9/26/21, 11:34 AM Balanced Scorecard Audit Checklist - 12 Control Points

Balanced Scorecard Audit Checklist – 12 Control Points

Even the best business systems need to be revised and updated regularly. Use the checklist below to audit your Balanced Scorecard,
find possible problems, and fix them during the early stages before they result in bigger issues. 

There are a number of typical problems that a company’s strategist faces when implementing the Balanced Scorecard framework. Sometimes, they
might look like disadvantages of the framework, but I believe it’s all about finding the right way to use this powerful business tool. This checklist will
help.

I divided possible situations into the  green ,  yellow , and  red  zones so that you can quickly learn if your Balanced Scorecard is at
risk and how to fix it.

1. Who Designed the Balanced Scorecard for Your Organization?

In each department, we had a BSC practitioner who ran a Our strategist did the major job; working together with
disciplined discussion around the strategy and the ways to consultants in some cases. Other employees only saw the
execute it. results and did not participate actively.

All members contributed to the strategy formulation on

their level and helped to find respective measures. An
external consultant supervised the project and gave
excellent feedback on each stage.
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The Balanced Scorecard was delivered as an out-of-the-

box solution by a strategy consultant.

Explanation

Your strategy is a unique piece of intellectual 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 the
future.

Here is our implementation guide that explains the details.

2. What Components of the Balanced Scorecard do You Have?

We have strategy maps with cause-and-effectconnected We have a strategy map with business goals but still in the
business goals; all business goals are aligned with at least process of finding correct measures and planning
one leading and one lagging indicator, and action plans. initiatives respectively.

W h KPI b t th i
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We have many KPIs, but there is no strategy map yet.

Explanation

Forget about KPIs for now; 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?

3. What Does Your Strategy Map Look Like?

From our strategy map, I can track the customer value We have some goals on the strategy map, but we are not
chain; there are the cause-and-effect links between all of sure about the cause-and-effect logic. Sometimes, it goes
the business goals; bottom-up; sometimes top-bottom, and there are some
stand-alone goals that are not linked to other goals.

O t t i f i ll d i
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Our strategy map is a professionally designed diagram that
shows a big picture look at where our business is moving;
we get back to it at our annual meetings.

Explanation

A strategy map is one of the most important tools to achieve

crystal-clear understanding about how your organization
creates customer value.

Balanced Scorecard suggests a disciplined way to describe

the strategy.

4. Do You Use Strategic Themes?

We divide our business goals into three strategic themes. Our goals can probably be assigned to the different
In our case it is “Customer intimacy,” “Product leadership,” strategic themes, but we are not following this disciplined
and “Operational excellence.” approach yet.

All of the business goals we have only belong to the

strategic theme or to the “financial success of the
organization;” therefore, we don’t use any kind of themes.

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Explanation  

Strategic themes give a professional touch to the strategy

map so that it becomes more readable and easier to explain.

When crafting your strategy, make sure that you take into
account generic strategies and respective strategic themes.

5. What Measures do You Have?

We have a balanced set of measures that predict the
success of execution (leading ones) and measures
that confirm that execution was actually successful
(lagging measures). We have metrics for all perspectives,
not just financial ones.
Most of our measures are lagging ones, but we do
understand the importance of leading measures and trying
to find some. Half of our measures can be characterized as
being financial.

We are not sure about the differences between leading and

lagging measures. We have our KPIs from the list of
popular KPIs on the Internet. Most of our metrics are
financial ones.

Explanation

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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.

6. How Many Measures Do You Have?

For each business goal, we have 2-3 leading and lagging We have, on average, 4-6 KPIs for each business goal, most
measures; there are still some business goals without of them are lagging ones.
measures yet.

We are using standard KPIs that were suggested by the

external consultant, and we are not sure if/how these KPIs
are relevant to the business goals we have.

Explanation

As it was said before:

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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.

7. Is Your Scorecard Cascaded?

We regularly run a strategy discussion and involve We have a scorecard with a strategy map and measures.
participants from all levels of the organization. These measures are cascaded down to the lower levels.

Each business unit has its own Balanced

Scorecardaligned with higher and lower levels by business
goals.

Our strategy map and its metrics are available for the top
managers only. All business goals are mandated top-down
and are controlled by KPIs.

Explanation

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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.

8. When Was the Last Time Your Balanced Scorecard Was Updated?
Measures are updated monthly or quarterly; strategy Measures are updated regularly, but the strategy map was
maps of all business units are revised quarterly or yearly. never actualized.

