When a company wants to build and automate a business scorecard, it decides between good old Excel and specialized software. Spreadsheets (like MS Excel or Google Sheets) doesn’t require any long training and are normally installed on many computers; at the same time, professional scorecard software provides some attractive functions, but implies additional cost.
- Excel vs. Specialized Software: where Excel wins, risks, where specialized software wins
- Opinions: what experts say; what users say
- Practice: video tutorials on how to create scorecard in Excel; quick tricks with BSC Designer
The purpose of this article is to analyze the case where Excel wins and where the specialized software might be a better choice. If you have any additional ideas that will help business professionals to solve a dilemma, feel free to share it in the comments.
Where Excel Wins
A spreadsheet (like MS Excel) is an excellent business tool. We can find it on many computers and it is also available in the Cloud. When it comes to the scorecards/dashboards/KPIs, it has certain benefits and application areas.
1. No need for additional investments
If you don’t have a budget for any new software, then Excel is an excellent choice for an automation task. In a few clicks, one can build a basic scorecard with all the necessary details for the KPIs, including target values, initiatives, and business context. With some tricks a basic scorecard in Excel can be created even faster.
2. Single-user scorecard
If a person has a “black belt” in Excel and he/she will be the only user of the scorecard, then Excel is also a good choice. Use of the formulas, tabs, and cross-links will help to present all possible performance data and analyze it.
3. Creating a prototype
There is no “one size fits all” performance measurement and management solutions. Before investing in automation software, it’s a good idea to try various approaches and understand which one fits better to the needs of the organization. Spreadsheet software is a good test ground for such experiments. The prototype scorecard can later be moved to specialized tools like some of our users did.
Risks of Having Scorecards in Excel and How to Avoid Them
Now, let’s focus on some typical risks of having a scorecard in a spreadsheet. Some of them were mentioned by our users in the case studies.
1. The risk of spaghetti-style scorecard
While any specialized scorecard software dictates certain approaches to the scorecards, the spreadsheet gives us absolute freedom. In some cases, the result of this freedom is a spaghetti-style scorecard with many cross-links between hundreds of metrics and several tabs. It probably will work for a time, but the next actualization might become a nightmare. If you decide to use a spreadsheet, make sure you keep the structure of the KPIs simple.
2. Historical data is hard to manage
How does the customer retention change over time? Why are sales high this June? Do we grow faster than the market? Analyzing trends is a great source of business insights. The problem is that the spreadsheets were simply not designed to keep historical data.
Off course, there are some turnarounds like cloning the column before entering new data, keeping historical data on a separate tab, or in a separate spreadsheet. These tricks will work on a small scale, but for larger scorecards, the spreadsheet will soon become a huge monster that makes it hard to analyze performance over time. Think about the way historical data will be stored beforehand.
3. Strategy map is frozen
A good business scorecard should include a strategy map that explains the context behind the KPIs. Those who create scorecards in Excel can use build-in drawing functions or create a strategy map in the software for the presentations, like in Power Point.
The visual picture in this case might look very professional, but changing any detail will be a headache. That’s why those visually appealing strategy maps normally remain untouched until the next annual performance review. One way to win this game in Excel is to replace the visual map with a data table or text-based map, making it less attractive, but more editable.
4. Time consuming KPI normalization and weighting
In most cases the values of the indicators are measured on different scales, and for the purpose of further analysis, they need to be adjusted to the common scale. For example, if the “email response time” indicator is measured in hours, it needs to be compared with the “satisfaction rate” indicator measured in %, and then we need to normalize “email response time,” for example by presenting its value on the [0..24 hours] scale, and calculating its performance respectively.
Few weeks after the implementation the end users will probably actualize their requirements. The typical ones are:
- The measurement scale for the indicators can change over time
- Consider cases like “less value means better performance”
- Indicators might contribute to the overall performance with the different weights
It’s not a rocket science, and the math is simple, but it is a time-consuming task that can be easily automated.
5. The need to agree on the workflow
Most business professionals are familiar with Excel, so there is no need to train them for the basic operations. However, Excel is not a tool specialized in scorecards, so it doesn’t provide any fixed workflow for the scorecard creation and data entry. Organizations need to define and communicate to the teams how to use a scorecard-related workflow: how to add new KPIs, how to update and validate data, how to reflect changes on the strategy map, how to report on the performance, etc.
As the analysis of the history of software shows, the trend is towards specialized tools.
Where Specialized Scorecard Software Wins
With a specialized software users can expect automation of various aspects of the business scorecards. In the beginning any automation tool will provide a framework to build a scorecard, describe KPIs, and enter performance data.
1. Multi-level KPIs
Imagine a situation when you need to measure “Customer satisfaction, %” that correlates with the “Response time” and “Response quality,” and those two indicators need to be further drilled down. Such multi-level structure is possible in Excel, but maintaining it might be difficult. With the automation software, the multi-level scorecards are much more user-friendly.
