Balanced Scorecards

While balanced scorecards evolved out of the management accounting field, their power and effectiveness has been substantially enhanced by BI tools and data warehousing techniques. In our article Balanced Scorecards in the Business-Centric BI Architecture, we explore the idea that most of the literature about balanced scorecards presumes that the scores in the scorecard are readily available. In our experience, that is sometimes the case, but not as often as one might think. More often, being able to provide the scores involves being able to draw and potentially integrate data from different systems. Sound familiar? Therefore, we believe that balanced scorecards – whether custom designed or packaged applications – need to be considered in the broader BI architecture. Failing to do so can result in yet another instance of a standalone application that delivers information that is not consistent with that provided by other standalone applications.

Because of the link with management accounting, we believe it is also useful to note that balanced scorecards can be thought of as a means of delivering management accounting information. While cost information is certainly a key component of management accounting, managers today need a richer set of information to manage and improve operational performance. In our article Delivering Strategic Business Value, we describe the full range of relevant performance information that BI can deliver, and that information can be readily aligned with the measures selected for a balanced scorecard. This is particularly important for implementing “cascading scorecards,” a balanced scorecard technique whereby corporate-level scorecard objectives are successively cascaded down to business-unit and departmental scorecards. While the implied hierarchy of measures is not always additive, it is certainly important that measures that are supposed to be additive be designed to draw from an integrated data source.

In order to design an effective and relevant balanced scorecard that is based on a single version of the facts, we use an approach that parallels the strategy mapping approach advanced by balanced scorecard theorists and practitioners. Based on our BI Pathway Method, we work with your company to identify the key performance indicators from the four balanced scorecard perspectives: financial, customer, operations, and learning. In concert, we identify data sources and evaluate balanced scorecard information requirements in the broader BI architecture. This sequence of activities allows us to design a balanced scorecard that aligns with the core business processes that drive profits and performance. It also allows us to leverage other BI investments wherever possible, and thereby avoid duplicative costs and the introduction of another source of conflicting data. The balanced scorecard has been proven as an effective management technique for communicating strategy, measuring performance, and improving results. By bringing BI and data warehousing tools and techniques into the mix, we can ensure that your investment in a balanced scorecard pays handsome dividends.