Even the best business systems need to be revised and updated regularly. Use the checklist below to audit your Balanced/Strategy Scorecard project, find possible problems, and fix them during the early stages before they result in bigger issues. We wanted to create an educational tool for our clients, that’s why we divided possible situations into the green, yellow, and red zones so that you can quickly learn if your project is at risk and how to fix it.
Below you will find audit questions. If you just started with the Balanced Scorecard and many terms sound unfamiliar for you, then we do recommend to start with the questions and answers page and then return to the audit questions later. This checklist is also available in a form of an infographic.
Who designed the Balanced Scorecard for your organization?
Explanation: Your strategy is a unique piece of intellectually property that is tailor-made by the members of your team; external consultants can help with many organization and methodological issues, but make sure that the strategy remains your core competency. Involve your team in the early stages of strategy discussion, as this will help to solve many motivational problems in future. Here is our implementation guide that explains the details.
What components of the Balanced Scorecard do you have?
Explanation: Forget about KPIs, they are not the most important part of the Balanced Scorecard. Focus on your strategy first. What hypothesis do you have in mind? How does it decompile into business goals? What is your action plan? How can you track the execution?
How does your strategy map look like?
Explanation: Strategy map is one of the most important tools to achieve crystal-clear understanding about how your organization creates a customer value; Balanced Scorecard suggests a disciplined way to describe the strategy.
Do you use strategic themes?
Explanation: Strategic themes give a professional touch to the strategy map, so that it becomes more readable and easier to explain. Make sure when crafting your strategy that you take into account generic strategies and respective strategic themes.
What measures do you have?
Explanation: Many organizations tend to focus too much on the financial indicators, in their nature most financial indicators are lagging ones, e.g. they will tell you the score of the game, but won’t tell you how to win. Make sure you invest enough time in finding good leading indicators.
How many measures do you have?
Explanation: As it was said before, the Balanced Scorecard is not about KPIs, it is about business strategy and business goals. This implies that first you need to understand your business context and only then should you find appropriate performance metrics, so taking indicators from some online list is not the option. Your ultimate goal is to execute your strategy, not to do another measurement exercise, so try focusing on the most important indicators (we have talked before about key-stone indicators) only.
Is your scorecard cascaded?
Explanation: Don’t promote silo thinking in your company, otherwise your strategy execution efforts will be very limited by the classical command-control hierarchy. Instead, during the early stages try to involve your team in strategy discussion on all levels of your organization. When you need to explain your strategy to the lower levels, do this using business goals, not KPIs.
When was the last time your Balanced Scorecard was updated?
Explanation: On the one hand your major strategy might be the same for several decades, on the other hand the way the strategy is interpreted by business units will certainly change. It’s hard to give a general estimation about how often you need to revise your strategy scorecard, but if you found out that you have missed some new market opportunities, then you did it too late. Be more proactive with your strategy and do more controlled experiments.
Do you use automation software?
Explanation: One might survive with pen and paper format, but in this case problems with buy-in and motivation to use the Balanced Scorecard cannot be avoided. It is needless to say that your time is valuable, so make sure you spend it on solving intellectual challenges, and not on drawing objects in presentation software. Give BSC Designer a try, it is recognized by many professionals that it is an excellent tool.
How does your company use the Balanced Scorecard?
Explanation: Make sure that the Balanced Scorecard is actually a strategy execution framework, not just a simple reward calculation scorecard. And by the way, in the most cases linking rewards to the indicators doesn’t work.
How do you treat a “KPI in the red zone” situation?
Explanation: Balanced Scorecard is more of a cultural shift than some advanced process or technology. You are looking for ways to engage employees, and explain how they contribute to the strategy execution, rather than for a way to control them directly. A KPI in a red zone doesn’t mean just problem, first of all it is an opportunity.
Are there some other audit questions that you think we should add? Please share your thoughts in the comments.