The classic cascade system is inappropriate
A properly designed Balanced Scorecard system enables a laser-like focus on the critical capabilities that must be developed and executed to deliver strategic outcomes.
Why do so many Balanced Scorecard Efforts fail? The classic cascade system is inappropriate
A properly designed Balanced Scorecard system enables a laser-like focus on the critical capabilities that must be developed and executed to deliver strategic outcomes. A critical few (certainly no more than 15) objectives should appear on the Strategy Map with, say, 25 KPIs on the scorecard. The initiatives are where execution takes place and again should be few in number.
Too often, I see maps and scorecards that are packed full of objectives, KPIs and initiatives that are designed to capture everything the organization does. Managers get upset if they cannot see “themselves” on the map and so it grows in size and complexity.
The problem, and one promoted by too many consultants, is that the Balanced Scorecard is positioned as an all-embracing performance management system: it is not, it is a strategy management system and there’s a big difference, especially around the objectives that appear on the map. Collective ownership rather than silo-based. As Drs. Kaplan and Norton said, “Managing strategy is not the same as managing operations.”
…the Balanced Scorecard is positioned as an all-embracing performance management system: it is not, it is a strategy management system and there’s a big difference
The dangers of hybrid scorecards
What we typically end up with is a hybrid strategy/operational/organizational design scorecard system that, to be frank, is essentially meaningless as managers try to figure what the hell this all means in driving step-change strategic performance improvement. The golden nuggets of knowledge get lost in the mass of inappropriate data.
The ridiculous classic cascade
If this is not bad enough, we then typically and quickly move on to ridiculous cascade systems. The theory being, take the corporate scorecard and devolve to each unit and department. Thus, fulfilling the dream of “making strategy everyone’s job.”
So what’s wrong with this? Plenty.
Firstly, when the high level map and scorecard is designed (properly) the senior team should spend at least a year working with it, testing it, and understanding how scorecards work and how to read them (not an easy task) before they even think about cascade. Once they get this, know what the scorecard will do for them and the organization and what are the critical few strategic objectives etc., then cascade becomes possible – if required, and it might not be.
senior team should spend at least a year working with it, testing it and understanding how scorecards work and how to read them (not an easy task) before they even think about cascade.
Secondly, cascades are time-consuming and performance enervating. Say you’re building scorecards for 28 departments, then a huge amount of time and energy is expended on their creation. Mostly, these include many objectives and KPIs that are forced onto the departments without their having any real idea of how this helps them do their job better – and they have no say on whether they need these. What we end up with is a labyrinth of scorecard systems that make little sense to anyone. Moreover, they can only reasonably be managed as a measurement and reporting tool (and a poor one at that) which is despised by people throughout the organization, who consider it a complete waste of their time – but hey, strategy is now everyone’s job, right?
As an anecdote, a senior scorecard associate of mine told me that he recently reviewed a cascade to about 20 departments that, for example, had a scorecard for a four-people legal team that had many objectives and KPIs. The point being exactly? – other than to provide revenues for the consultancy, of course.
Thirdly, and linked to point two, the classic cascade is a top-down command and control system. A system enforced from above – by those who know best. This is totally out-of-step with the more empowering team-based working we need in the digital era.
Finally, the cascade system is so big, with so many supposed connections upwards (although the understanding of cause and effect and how KPIs work is so poor that the connections are in the name of arrows only) that changing the system quickly becomes impossible. So, no agility and the scorecard becomes out-of-date very quickly. Again not sensible in the digital age. Too many Balanced Scorecards end up like budgeting systems on steroids.
Too many Balanced Scorecards end up like budgeting systems on steroids
But what to do?
Before cascading, I always ask senior management teams a series of questions. 1) Most importantly, what will a cascade help you achieve that cannot be done through just one corporate map and scorecard? 2) Given the speed of change in your organization how quickly could you revamp the cascade system if required? 3) Do you have the energy, discipline and capabilities to manage a suite of aligned scorecards? 4) Is an “enforced,” scorecard system in keeping with your values and culture?
When cascades work
This is not to say cascades should not happen or cannot work. Far from it. I much prefer the approach taking by companies such as the oil and gas giant Statoil that focus not on cascading, but on strategy translation. This means that lower level units, departments, etc., are free to build their own scorecards that are based on those above, but also capture their own local strategic requirements. Scorecards are not mandated so departments can use it or not. It’s all about buy-in and empowering teams. Statoil now has about 800 scorecards organization-wide because departmental managers and others see the value. They see how it can help them do their jobs better. Moreover, employees at all levels discuss, debate and agree on what it is they want to achieve, how they measure this and how they will deliver. A governance model is in place to ensure the whole organization is moving in the right direction, but interventions with lower level scorecards are rare.
If the scorecard system is fully “owned” at the level of implementation, then it has proven a very powerful framework for strategic performance improvement.
Another approach I like is taken by the US-based Insighformation and its approach to building community-based collaborative scorecards in a government or not-for-profit setting. In this approach, a high level map is created, but then network partners are free to identify how they best contribute to the high-level strategies while benefiting from the collective partnership. Again, devolved empowerment is critical to success. An excellent model for nonprofits.
All in all, the classic cascade is a symptom of a much broader issue with conventional Balanced Scorecard Systems. Cascades are largely Theory X leadership plays rather than Theory Y. Sadly this is often true of the whole approach to the scorecard – which I will discuss in my next post in the series.
- See also “Why so many Balanced Scorecard Efforts fail. Clue 1- It’s all about leading transformational change“.
As always feedback is welcomed.