Measures are not updated regularly; on all levels, we use

the same strategy maps as we had a few years before.

Explanation

On the one hand, your major strategy might be the same for It’s hard to give a general estimation about how often you

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several decades, on the other hand, the way the strategy is need to revise your strategy scorecard, but if you found out
interpreted by business units will certainly change. 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.

9. Do You Use Automation Software?

We use some professional Balanced Scorecard
software that allows us to create strategy maps, add
business goals, explain the cause-and-effect logic, align
KPIs, and initiatives.
The data required for KPIs is taken directly from other
business systems.
We use professional dashboard software, so we have
access to our KPIs, but strategy maps and respective
business goals are not part of the system.
Data for the KPIs is imported from spreadsheets that we
already have.

We use presentation software like MS PowerPoint for the

strategy map and spreadsheet software like MS Excel for
the measures.

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.

Your time is valuable, so make sure you spend it on solving

intellectual challenges and not on drawing objects in
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presentation software.

Spreadsheet software might be suitable for the prototype of your

Balanced Scorecard, but once you want to scale it, you’ll need to have
some professional automation tool.

Understand the difference between KPI software and

Balanced Scorecard software. Give BSC Designer a try; it is
recognized by many professionals and is an excellent tool.

10. How Does Your Company Use the Balanced Scorecard?

We use it when we discuss strategy on all levels; We are gathering much strategy-related information in our
initiatives help us to formalize our action plans, they are scorecard, and we are on the way towards a disciplined
measures to help track the execution process. strategy definition, description, and execution using this
framework.

We mostly use the KPI part of the scorecard; some metrics

are used to determine rewards and bonuses; employees
are controlled by indicators.

Explanation

Make sure that the Balanced Scorecard is actually

a strategy execution framework, not just a simple reward
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calculation scorecard.

In most cases, linking rewards to the indicators doesn’t work.

11. How do You Treat a “KPI in the Red Zone” Situation?

Measures can be in the red zone; this is an indication that A KPI in the red zone is a problem, so we are trying to
we need to pay more attention to that certain part of the choose KPIs carefully so that we focus only on those that
business. we can influence.

A person responsible for the business and KPI is able to

discuss the situation and provide possible
improvement/prevention plans.

A KPI in the red zone means that someone did not do his
job and will lose his bonus for the next quarter.

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.

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A KPI in a red zone doesn’t mean just problem; first of all, it is

an opportunity. Learn more about establishing a
proper performance measurement culture.

12. Have You Described a Good Strategy?

We have our goals, and behind each goal, we have
its strategic rationale.
We have a hypothesis about how our plans are aligned
with customer goals and financial achievements.
The strategic rationale is clear for most goals, but we still
have to test some hypothesis before formulating a viable
strategy and explaining it to the team.

Our strategy is overloaded with business jargon. We have

many goals about “leveraging opportunities,” but most
members of the team don’t understand what exactly this
means.

Explanation
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Good strategy is not just about creating a strategy map or

finding KPIs.

A good strategy takes into account the reasons for your current
challenges and business conditions and proposes the best reaction
hypothesis

A good strategy is:

A product of discussion
Uses the expertise of your team
Resonates with your mission and vision

Before, we discussed specific steps that organizations

normally pass to come up with a good strategy.

What Experts Say

Here are some citations from the interviews with Balanced Scorecard experts.

Jeroen De Flander about typical Balanced Scorecard implementation mistakes:

Here’s my list of 8 typical mistakes you should avoid:

1. Senior management is not convinced and shows little commitment

2. The scorecard is developed by ‘the happy few’
3. The internal/external project members have limited or only theoretical knowledge
4. The scorecard is only used by top management
5. The scorecard stays too long in the development stage before it’s launched and used
6. There are not enough links to the strategy and planning processes
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7. The content of the Balanced Scorecard is unrealistic

8. The scorecard is only used for remuneration purposes

From the interview with James Creelman:

Also, remember that the scorecard is not a measurement system – this is the biggest mistake that companies make, and it stops them from securing the
real benefits of the approach – which is around step-change and breakthrough performance improvement.

From the interview with Dan Montgomery:

The problem with a lot of BSC systems is that a lot of effort goes into getting the system designed, then people move on to the next project. If you’re just
using it to report on performance occasionally, it won’t stay fresh.

Are there some other audit questions that you think we should add? Please share your thoughts in the comments.

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