Developing a taxonomy for Balanced Scorecards

What exactly is a Balanced Scorecard? There are many different designs around, and they are used in all sorts of ways. Do all Balanced Scorecard designs offer the same utility? How can you tell one from another? An early 2GC research paper highlighted the need for different design methods to accommodate the differences between strategic and operational performance management. Our current research in this area is looking to extend the scope of this early work to cover a broader range of Balanced Scorecard applications.

How is it going?

We have identified a model that appears to effectively characterise the design and use variations typical of common Balanced Scorecard applications; it also appears to be useful as a diagnostic tool. The model is derived from a practical mechanism that been in use within 2GC projects since 2007 years, and appears robust and stable - in that as it explains what we observe, and helps us choose appropriate design methods to use in our projects. We are currently focused on understanding other critical work on taxonomies, and comparing our model with this literature, while continuing to collect empirical observations from our client work. Greater understanding of this issue will help to refine the Balanced Scorecard design methods used by 2GC.

Understanding the boundaries of existing Balanced Scorecard design methods

A number of ‘reference’ Balanced Scorecard design processes are described in the literature, but it is clear that all are normally changed either before or during use to suit the specific circumstances found in a client organisations. If the reference process calls for five workshop sessions, what happens if the client can only schedule (or afford) three? How far can a recommended or “vanilla” process flex to suit conditions before it stops working reliably? Are there limits beyond which customisation causes failure of the design process, or of the Balanced Scorecard that was designed? We hope that insights arising from this work will improve organisations’ ability understand the limits of applicability of the various Balanced Scorecard design processes, and so lead to better specification and management of these processes.

How is it going?

We are currently working on integrating specific case experiences gained during 2009 and 2010 involving Balanced Scorecard design projects which did not conform to best-practice. This work is leading to several key insights into how design processes can be modified to accommodate design process exceptions (planned or unplanned), and qualifying out the implications of these variations on design quality. We hope to publishe a working paper on this work later in 2011.

Organisational Theories of control as explanatory factors for Balanced Scorecard

The 3rd Generation Balanced Scorecard design method is highly effective as a framework for driving strategic alignment within organisations - even though the method was originally was focused on the design of individual Balanced Scorecards. This work is focused on understanding more clearly why this is so. One important contributing factor appears to be the resonance between 3rd generation Balanced Scorecard methods and theories of organisational design / organisational behaviour. We have identified strong similarities between 3rd Generation Balanced Scorecard design methods and relatively early writings on the need for autonomy within an organisational control system. There are also links to literature on strategic control and as a organisational internal communication and contracting that also inform this discussion.

Balanced Scorecard design is about more than just process. Critical are issues such as facilitation, and the contribution of the leadership team who participate in the design process: 3rd Generation methods appear to work well because they align well with the needs of these additional elements. We hope that by understanding how and why this is more clearly, we can further improve the quality and effectiveness of the 3rd Generation design methods.

How is it going?

We are working on a literature review for this topic, and also tagging our ongoing client case-load to ensure that experiences gained with organisations is made available to a subsequent working paper, planned for publication in 2012.