Balanced Scorecard is not Strategy

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Harvard Business Publishing is again pushing its balanced scorecard stuff, but under the misleading strap-line Strategy has never been more important. Don’t get me wrong – BSC is a much better tool for on-going performance management or for strategic initiatives than the crude finance-only metrics that too often dominate, but it’s a very long way short of being a strategic management. A few shortcomings:

  • Whilst the causal logic behind the 4 dimensions of a BSC or strategy map are plausible enough, there’s no mechanism to ensure that they are valid or that the chosen items and mechanisms are indeed the most important. So – like many other issues – what gets on the page relies too much on judgement. 
  • Given this lack of rigour, the metrics chosen to track performance can also be ill-chosen.
  • There is no recognition of internal conflicts between different functions – it’s easy for the sales function to hit Green on its aims, whilst actually causing Red in service or profitability.
  • There is no protection against setting up objectives with unintended consequences or boom-and-bust outcomes … pushing up growth in revenues and profits, for example, whilst creating problems that make it impossible to continue doing so in the longer term.
  • There is nothing in the typical BSC about competitors, market conditions or other critical external factors.

Though BSCs may, with suitable care, be OK in their place – strategic management isn’t that place.

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Comments

  1. James Dunning  November 20, 2009

    At a practical level, my experience is that BSC has also proven difficult to implement “on the ground” in terms of employees at every level understanding its application on an on-going basis. That may well be a consequence of poor implementation/ownership within the organisation, but that was nonetheless the outcome.

    James

    reply

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