Key stages of BSC implementation: mistakes and suggestions

We have already talked about major reasons why balanced scorecard system may fail. And it is generally agreed that most mistakes come from people and their attitude towards balanced scorecard. Well repeat once again that balanced scorecard is not a magic tool that turns a mediocre company into an international corporation. Implementing and maintaining of balanced scorecard is a complex process. Mistakes made at any stage of this process will have serious consequences for the company and its ultimate goals gaining competitive advantage, increasing market share, optimize and company work and increasing profits (most common business goals). This article reviews stages of implementing and maintaining of balanced scorecard, as well as major mistakes and consequences of such mistakes.

Implementation of BSC system is a complex process Stage 1. Choosing performance measures and KPIs It is difficult to say whether or not this stage is the most important. However, wrong selection of KPIs will result in taking wrong actions and making wrong conclusions. Choice of inappropriate KPIs will make balanced scorecard just a pile of data sheets, graphs and figures. It needs mentioning that in order to select the right KPIs one should use a creative approach. Albert Einstein used to say: We cant solve problems by using the same kind of thinking we used when we created them. If we apply this statement to balanced scorecard and selection of KPIs it is possible to say that if existing measures do not work, then a new set of KPIs must be different. Look at your company with the eyes of your competitors. Have a detached view on your company. Often, choice of the wrong KPIs is a direct result of setting incomprehensible and vague strategic goals. This is to say that in order to reach the wrong goals you need the wrong measures.

Sometimes employees and top management use traditional methods like brainstorming which is however not the right way to choose relevant KPIs for business evaluation performance with balanced scorecard. Stage 2. Getting relevant data for measures and KPIs. There are several problems associated with this stage. Data may be untimely obtained or distorted when transferred from the lowest level to the top one. It is possible that employees use the wrong information, or the information is incomplete. Any minor mistake may cause distortion of figures. One of the most common reasons of hunger for information or data misuse is lack of time and qualified personnel to extract the information from data systems and analyze approach will not work here. The key points go as follows:

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data collection must be automated there should be qualified personnel to extract and analyze data every employee should understand his responsibility and contribution in data collection process cheating in collecting data will distort KPI values

Stage 3. Reporting and analysis Those who possess information possess the world. This is what the old saying says. However, the information alone does not mean anything unless you know how to use and analyze it. Balanced scorecard will be helpless if information is not transferred throughout different levels of the company. So, there should be at reliable and effective reporting procedure. It is imperative to set certain standards for reports . Employees and managers need to understand what these reports should contain and how they should be submitted. Keep in mind that untimely submission of reports will make it impossible to react on changes in the company environment or market conjuncture. Wrong information in the report will provoke wrong response actions. It is very easy to foresee consequences of using distorted information or failure to use the right information on time. There also must be a clear structure and understanding which reports go to which managerial levels. As to the analysis, the company management first needs to decide which tools are to be used and who will be responsible for processing of information. Use of automated analytical tools is highly recommended. Without proper analytical tools one can make the wrong conclusions even having the right information. This will result in failure to reach companys strategic goals. Stage 4. Response actions and countermeasures

OK, you have chosen the right KPIs, installed database systems and data extraction tools, tuned up relations and feedback between different company levels (operational-managerial), appointed personnel to be in charge for analysis of informationwhats next? You have received the first figures on KPIs and you need to take action otherwise balanced scorecard will remain just a theoretical tool. Which signals are dangerous and which represent positive trends? Is it wise to make conclusions and take countermeasures based on short time trends? What if the company is operating in the changeable market? Which KPI changes are especially important for your company? There are so many questions to be answered and one should be ready to do that. You need to know answers before you implement balanced scorecard otherwise the strategy will lack coherence and consistence. It is advisable to invest in company management and HRM so that your personnel will be ready to react and take response measures. A comprehensive set of rules and norms to analyze evaluation results needs to be worked out. ***** It is difficult to mark any stage as the most important. Failure at one stage will mean failure of the entire evaluation and decision-making process. Balanced scorecard requires sufficient investments, so it might be very expensive to misuse this system. Of course, balanced scorecard can be adapted to market conditions and company strategic goals, which although can slightly change over time. At the same time total readiness of all company employees to implement and maintain balanced scorecard is an absolute MUST. Dont forget that balanced scorecard is just software which is operated by people. BSC system will not make decisions instead of you, but rather help you pay attention to the most important issues, processes and problems in the company. Try to keep your goals and ambitions realistic, as unrealistic goals will require unrealistic response actions. Make sure your personnel is ready to use the system and every employee clearly understands company goals and his contribution in reaching these goals.

What makes an effective work of Balanced Scorecard?

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