Scorecard Sustainability: Discovering the Inflection Point for Business Scorecard Termination or Major Alteration

• DOI: http://doi.org/10.1002/jcaf.22205
• Published date: 01 October 2016
• Date: 01 October 2016
• Author: Lawrence P. Carr,Suzanne Gratton

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© 2016 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22205

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© 2013 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.21841

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Lawrence P. Carr and Suzanne Gratton

The balanced

scorecard (BSC)

has become

a widely accepted

management tool.

Popularized by Kaplan

and Norton (1992),

it offers a framework

for a comprehensive

organizational mea-

surement system (see

explanation of the

balanced scorecard at end of

article). An estimated 60% of

Fortune 1,000 companies use

the BSC approach, which has

been heralded as one of the 75

most influential business ideas

of the 20th century. Despite

BSC’s potential for supporting

substantial improvements in cor-

porate performance, over 70%

of the scorecard programs are

abandoned in the first 2 years of

use (Neely & Bourne, 2000). It’s

well known that of the hundreds,

possibly thousands, of companies

that have adopted or attempted to

adopt and implement a balanced

scorecard (150+ members have

been inducted into the Balanced

Scorecard Hall of Fame alone),

many companies discontinue

its use for a variety of reasons.

Some reasons are fairly obvious,

such as a flaw in the way the tool

was originally implemented, or

because of a change in leader-

ship, where a new executive

brings a new system for measur-

ing strategy. Some other reasons

are less clear, such as a lack of

understanding of causal relation-

ships and how they are linked to

critical success factors (Ittner &

Larcker, 2003).

Significant research has

uncovered a variety of reasons

for scorecard discontinuance

(Bourne, Neely, Platts, & Mills,

2002; Schneiderman, 1999).

Through an analysis of case

studies from the field, we have

constructed a framework for rec-

ognizing BSC warn-

ing signs, which lays

out the most com-

mon reasons BSC is

discontinued or fails

(see Exhibit 1).

Many reasons

for failure are recog-

nized only in hind-

sight, and perhaps

mainly by outside

experts. For example,

if a scorecard was developed

internally, the architects usually

don’t see the flaws in their own

handiwork, partly because they

may not have worked on doz-

ens of scorecard projects in the

past, and partly due to human

nature—most people find that

it’s difficult to be objective and

dispassionate about their own

ideas and work. After the fact,

it’s easy to say that the score-

card was flawed or improperly

implemented, but how would the

creators know in advance? What

telltale signs may indicate that

something is amiss during the

implementation process, and do

these factors have to be fatal?

We believe that course correc-

tions are not only appropriate,

Why do many balanced scorecard implementations

ultimately fail, and how can managers recognize

when a scorecard program is in jeopardy? This

article points out several warning signs—inflec-

tion points—to help managers manage balanced

scorecard programs from their design through to

implementation and use over time.

© 2013 Wiley Periodicals, Inc.

Scorecard Sustainability: Discovering the

Inflection Point for Business Scorecard

Termination or Major Alteration

JCAF21841.indd 25 2/12/13 7:39:33 PM

This article was originally published in Volume 24, Number 3 of The Journal of Corporate Accounting and Finance.