an effective framework for strategic alignment and execution. It has shown good results in improving overall business performance across various domains.
Problems arise when organizations new to the Balanced Scorecard begin implementing it. Often, the framework’s guidelines for strategy cascading and alignment with business strategy are overlooked, with the focus placed solely on KPIs.
This issue is worsened by the use of non-specialized scorecard software, like Excel spreadsheets, which are suitable for automating KPIs but not for describing and cascading complex strategies into scorecards.
The problem is further complicated by scientific literature, which often limits analysis to the early version of the Balanced Scorecard, focusing on performance measurement rather than its core purpose—strategy execution.
Below is a compilation of our case studies where the Balanced Scorecard is used under a strategy-centric paradigm, along with references to research where the Balanced Scorecard is primarily discussed in the context of performance measurement:
What Happens When the Balanced Scorecard Is Implemented as a Measurement Framework
When the Balanced Scorecard is implemented as a mere measurement framework, the defined metrics are passed down to departments and teams, often leading to confusion and disengagement:
- Firstly, administrative pressure to use these metrics can result in a general lack of acceptance of anything labeled “Balanced Scorecard” or “strategy.”
- Secondly, while ‘cascading‘ still occurs in these cases, the focus shifts to KPIs rather than objectives, reinforcing the measurement bias.
- Ultimately, senior managers observe low employee engagement and performance gaps, contrasting with the Balanced Scorecard’s promises of effective strategy execution and employee engagement. This leads them to conclude that the Balanced Scorecard is unsuitable for their organization, prompting a switch to other strategy frameworks like OKR or Hoshin Kanri.
Shifting from KPI-Centric to Strategy-First Implementation
To implement the Balanced Scorecard correctly, don’t put the cart before the horse. In other words, don’t start with KPIs—start with strategy and its decomposition into objectives.
We discuss the specific steps of strategy implementation using the Balanced Scorecard framework in our strategy implementation system that includes the steps:
- Cascading strategy into scorecards
- Decomposing high-level objectives into goals, KPIs, risks, and initiatives
- Aligning scorecards with overall strategy
Finally, a practical piece of advice:
- Consider rebranding your strategy implementation efforts.
Instead of calling it “Balanced Scorecard,” try “Strategy Deployment” or “Our Plan to Win.” This can help prevent misunderstandings within the management team.
- The Evolution of Balanced Scorecard in Healthcare: A Systematic Review of Its Design, Implementation, Use, and Review, F. Betto, A. Sardi, P. Garengo, E. Sorano, Int J Environ Res Public Health. 2022 Aug ↩
- An Information Security Performance Measurement Tool for Senior Managers: Balanced Scorecard Integration for Security Governance and Control Frameworks, T. Herath, H. Herath, Information Systems Frontiers, 2022 ↩
- Incorporating a scorecard into a business continuity programme , T. Stourac, Journal of Business Continuity, 2014 ↩
- Performance measurement of supply chain management: A balanced scorecard approach , R. Bhagwat, M. Sharma, 2007, Computers & Industrial Engineering ↩
Alexis is the CEO of BSC Designer with over 20 years of experience in strategic planning. He has a formal education in applied mathematics and computer science. Alexis is the author of the “5 Step Strategy Deployment System”, the book “10 Step KPI System”, and “Your Guide to Balanced Scorecard”. He is a regular speaker at industry conferences and has written over 100 articles on strategy and performance measurement. His work is often cited in academic research and by industry professionals.