Step 1: Identify The Need
The following “red flags” indicate that your marketing organization would benefit from a well-designed balanced scorecard.
- Information/data/KPI overload or under load
- No alignment across the department on most important/critical KPI/measures
- Similar metrics based on multiple data sources cause confusion
- Misalignment around current performance of department or organization
- Uncertainty around how measures or activities connect with overall strategic goals
Form a cross-functional project team that will own the development and implementation of the balanced scorecard, start to finish. The implementation of a balanced scorecard is a highly valuable and involved process and should be treated with careful consideration and commitment. Ensure that this team has a healthy balance of both analytical, and big-picture oriented members. Once complete, the balanced scorecard will drive many critical tactical and strategic decisions.
Step 2: Define The Scope And Audience
Once you’ve identified the need for a balanced scorecard, you must define the scope and audience of it. Since the ultimate objective of a balanced scorecard is to provide a concise measurement of performance in critical areas, it is important to clearly define the boundaries of the scorecard. Ideally, it would be developed from the top down with each level of the organization’s strategic goals and measures aligning to those a level above. However, it is not uncommon for balanced scorecards to be developed in functional silos. Either way, the important questions to answer in this step are:
- Who am I creating this balanced scorecard for in terms of the doers within the department/organization?
- Who am I creating this balanced scorecard for in terms of the leaders within this department/organization?
- Does this department/organization have clearly defined strategic goals to align to?
- How often should this be created or does it need to be in real time?
The answers to these questions will help identify the boundaries of the balanced scorecard.
Step 3: Identify Activities and Drivers Most Critical to Success
In this step, it’s important to reference the strategic plan for the organization and the functional department. You want to ground the team on the strategic goals and dependent activities and drivers. This facilitates the process and discussion of identifying which marketing activities and initiatives will have the most impact on reaching stated goals. This naturally leads to discussion of how these initiatives should be measured to ensure success.
The resulting critical activities and drivers will vary by team and company. For example, the drivers to success for a brand-oriented marketing team will likely span across multiple functions such as customer service or supply chain compared to a digital marketing team. Furthermore, varying corporate strategies (i.e. product, service or operations driven) will further influence success drivers. The bulk of the value within this step is in the alignment around what activities and drivers will be most critical to success within each organization. This output is essential to the development of the balanced scorecard.
Step 4: Assess the Available Data/Information and Gaps
With a list of key activities, initiatives and drivers to success from Step 3, you’re now equipped to audit sources of data that can be used to construct metrics to measure them. Typically, a balanced scorecard consists of data derived from both internal and external sources. Examples may be sales transactional data from POS systems or on-going customer research studies. Assess the available data sources that enable you to measure the success of each identified key activity and initiative while documenting gaps.
Step 5: Prioritize the Metrics
Perhaps the toughest of the steps, the team will have to determine prioritization. The underlying criteria for determining the final list of measures and targets should always be based on which have a direct impact on the success for the stated goals. It is important to remember in this step that the balanced scorecard is not meant to replace deep analysis. On the contrary, it is designed to more quickly identify where deeper analysis is needed to better understand what may be driving a metric up or down.
Additionally, where there are data gaps, the team must assess the importance of these potential measures to decide how/if certain data gaps should be filled.
Step 6: Develop and Pilot the Format
Once the final goals, measures and targets are identified along with their corresponding data sources, the team is ready to develop and pilot the balanced scorecard. The format and tools may vary. Everything from ERP reporting tools, proprietary balanced scorecard software or a simple Excel spreadsheet with conditional format may be used. Of course, the ultimate goal should be automation. However, a manual format in the pilot stage may be ideal for iteration. During this phase, the goal is to embed the tool into existing processes and get all team members accustomed to using the tool and its insights. A typical pilot phase may last 2-3 cycles (depending on how frequent the tool is created).
Step 7: Refinement
Balanced scorecards can get held up in beta stage. As use within an organization progresses and strategies and goals change, balanced scorecards should be iterated and adjusted. Ideally, and once embedded into the organization, leadership may opt to attempt to fully automate the creation of the balanced scorecard tool or implement more broadly.