Identifying And

Overcoming Challenges
In Implementing A
Balanced Scorecard
BALANCED
SCORECARD
MANAGEMENT
C-BSC

Framework
v 1.0 2020
Prioritizing is a short-term exercise and, if everything
goes according to the (agreed) plan, you are on the
right track. But if things were that simple, I would not
spend my time writing this paper and you wouldn’t be
reading it. Right?

After leading dozens of performance projects, I came

to believe it’s highly improbable for any manager to
come up with a plan for a totally out of hand future,
so one has to very much luck out to hit the planned,
original targets.

The Balanced Scorecard is one of the best

management reporting frameworks available out
there. I’ve worked with many clients to integrate the
BSC; I know it like the back of my hand. Still, I’m
guessing that you’re not in just for a portfolio or a
simple description of what a scorecard is (and how to
use it). You can get this kind of info after 3 seconds of
googling.

And now the boring, but necessary introduction:

Bringing up history might not seem the immediate ‘go-to’ choice but, pedigree
matters – so, let me tell you that not only do we have a history full of examples
where innovation was the tool required to get over a difficult time, but we’re now
living these times again. Companies performance culture has gone awry. We’re now,
more than ever, in a real need for innovation. Traditional approaches need to be
re-designed so they may fit the new operating conditions. Strategic thinking is of
utmost importance, to say the least, if you want to capitalize on current and
upcoming market opportunities. I’m talking here about risk management, cost
savings, efficient HR and a functional innovation policy.
 Let’s jump to the
really interesting stuff

You know that currently, whenever you

want to measure a company’s
performance, you have to appeal to two
standard starting points, namely: the
financial & internal systems. The first
one directs your focus to the cash-flow
and profitability areas and the second
one on properly moving the whole wheel
so that the first goal be achieved.

Traditionally, the Balanced Scorecard is a

concept which allows you to adapt your
actions in relation to the business
strategy. In 1992, Kaplan and Norton
introduced the idea of combining the
financial and non-financial performance
measures into scorecards targeting
wider audiences for the first time. Four
years later, they piled on their initial
theory and added to it the four strategic
management processes required in BSC
implementation. The news now was the
causal relationship of the BSC
dimensions. This new perspective has
been, once again refreshed, after 5 years
with the introduction of the strategy
maps and the inherent measures for
each of the four BSC perspectives.
The companies whose performance is measured through objective
non-financial indicators have been proved to reach better performance
and shift their focus more on product quality.

Unfortunately, the path is not as smooth as it may seem. Everyone who

has a history in implementing a BSC system can vouch for the troubles.
One of the most common is the price a company will pay to implement it
and I’m referring to the financial costs and implementation difficulties.
The BSC system is not a preformatted one; it cannot be taken ‘as is’,
implemented and - from that point on - money will flow. If you’ve heard
this, you can add it to your repertoire of jokes. The reason we aren’t
talking about a universal success formula is that every business is unique;
they have a specific audience, therefore they need a customized approach
when implementing a BSC system.

To avoid headaches, consider using a specialized consulting company and

getting your people trained within this field. And if this were the only
issue, then everyone would be instantly happy. But no, you have to
develop a strategic approach that will allow everyone to understand the
company’s objectives and the available routes to get to them. When these
steps have been identified and dealt with, next you need to focus on
information dissemination. Don’t treat it lightly, this may be the most
difficult step within the process, and it requires special attention. As you
know people have different levels of understanding, everyone’s brain is
following predefined, particular routes when deciphering information. On
top of this, not everyone is specialized in financials, production,
management and so on. This lack of common background between
managers can make the entire process of choosing the right approach, and
the correct dissemination method, quite difficult.

Additionally, the four perspectives can be calibrated in accordance to

company needs and industry peculiarities. Therefore, in most cases, it
pays to consider (ideally, before starting the entire process) adapting the
entire BSC concept to your requirements.
Key drivers in
BSC implementation
I have previously mentioned that dissemination is a key traction element
in the implementation of a BSC system. Everyone is on high horses in
relation to innovation, but what they overlook is the fact that people are
naturally resistant to change.

