Balanced Scorecard Pitfalls

Balanced Scorecard is a strategic performance management tool that has enormous potential when applied properly, but to achieve its success is not without challenge. A whole sector of Bogsnes’s book “Implementing Beyond Budgeting” is dedicated to expounding how to apply Balanced Scorecard combining Beyond Budgeting philosophy by addressing the following seven pitfalls in the process:

1. A new box on top of old boxes: Simply adding the scorecards on top of existing management processes such as budgeting is an egregious mistake (which is, sadly, a mistake that a great many companies are making). Scorecards are strategic and long-term focused, while budgets are barely linked to strategy and short-term oriented. A well designed scorecard system needs to quickly pick up the signs of changes in the business environment and react by revising tactics to adjust course and adapt to the new situations. This will be impeded by fixed budget numbers that represent the financial targets in the scorecards. Solution? Drop the budget!
2. It is all about KPIs: KPIs are not the problem; the problem is that KPIs alone cannot do the job! Maybe they work well in the financial perspective of the scorecards, where the link between strategic objectives and KPIs is usually quite obvious. But in non-financial areas, KPIs can at most offer a vague indication as to whether the business is going in the…