As a strategy and performance management framework, the Balanced Scorecard (BSC) can help any organization—be it government, nonprofit, or for profit—manage its execution of strategy better.
Implementing the BSC isn’t just about determining your strategic objectives, figuring out what measures you are going to use to track your progress, and the implementing the initiatives aligned to those objectives.
It is about implementing the theory of your organization—the hypothesis implied by the investments you make to create or improve desired capabilities so that you can deliver results to your clients or customers. Along the way, you have to continually tweak the theory, making course corrections as you move forward based on what you have learned and what you believe will occur.
The Strategic Theory of Your Firm
That’s why the Balanced Scorecard is a great tool that enables any organization to follow what Todd Zenger advanced in his article, “What Is the Theory of Your Firm?” in the June 2013 issue of Harvard Business Review: “Theories define expectations about causal relationships. They enable counterfactual reasoning: If my theory accurately describes my world, then when I choose this, the following will occur. They are dynamic and can be updated on the basis of contract evidence or feedback.”
Three significant ways in which the BSC can help you better manage your organization’s strategy are:
- Enabling data-based decision making
- Setting and enforcing accountability
- Structuring regular strategic discussions
The Balanced Scorecard enables data-based decision making because it requires that each of your organization’s strategic objectives be tracked by at least one strategic measure–an indicator or regularly collected piece of data that can tell you whether you are making progress toward achieving that objective. Once you establish that measure, when you regularly collect and review the data, you can tell whether you are achieving the objective you set out for your organization.
Accountability for Implementing Your Strategy
While plenty of organizations say they talk about strategy regularly—and I don’t doubt that they do—one problem they often encounter is accountability. They talk about strategy and decides to take particular actions, but no one ever follows through because no one individual is ever really held accountable for those actions.
With the BSC, an individual is accountable for every objective on your strategy. Therefore, a decision made during discussion of any particular objective is, by default, assigned to that objective owner unless stated otherwise.
A Structure for Discussing Your Strategy
Finally, the BSC provides your organization with a structure for discussing your strategy. This is one of the most underrated benefits of the framework. Organizations often struggle with how they should talk about strategy.
The Balanced Scorecard provides organizations with a simple, coherent, and comprehensive structure for their strategic discussions. Simply discuss one strategic objective at a time and the measures and initiatives that are aligned to it.
Need an order or priority to organize the discussion? Start either at the top or bottom of your strategy map or red objectives first, then yellow, and then green. You can even experiment and see what works best for your organization. There is no right or wrong way to do it.