When a company wants to build and automate a business scorecard, it decides between good old Excel and specialized software. Spreadsheets (like MS Excel) 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.
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.
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.
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
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.
I invite readers to share their stories about using scorecards in Excel, migrating from Excel to the specialized software or backward, or from the professional tools to the spreadsheet in the comments.