Failing grade on balanced scorecards

Less than 20 percent of all typical companies have mature balanced scorecard implementations in place that are generating business value, according to research from The Hackett Group.

Balanced scorecards can be powerful tools providing concise, predictive, and actionable information about how a company is performing and may perform in the future. The Hackett Group found that world-class companies are 159 percent more likely than typical companies to have mature balanced scorecards in place; and the full benefits of effective balanced scorecards are not being realized for more than 80 percent of typical companies examined by the firm. Primary reasons include too many metrics and overweighting the scorecards with historical financial information.

According to Hackett, companies report an average of 132 measures to senior management each month – nearly nine times the number of measures in most effective balanced scorecards. In addition, half the metrics companies rely on are driven by internal financial data, which places far too much weight on historical performance and not enough emphasis on forward-looking measures such as external financial and operating performance.

Hackett’s research found that overall, nearly two thirds of typical companies have some type of balanced scorecard program in place or in development. But only 17 percent of all typical companies have developed mature balanced scorecards that rely on a mix of financial and operational metrics. Even at world-class companies, only 44 percent have achieved this goal. According to Hackett’s research, this suggests that most companies are having significant difficulty taking balanced scorecards from concept to reality.

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Jim Love, Chief Content Officer, IT World Canada

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