The balanced scorecard

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A large Management Development community I track has been discussing how we could have prepared people better for the current troubles, and some have advocated the Balanced Scorecard [BSC]. I have used BSC in strategy teaching for some years, and come across BSCs in many companies. My impression is that, whilst it is a valuable extension to standard financial reporting systems, it has some limitations as a tool for managing strategy – limitations that the down-turn has exposed quite sharply.

As usually implemented  …
– there is no coverage of competitive conditions or competitor behaviour – nor can I find any suggestion in the BSC or Strategy Maps books that they should do so.
– there is no coverage of overall supply/demand conditions – and again, no suggestion they should do so.
– there is no attention to prospective performance – i.e. how we are likely to perform on key indicators in coming periods [as distinct from our performance targets].
More seriously, although the causal logic generally seems to make sense to executives [Learning/Growth >> Internal Processes >> Customer Consequences >> Financial Outcomes] there is no rigorous, formal, verifiable structure to that logic – i.e. no solid ‘theory’ – that might ensure the strategy map is robust. Consequently, BSCs seem to reflect what teams think, or would like, some of the causal relationships to be – which may be entirely different from what another team might come up with. [I address this issue and suggest the basics of a more rigorous approach in chapter 4 of my book .. see ]
As a result, I can’t as yet see how a company’s BSC could have led them to anticipate the current crisis, to plan for it, or to work out what to do to survive and escape from it. It would be extremely valuable for many of us to hear of cases where BSC has been helpful in coping with current difficulties, and how that has happened.

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  1.  April 19, 2009