Purpose of the scorecard
â€¢ The overall purpose of the scorecard is to create balance in the management of the company, acknowledging the areas that create performance (leading indicators) and the outcomes (lagging indicators) which are primarily financial. The metrics within the scorecard are purposefully chosen to be those which are most actionable as they monitor overall progress toward the long-term direction. We have refined the measures based on their usefulness over the past several years in the ongoing management of the organization.
Number of measures
â€¢ It is considered best practice to manage the size of the scorecard, in order to avoid analysis paralysis. Too many measures confuses the organization by making it unclear what the most critical outcomes are.
Maintaining good measures to provide trending context
â€¢ Year-over-year trending is useful to the extent that the measures maintain their validity and create actionable data. This gives a good sense of overall progress especially when connected with multi-year targets that are tied to a strategy. Some organizations fall into the trap of connecting the scorecard to the project level of the strategic framework or frequently repopulating the scorecard to match the initiatives, which results in a much more operational set of measures, less actionable information and less of a sense of overall progress. Measures have to be connected with a specific level of the strategic hierarchy. The higher we can push that connection, the more useful and less tactical the organization will tend to be.
What is being measured?
â€¢ Corporate initiatives are both shorter-term and hierarchically lower in the strategic framework than the scorecard is. The initiatives are used to align the organization to the strategy, the measures allow us to monitor overall progression. So the initiatives are the projects we use to align the organization, but the scorecard measures are purposefully connected with the long-term direction. For this reason, we donâ€™t look to create a 1-to-1 relationship between initiatives and measures. Cumulatively, the initiatives work together to create overall outcomes as reflected by the group of measures.
2 challenges in scorecard management
â€¢ The scorecard becomes the central conversation point for overall corporate performance, but there are two balance points that have to be considered as ongoing management continues:
o 1) Allowing the measures to be connected to anything below the long-term strategic objectives of the organization creates a more tactically focused scorecard which changes the conversation and focus at both the board and executive levels.
o 2) Using the scorecard to only prove past performance. We are beginning to leverage the scorecard to provide better analysis to the factors supporting and resisting our ability to be successful with future strategies, and managing the tendency (older management style) of using them purely to justify or prove the quality of past behavior. This is a more strategy focused approach. The scorecard does have a role in performance assessment, but newer schools of thought around business performance management is suggesting that organizations move beyond using it just for that one purpose. It changes the focus within the organization.
Complete Corporate Framework
â€¢ Vision, Values (Strategic framework)
â€¢ Long-term Direction (Strategy)
â€¢ Balanced Scorecard (Measurement of progression toward long-term direction)
â€¢ Corporate Initiatives (Corporate wide alignment)
â€¢ Core Strategies (Tactics)