So, what’s the diagnosis? In two words: Broken Linkages.
While there are multiple approaches to developing a balanced scorecard, most balanced scorecard practitioners will agree that balanced scorecards connect strategic planning with strategy execution.
But too often, the critical linkages between strategy and execution are broken.
Why? A primary cause for broken linkages is when one team creates the organization’s strategic plan (a Board or an executive team) and then a different team (a management team or task force) is expected to “convert” the strategic plan to a balanced scorecard. This piecemeal, “throw it over the fence,” approach to scorecard-building has three fatal flaws.
The strategy itself is usually incompatible for use with a balanced scorecard. Typical strategic planning frameworks rarely contain clear and purposeful linkages all the way from high level vision, mission, and competitive positioning down through focus areas (strategic themes) and strategic objectives (which are the critical linkages used by balanced scorecard to connect strategy with execution).
The strategy is usually incomplete. More likely than not, there was no consideration during strategy formulation of the four interdependent dimensions of strategic drivers and results (e.g. balanced scorecard perspectives) which usually results in a focus on results with no consideration of key drivers. Key drivers are critical strategic choices and the crux of ensuring an executable strategy.
The strategy gets lost in translation. The balanced scorecard team and/or their consultant find themselves sifting through a strategy document to try and extrapolate what the driver and result objectives should be, what perspectives they belong in, and if/how the objectives are interrelated. These are the basic building blocks for a balanced scorecard. This approach can lead to erroneous assumptions about strategy, or even worse, the team may just abandon the effort to interpret the strategy and, instead, fall back on obvious operational objectives needed to ensure that the organization functions exactly as it always has. The resultant operational objectives may or may not be aligned with the organization’s desired FUTURE – its desired strategic direction or its shift in competitive positioning.
In other words, they end up with a scorecard similar to the one the board member was complaining about…one that simply measures normal operational execution and has no connection to strategy.
We’ve created a short webinar to illustrate how the linkages should work, from high level strategy through the elements of a balanced scorecard, linking strategy to execution.
If your linkages are broken, contact us about a strategic health assessment. Your current strategic planning & management materials and process will be assessed and compared to best practice and a gap assessment will be delivered to show you where the linkages are broken and what needs to be done to repair them.