Therefore, when trying to substantially change a business management

systems you need to take ‘diffusion’ into account. A pro-innovation
attitude takes root only when everyone involved in a company’s evolution
acknowledges that the initiative will greatly benefit the organization.
However, there are times when the proposed initiatives are not seen with
the same eyes by everyone and they consequently get rejected.

Among the external factors that affect our decisions, 4 major classes have
been identified. (a) efficient choice, (b) forced selection, (c) fads and (d)
fashions.
The first one states that a company should appeal to it whenever the
organization needs to achieve the main short to middle term
objective, under restrictive conditions. The second one implies
changes brought under the pressure of an important governmental
organization – an example we will detail in one of the case studies
we’ll be presenting. The remaining ones assume that, sometimes, a
company is undergoing change in an attempt to imitate stronger
competitors or successful companies.

Implementing a BSC system and the later process of

institutionalizing it in a given company are always influenced, every
time, by at least one of them, if not a collection from the above
factors. To highlight how these aspects influence how we experience
a BSC application, we’ll go through 2 different case studies that will
hopefully improve our understanding in how to best approach such
an endeavor.

38%
As it results from their research in the year
2017, the Balanced Scorecard methodology
is applied by approximately 38% of the
addressed companies in the world.

44%
Presents in their research from 2018 that
the Balanced Scorecard is used in more than
44% of medium and large enterprises.

Another research study specialized in the use of the Balanced Scorecard was carried out in
2018.

It was aimed at the factors that hinder the use of the mentioned concept in addition to the
use of the BSC. It identifies financial resources and a lack of qualified labor force as the
main factors.
Samples of BSC evolution
and changes within
different organizations
– 2 case studies
1. Balanced scorecard adaptation
within a governmental institution.

Strategic planning framework and

Balanced Scorecard adoption

Due to privacy policies, I’m not going to

use the company’s real name - I’ll simply
name it A. So, company A developed a
detailed plan which covers the
strategic, business and operational
planning. A’s business plan is cascaded
to the group, division, branch and
network levels even up to the final
stage, the individual level, with
individual performance contracts. For
each of these performance levels
there’s link to a set of strategic
directions and financial bonuses to
strengthen everyone’s involvement.

The company decided to use the BSC

as the main tool to track and improve
performance & corporate
responsibility. This stage was
completed with the selection of several
sets of KPIs, consequent incentives and
a mix of performance drivers. All of
these have been done with a second
goal in mind: developing a functional
BSC model.
Design changes to the original Balanced Scorecard Framework

A few years later the company reviewed their achievements to make

sure they are on the right track and that the BSC system has been
integrated throughout all company layers. As a result of this audit, during
the following year, the company adjusted their BSC system.

One of the findings that lead to a new adjustment was that their
strategic goals were not clearly linked to business objectives. Therefore,
they had reached the point where they saw the necessity of drawing up
a Strategy Map. Once the strategic map was sketched, company A found
it difficult to explain the new design against the traditional perspectives
of the BSC.

To overcome this gap, company A introduced an additional element:

newly developed “operational BSC’s” in an attempt to get a general
picture of specific business line performance. This approach was
focused only on operational aspects of the business capabilities:
workflows, building, etc. and was used to compare the planned vs real
performance.

In the final stage, A company refined its BSC system and developed 2
approaches with different goals: one for stakeholders and the second
one for employees and infrastructure. Both systems were focusing on
different aspects of the company’s activity and goals.

