Volume No. 64
The Argument Against
up front that the title of this post may be a bit
misleading. But it does point to an age old problem in
implementing a Balanced Scorecard . . . specifically, how
companies respond to a critical choice point encountered in
designing the scorecard itself.
One of the most important choices companies encounter during
the very early stages of scorecard design and architecture
is the decision of whether or not to "cascade" KPI's and to
what level of detail.
The temptation of many is to cascade to the n'th degree, and
build what I call the "never ending tree structure" . . .
one that allows companies to keep breaking down measures and
indicators until they can't break them down any more. In
fact, some software applications actually encourage this
process by building this "tree structure" orientation into
the administrative interface itself.
In a weird sort of way, this is a self-perpetuating
prophesy. Software designers and some users are by their
very nature analytic thinkers. You know the type – the kind
of people who over intellectualize every problem they
encounter. The ones who prefer to model and analyze
everything they encounter, right down to their spouses if
they would let them. And believe it or not, society needs
these people. CSI agents, NASA scientists, golf or baseball
swing coaches – all of these are great career choices for
the hyper-analytic crowd. But if its great performance
management and business excellence you crave – stand clear!
What you want is enough "breakdown" analysis to make your
objectives relevant to the managers and employees that are
accountable for driving positive change, but little or no
more than that. Usually that means 2-3 levels tops, with
maybe a level or two of trending where necessary. But just
because your system or IT solution will enable you to go
down 10 levels ("pointing and clicking" on every bar chart
data element until the cows come home) doesn't mean you
should build that into your enterprise performance
management solution. And just because you may need that
level of detail for a custom report for one of your
corporate CSI-type analysts to do his job, doesn't mean it
should be a central design principal in your performance
management process and supporting application.
Here are a few tips when faced with the IT capability of
"cascading to your hearts content":
level to which you drill down should be no more than 2-3
levels from your highest level business objective
any more will begin to lose that critical "line of sight"
I've discussed in previous posts.
The lowest level KPI or business metric you select should be
both measurable and MANAGEABLE. For example, you can drill
all the way down to the tire or lug nut on the truck in your
delivery fleet, but that level is rarely anyone's key
accountability and hence may not be as "manageable" as you
may think. And if by chance it is, then make it part of
another context, or another scorecard, related to that
specific business function
not part of your enterprise scorecard.
Every KPI should be tied to one or more high impact
initiatives designed to drive business improvement, with the
total number of strategic initiatives across all KPI's less
than 20-30. Beyond that, the organization will begin to lose
Keep your scorecard layout simple and easy to understand,
avoiding complicated multidimensional analytic graphics or
leave these for the custom panels or your analytic core.
Make EVERY view in your scorecard something that your CEO
and Board COULD understand if they saw it. That's not to say
they would typically view those screens, but they should be
able to make a mental connection to something they care
short, don't let your software capability drive your EPM
process, but rather let your EPM process drive your
software. After all, it's called EPM for a reason. Said
another way, if God had intended the ultimate in
hyper-analytic solutions for your EPM process, it would
probably be called something like Micro Analytic Performance
maybe a cool solution for the BI crowd, but not something
that should be top of mind for your management team.
Bob Champagne - UMS Group, Inc., a privately held
international management consulting organization specializing in
Performance Management tools, systems, and solutions.
Included in UMS Group's product portfolio are a wide variety
of performance tracking, reporting, and benchmarking
solutions, as well as customized performance assessments and
diagnostic services. UMS Group has consulted with
hundreds of companies across numerous industries and
geographies. Visit UMS Group at
or contact us directly at +1 973.335.3555.