Organizations that want to get a better handle on how they are doing in the areas most important to their success often decide to develop a Balanced Scorecard. Here are four typical stages of development.

Stage 1: Enlightenment. Senior executives need to believe that the path to solid, long-term success requires knowledge of: (a) customer requirements and how to meet them; (b) employee requirements in order to reduce turnover, improve processes, and provide better service; and (c) operational processes and costs to discover how to become faster and more flexible. With this realization, leaders seek measurements that will tell them how the company is doing in each of these areas. Better yet, they want a measurement system that shows the connection between these vital areas. They are enlightened. The need for a Balanced Scorecard grows.

Stage 2: Identification. The organization initiates a system-wide effort to identify existing measures and to create needed measures where none exist. It begins to track performance on these measures, to report progress to employees, and to reward them for meeting performance goals.

Stage 3: Refinement. The reaction to the measurements, progress, reports, and rewards suggests that people respond to what is measured. This leads to greater refinement of the measures. For example, since daily performance measures receive more attention than annual customer surveys, leadership may decide it should have more frequent customer measures and establish interim performance indicators tied to the less frequent surveys.

Stage 4: Integrated Analysis. The organization’s measurement system is linked to the organization’s vision with goals for key indicators. Results are recorded and communicated regularly. Employees understand through the measurement system what the company is trying to achieve. The final stage is to understand cause-and-effect using integrated databases, modeling, statistical work, and other methods of predicting which areas provide the best leverage for achieving the organization’s vision.

How long does it take to develop an effective Balanced Scorecard? Assuming that Stage 1 is complete and that leadership wants a holistic view of the organization, Stage 2 can take from three to six months depending on what measurements the company has in place. Developing the right measures and the ability to report them can take another year, and it can take another year or so to have enough data to begin doing statistical analysis and modeling, for a total of 2.5 to 3 years from leadership enlightenment to Balanced Scorecard bliss.

To read more about measurement systems, click on these articles:

• Core Value: Management by Fact
• Transforming Measurement
• Get the Information You Need
• Creating a Balanced Scorecard
• My Personal Baldrige: Measurement

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