Most companies don’t embrace the textbook approach to performance measurement by following the Balanced Scorecard to the letter. In the real world, most scorecards are unbalanced, reflecting the key drivers of a company’s success.

When the Balanced Scorecard was introduced about 10 years ago, it expanded businesspeople’s thinking about what should be measured. When they looked beyond the financial perspective, executives saw that customers, internal processes and an area described as "people/innovation/growth" warranted close scrutiny. The Balanced Scorecard also enabled companies to see not only how they performed in the past, but how they might perform in the future by using forward-looking measures, such as customer satisfaction ratios, employee turnover rates and even intellectual capital.

The textbooks say that all four perspectives, or quadrants — financial, customer, internal processes and people/innovation/growth — are assets that contribute to the company, so all deserve equal attention.

However, the idea of balance falls apart at many companies, and what usually results can more accurately be called a biased scorecard, an unbalanced scorecard or simply a performance management system. That’s because companies focus on areas that drive their success. Their scorecards reflect and support their strategies, and if those strategies center around the customer, for example, then the customer perspective will likely get more attention than the other three quadrants.

"The application of the Scorecard in the real world is different from the academic theory on how to use it," says Alan M. Missroon, vice president of marketing at CorVu Corp. in Roswell, Ga., a software company that includes Scorecard capabilities within its applications. "In practice, people customize the Scorecard to suit their environment. They identify the key drivers of their business and build their performance measurement system around those key areas. Whether you call that a scorecard or a performance measurement system or just a set of metrics, what’s important is that you end up with something that reflects what the business and the company strategies are all about," he says.

Developing a full-blown scorecard based on company strategies can take a year or more. The process typically includes gaining consensus from a lot of people on what the company will measure. Many organizations think they don’t have that kind of time, so they develop a makeshift performance measurement system that is more tactical than strategic in nature, according to Missroon. The problem with that approach is it can steer companies away from measuring the things that really matter.

"A company winds up with some kind of performance measuring system, but they fail to link that system to their corporate strategy," Missroon says. "Unless you begin with the textbook approach and map out your strategy first, how do you know what your performance measurement system will consist of?"

Companies assume that if their scorecard is unbalanced compared with textbook standards, that’s fine as long as it’s strategy-driven. But what about the culture shock that comes with the introduction of an ‘unbalanced’ scorecard — for example, one that emphasizes customer satisfaction and internal processes more than financial metrics? Would that send a message to employees that the financial aspect — which, before the Scorecard came along, used to be the most important perspective to consider — is now less important to the company?

The answer, basically, is that you can’t really focus on one component without affecting the others. If you focus on the customer, you need to put in place the kinds of internal processes that can respond to customer needs faster. That means you need to develop innovation capabilities to find better solutions to process problems that are impeding customer service. And if you do that, you’re likely to increase revenue per customer, which would improve your financial perspective.

That’s how Jane Comstock, solutions manager for the Balanced Scorecard with IBM Global Services in Houston, views the development of a scorecard for her business. While other IBM divisions have already imbedded a scorecard into their business, IBM Global Services, the consulting arm of IBM, started to develop one only about three months ago. The overriding strategy upon which it will be built is customer satisfaction. Comstock believes all four of the textbook perspectives can support that central strategy.

"For example, the internal processes part of our business is directly related to responding to our customers in a timely manner, and the learning and innovation aspect is critical for us since what we’re selling to our customers above all is our expertise," says Comstock. "Of course, how successful we are with those things will affect our financial component." She adds that the compensation of all employees in the services/consulting arm of IBM is based on their customer satisfaction ratings.

Laura Downing, vice president with the Balanced Scorecard Collaborative in Lincoln, Mass., agrees that you can’t focus on one of the perspectives without looking at how it will affect the other three. "You don’t, for instance, invest in the learning and growth part without understanding how your internal processes will benefit and how your customers will benefit from such an investment," says Downing. "Some companies go right to the customer perspective, but internal processes may need to be changed to support new customer-focused initiatives." She adds that while businesses should include all four perspectives in their scorecards, there may always be reasons to over-focus on one perspective.

Liz Tullis, director of business strategy at answerthink Inc., an e-business services company in Hudson, Ohio, says if organizations look at just one part of the Scorecard without ever considering the impact it will have on the other parts, they’ll never make the connection on how one interrelates with another. "However, balance for balance’s sake alone shouldn’t be what drives its creation," says Tullis. "In the end, you may end up with metrics in all four perspectives, but it’s how you get there that’s important. Your strategies determine what the scorecard will consist of. The four perspectives are just a way to organize it and to provide a focus."