2. Strategy map with cause-and-effect links
Unlike presentation software, most automation tools for the scorecards can build a live strategy map where the current performance data is visualized. Some visually appealing templates are already available in the tool, and even users without any design skills can create professional maps from scratch.
If you don’t need a strategy map, then probably, you are looking for a KPI software, but not for a Balanced Scorecard tool.
3. Team work and access management
Under the umbrella of “team work,” automation software allows you to maintain data in the Cloud, assign access rights to the scorecard and indicators, and send notifications to the team members.
All this is doable in Excel, for example, by placing a spreadsheet in the Cloud or by exchanging emails with attached files one can achieve the same result, but by spending much more time.
One thing that limits the possible application of Excel spreadsheets is how the historical data is treated. Anyone with a right to modify a document can not only introduce the new information, but also change the historical data. In this way the manager cannot be sure that the information stored in the spreadsheet was not manipulated. The spreadsheet software simply was not designed for this purpose.
In a specialised software, like BSC Designer, you can limit the rights of users to modify historical or future data. Moreover, you can decide what data is considered as historical. For example, you can adjust the workflow to allow editing of data that is no older than 30 days, and modify values for the nearest future only, let’s say 3 days from today’s date.
4. Keeping scorecard up to date
Specialized automation tools will make data actualization easier, and in many cases, will help to automate the data entry by fetching required information directly from the database.
Business scorecards are not for the top managers only. The important business goals need to be aligned with the goals of other business units, and respectively those business units need to be actively involved (in practice, there are different ways how organizations do this). The specialized scorecard software will provide their users with one or another way to do cascading.
What Experts Say
We have interviewed some practitioners of the strategy scorecards, and among other questions, we asked their opinion about automation tools. Here you have some quotes:
From the interview with James Creelman:
Start with office tools, etc. After a year or so, migrate to a scorecard automation tool. Automation enables a company to get the best out of the scorecard – progress tracking and reporting, best practice sharing, etc.
From the interview with Jeroen De Flander:
I would suggest you either choose a standard software solution and change your process or postpone automation until you are 100 percent happy with the underlying process.
From the interview with Juan Carlos Aranibar:
Excel is a good tool to initiate and prototype a Balanced Scorecard methodology. In the last versions are available complementary features to automatize information modelling, extraction and visualization. However, there is no way to manage strategic maps as native, and other tasks that deal with advanced dashboards.
In fact, Excel is not a tool to manage dashboarding capabilities in a sophisticated way. It is possible to draw a map linking bubbles or circles, but it is complex to make interaction with them because macros and other workarounds are needed, which means it is not an easy job to understand and maintain.
For this reason, a specialized software is a better option, especially when a performance culture is a paradigm that an organization is trying to adopt.
From the interview with Ignacio Castillo:
I must say with great pride that the only tool we work with is BSC Designer and we implement it with all our clients, and the version they prefer is in the Cloud.
From the interview with Dan Montgomery:
Good visualization is necessary to create a shared strategic perspective amongst your team…
You need a common database of valid information, with a customizable front end that makes it actually useful to an individual, and good presentation tools to support conversation and decision-making.
Spreadsheets, by design, don’t do a good job of this.
From the interview with Gavin Lawrie:
In our view, a well designed Balanced Scorecard comprises a selection of about 20 financial and non financial measures, reported quarterly. The idea that you might need specialist software to support this activity for a single Balanced Scorecard is laughable. Our view is that specialist software is not required (and is sometimes a distraction) for reporting a single Balanced Scorecard – the software is typically expensive compared to the alternatives (e.g. Excel) and usual not much more functional.
However if you have to report many Balanced Scorecards in a period (more than five is our current thinking), automated reporting solutions become more attractive. It really depends on your organisation though, and there are no reliable hard-fast rules you can follow. What is clear however, is that none of the (about 100) available software solutions will help you design a Balanced Scorecard – they are simply automata that make reporting a Balanced Scorecard design easier (regardless of what the vendor might say).
What Users Say
Some users of BSC Designer shared their experience related to moving from scorecards created in spreadsheet software to BSC Designer.
We find BSC Designer a very ergonomic and intuitive tool. It quickly adapts to your way to carry out the information analysis. It is simple, fast and effective. BSC Designer helps to avoid using and maintaining home-made Excel sheets and produces professional results. Read more…
We have a very good experience with BSC Designer, as this instrument can facilitate the implementation of the Balanced Scorecard in our unit. We have been trying to design a MS Excel spreadsheet but this approach proved to be more difficult than anticipated. BSC Designer, therefore, is very welcome attempt at an electronic version of the Balanced Scorecard. Read more…
I was searching for a tool, which would help me to build an overall index for Supply Chain department performance. BSC Designer seems to be the right tool – easy to use and also to share with others. So far, I was trying to prepare something similar in MS Excel, however it was too complicated to update with new data. I will see if your BSC Designer will satisfy all of my needs. Read more…
Jiri Kratochvil, Manager Supply Chain Projects, PMI, Czech Republic
How to Create Balanced Scorecard and KPIs in Excel
We get the same question almost every day:
“How can I build a Balanced Scorecard in MS Excel?”
