Why So Many Struggle with the Balanced Scorecard

By William “Wes” Waldo

The balanced scorecard is a terrific tool in translating strategy into action. It goes beyond financials to include other metrics—customer-facing, employee-facing and process-oriented. Unfortunately, as is the case with many things, companies often pick and choose only the parts they want to use. In this case, organizations can become intoxicated by the metrics. But developing metrics with no plan to make them actionable is like gathering all the supplies you need to take a trip, except for the most important thing—a compass. That’s why we use the balanced scorecard in combination with Hoshin Planning to truly drive alignment.

Balanced Scorecard: Rooted in Science

The developers of the balanced scorecard were driven by science. They recognized the relationship between metrics and would often test those relationships mathematically. They understood that the metrics in a top-level balanced scorecard were not actionable—they were merely indicators of effectiveness—and that to deliver results, the balanced scorecard must be driven beyond the corporate offices, down past a business unit, to the level of people who actually do things on a day-to-day business. Without those added steps, any expectation that the balanced scorecard will drive meaningful changes in performance is a fallacy.

Hoshin Planning: The Compass

The Japanese hoshin kanri translates to “shining metal pointing direction,” or, as we like to think of it, a compass. When we’re trying to get from Point A (our metrics) to Point B (our results), we can seldom do that in a straight line. And if we don’t periodically stop and check our compass heading, we are bond to get lost. In using Hoshin Planning to drive balanced scorecard metrics down through the organization, we’re continually checking our heading and how we’re going to get to where we want to be.

If we don’t periodically stop and check our compass heading, we are bond to get lost.

Hoshin Planning gets everyone in the organization involved. While senior management comes up with the three to five hoshins, or breakthrough objectives, they don’t just stop there and drive those down to the organization. Instead, they socialize those ideas with mid-level managers and incorporate their ideas. Then those mid-level managers are more involved and will talk to their teams. It’s like a game of catch, by the end of which, you have a plan that everyone’s involved with. This back-and-forth process is appropriately called “catchball,” and it’s a key element of Hoshin Planning. Learn more about catchball and the seven-step Hoshin Planning process.

Once you get more people involved and treat strategic planning as a continuous cycle, rather than something you do only yearly, you’ll find that in December, you already have your objectives for the next year. Plus, you’ll have a method for making those metrics in the balanced scorecard part of everyone’s daily work.

William “Wes” Waldo is COO and President, Americas at the Lean Methods Group. He has over 20 years of quality, operations management and performance excellence experience, including many years as a Lean Master consultant, Lean product manager and practice leader for the Lean Methods Group’s manufacturing team.