Several years later, after the Balanced Scorecard had been implemented,
the employees recognized the value of the effort by stating that the final
version of the system is in line with both practice and theory. They also
appreciated the incredible results continuous improvement generated.
The system has been tested and constantly adjusted to find the form
that best suited their needs.
Case study 2
Our second example, Company B, operates as a conglomerate of
companies with a significant annual revenue. In the past years they
found themselves in a pretty good financial position due to their
previous economic results and market situation, and as a result, the
company grew substantially through hiring a significant number of
professionals on all levels.

This growth proved problematic to their standard way of operating

the business and they started to analyze different systems to
implement to try to streamline their operations and provide the ability
to better manage their personnel. The analysis, led by their strategic
council, ultimately recommended implementing a BSC system to help
them reach their goals.

In terms of implementation, they focused on trying to adopt a

prototypical BSC: combining financial and non-financial measures;
structured into four perspectives: Financial, Customer, Internal
Processes, Learning and Growth; and based on cause and effect
relationships while trying to focus on communication and strategy
implementation.

Being a family business, their starting operational traits were very

much characteristic of such an organization: top-heavy, no clear
described strategy, ad-hoc decision making and a focus on personal
relationships. Nonetheless, they tried to undergo the traditional
implementation journey, with a starting focus on strategy
development, organizational restructuring, process mapping and
identification all the way to integrating the newly developed approach
in existing management systems.
A key issue for the company was that
they underpinned the newly designed
system on an existing software tool
meant to help monitor key operational
indicators, designed to track
day-to-day aspects of the business. As
such, the resulting stakeholder focus
was mainly on management
operational routine.

The end result mimicked a standard

BSC system but was, in fact, less of a
strategy monitoring system and more
of a set of metrics meant to analyze
operational performance.

Nevertheless, the implementation of

the new BSC system brought the
company, beside an improved motion
through most levels, better planning,
control, and monitoring capabilities of
their activities.
Challenges and Conclusions

Noticing the struggles faced in the 1st case study, we see

that implementing a BSC can be a long and sometimes
arduous process that requires constant adjustment and
tinkering. However, the journey provides benefits by
itself and by taking the time to ensure that the BSC is
customized to our organizational needs it facilitates the
creation of not just a strategy execution system, but of a
holistic framework that will facilitate the healthy and
long-term success of the company.

As shown in the 2nd case study, even when a BSC system ultimately fails to achieve
its end goal of providing a clear strategy execution and monitoring framework, it can
still benefit organization through facilitating the development of a strategic plan,
maturing and mapping organizational processes and shifting organizational culture
from ad-hoc decision making to a more data-driven approach.

Additionally, when there is no common approach and lots of stakeholders try to

satisfy their own objectives, the strategic plan is not meeting its purpose.
Sometimes it happens that different, conflicting strategic objectives are placed on
the same ground. In this situation it is crucial that we take a step back and ensure
that we perform a comprehensive stakeholder analysis to try to identify all
expectations. Once all requirements are clarified, ideally, we would proceed with
agreeing with all of our stakeholders which needs will be prioritized and why, trying
to ensure that everyone is on board and all are pushing in the same direction.
Another challenge that companies face in
the implementation is setting too many KPIs
within the BSC system, which can affect
efficiency and cause us to lose focus. Most
of the times this happens when companies
are rushing into the measurement step and
make it extremely complicated. By doing all
this at once, with a bucketload of
simultaneous measures, you’re most
certainly doomed to fail.

The process of implementing and using a

BSC is, as we’ve seen in this paper, distinct
to each organization with its own
peculiarities which impact the end result
differently. But that’s exactly why we need
to be aware the possible pitfalls, so we know
how to best adjust regardless of the
circumstances that we find ourselves in.
There are of course other challenges and
difficulties related to using a BSC in
organizations, together with further
recommendations that we can take into
account as we’re embarking on a journey
either to adopt this approach or to refine it in
our companies.

This is how I’d like to continue our

discussion, with picking up the conversation
in our upcoming newsletters in which we will
try to pursue the matter further and try to
bring everyone along our journey towards a
better understanding of how to work with a
Balanced Scorecard.