We thought about creating a tutorial to explain everything you’d need to know: the basics of Excel, creating formulas, formatting cells… Then we realized, we’d need to create an hour-long video manual. We did it. And in addition, we decided on a simpler solution.
Below we share both:
- Video tutorials for spreadsheet software
- A simpler solution with BSC Designer automatic export
Video tutorials: Scorecard in Spreadsheet Software
Creating Spreadsheet Scorecard with BSC Designer
We’ll show you how to get a Balanced Scorecard set up in Excel in just two minutes—without all that effort!
Here’s what you need to do:
1. Get BSC Designer
Go to the Download section and download the free trial version of BSC Designer Pro. Install and run the software.
2. Create a KPI Scorecard
Use the “Add Indicator” button on the toolbar to create the basic structure of your scorecard, and then create the indicators which will monitor your business performance in each category.
- You can even create sub-categories, for a multi-level scorecard. With just a few clicks, you can create a complete KPI scorecard like this.
3. Export KPI scorecard to Excel
Open the “Reports” menu, and click on “Export to MS Excel.”
- BSC Designer asks if you’d like to create a performance-based report, or a progress-based report. For now, just choose the default option.
4. Your KPI scorecard is ready
Click OK, and you’re done! Your scorecard is exported into MS Excel.
Notice that this is not just a simple text export. On the contrary, these cells include all the formulas you need.
If you change the value in one cell, all the related cells will be updated automatically.
For instance, if I change my value for one group’s performance, you can see, my company’s total performance is updated accordingly. You can even change the relative weight of an indicator, to increase or decrease its role in your scorecard’s overall value.
Right here at the top, you’ll even see a summary of all of your top-level categories, your business’s performance in each one, and the total performance of your whole scorecard.
And how long did it take to set this up? Less than two minutes!
- Do you want to understand the formulas that were used? Then check out Scorecard and KPIs 101 article.
There is room for improvement
Using a Balanced Scorecard in Excel is handy, because most computers already have Excel or some other spreadsheet installed.
The problem is, scorecards in spreadsheets are hard to manage, hard to update, and hard to share.
- Imagine if you need to add a new indicator, or a new sub-indicator! You’d need to have advanced knowledge of MS Excel.
- And what if you need to share the values of some of your indicators with your colleagues? It’s possible, but it’s certainly not practical.
MS Excel isn’t Balanced Scorecard software; this is not what it was designed for.
Fortunately, there is an alternative that won’t cost you anything. Just try the freeware edition, BSC Designer Light. Its functionality is limited, but it will allow you to design, update, and share your Balanced Scorecard. It’s an easy way to get started using the Balanced Scorecard, and it’s a perfect solution for beginners and small companies.
For a more powerful solution, consider BSC Designer PRO.
- Track your business performance through time.
- Analyze the historical value of your indicators.
- Plan for the future.
- Specify baseline and target values, and measure your progress toward your goals.
- Customize the performance formulas for your Key Performance Indicators.
- Import and delegate indicators from one level of your organization to another, so your whole team can work together more effectively.
- You can even generate strategy maps, diagrams, and reports, so you can plan your business goals and share your progress with investors and other stakeholders.
So, should you build your scorecard in Excel, or use BSC Designer software?
Here’s our recommendation:
- Start with MS Excel, or with our freeware edition, BSC Designer Light.
- Get used to working with the Balanced Scorecard. See how it can help your company, and what automation tools you might need.
- Then, once you understand your needs, upgrade to BSC Designer Online.
In our experience, once people start using the Balanced Scorecard in Excel, they upgrade to our BSC Designer software in one to two months. So, we look forward to seeing you among our customers a month or two from now! If you need any help getting started, we’re ready to assist you.
Do you have any questions? Feel free to ask in the comments!
Spreadsheet software like MS Excel is a good choice for one-user business scorecards with few indicators. It helps to play with the data and sort processes out before starting to use specialized software. Maintaining and sharing large scale scorecard is time consuming with spreadsheet software.
Specialized scorecard tools like BSC Designer require additional investment in the form of the subscription costs. Such tools were designed with a certain workflow in mind, and will help to automate many routine tasks like entering data, building strategy maps, sharing scorecards, reporting, and cascading.
The good thing is that one can try most of the professional tools for free, play with real data, and if something doesn´t work well, export data back into Excel.