European Management Journal Vol. 23, No. 2, pp.

214–227, 2005
Ó 2005 Elsevier Ltd. All rights reserved.
Printed in Great Britain
doi:10.1016/j.emj.2005.02.004 0263-2373 $30.00

An Integrated
Methodology for
Putting the Balanced
Scorecard into Action
ALEXANDROS PAPALEXANDRIS, Athens University of Economics and Business
GEORGE IOANNOU, Athens University of Economics and Business
GREGORY PRASTACOS, Athens University of Economics and Business
KLAS ERIC SODERQUIST, Athens University of Economics and Business

We develop a compact and integrated methodolog- performance metrics related to softer issues embed-
ical framework for Balanced Scorecard (BSC) syn- ded in people and processes, whose strengths or
thesis and implementation. The proposed weaknesses do not show up on a balance sheet
methodology capitalizes on existing knowledge, (Bromwich and Bhimani, 1994).
while incorporating critical issues, grounded in
our research and experience, which have not been Realizing the need of an integrated management sys-
systematically considered or documented in previ- tem that would incorporate both traditional quantita-
ous work. By identifying shortcomings and critical tive and more abstract qualitative performance
success factors from literature and experience, the measures, Kaplan and Norton (1996) developed the
methodology aims at overcoming certain serious concept of the Balanced Scorecard (BSC), which aims
predicaments faced by many implementations. at providing ‘‘a framework that translates strategy
The methodology embodies activities related to into action’’. The BSC is developed along the four
Project Management, Change Management, Risk well-known perspectives of Financial, Customer, Inter-
Management, Quality Assurance and Information nal Business Process, and Learning and Growth Perfor-
Technology, areas that contribute considerably to mance, which, at any point in time of measurement,
BSC implementation success. characterize the current status and future potential
Ó 2005 Elsevier Ltd. All rights reserved. of organisations. These perspectives foster a balance
between short- and long-term objectives, between de-
Keywords: Balanced scorecard, Performance man- sired outcomes (lag performance measures) and the
agement, Strategy implementation, Balanced Score- performance drivers of these outcomes (lead perfor-
card methodology mance measures), and between quantitative-objec-
tive measures and qualitative-subjective measures.
Introduction Through the years, the Balanced Scorecard has
evolved, from the performance measurement tool
In recent years, due to intensified competition, glob- originally introduced by Kaplan and Norton (1992),
alization and technology ‘‘explosion’’, organizational to a tool for implementing strategies (Kaplan and
learning, knowledge creation and innovation capa- Norton, 1996) and a framework for determining the
bility have emerged as the dominating factors of alignment of an organisation’s human, information
competitive advantage (Crossan and Berdrov, 2003; and organisation capital with its strategy (Kaplan
Zahra and George, 2002). As a consequence, organi- and Norton, 2004a). This shift has prompted compa-
zations are forced to search beyond traditional finan- nies to view the BSC as a strategic communication
cial measures and place greater emphasis on and management system, thus placing significant

214 European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005
 AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

weight on several implementation issues that have BSC implementation, while overcoming certain seri-
not previously been documented in the literature. ous predicaments like budget and time overruns,
resistance to change, inefficient or misleading deci-
Kaplan and Norton provide significant insight into the sion making information etc., faced by many
application potential of the Balanced Scorecard for implementations.
private and public sector companies and give numer-
ous design and implementation examples from a The remainder of the paper is organized as follows:
range of industries. However, little attention is paid Section two presents the proposed methodological
to different critical supporting factors such as change approach. Section three analytically outlines the pro-
management, project management, IT infrastructure posed phases and the activities performed in each
development, quality assurance and risk management phase. Section four discusses particular issues con-
that, from our experience, are critical for the successful cerning the use of the methodology and details on
implementation of a Balanced Scorecard. Further- the managerial implications that this BSC approach
more, the methodological approaches in the numer- offers. Finally, in section five we present the conclud-
ous case studies of BSC implementation projects ing remarks.
vary significantly in the sequence, content and num-
ber of implementation steps and phases, and are
applicable to particular companies and market seg-
ments rather than attempting to provide generalised The Proposed Methodological Approach
knowledge. For example Ahn (2001) uses a six phase
approach to implement a BSC; Brewer (2002) proposes The proposed methodological approach for prepar-
a four step Value Dynamics Framework for translat- ing, designing, implementing and rolling out the Bal-
ing strategy into measures; Letza (1996), uses a six step anced Scorecard is a results-oriented methodology,
approach methodology for implementing the BSC; focusing on short distinct phases with manageable
and Lohman et al. (2004) proposes a nine step ap- outcomes. It is developed along two main axes, as
proach for BSC implementation. shown in Figure 1. The horizontal axis (project phases)
represents the chronological succession of the project
In this paper we develop a holistic but lean method- activities and comprises six distinct project phases.
ological approach for BSC synthesis and implemen- The vertical axis (activity groups) comprises the dif-
tation, which capitalises on the work of Kaplan and ferent sets of activities (with two main activity groups
Norton and on the knowledge already documented – core and supporting activities), which are defined by
in similar implementations from different countries, the different skill sets/knowledge required to under-
macro and micro conditions, industries and com- take a given activity. This novel approach of using
pany sizes (e.g. Ahn, 2001; Brewer, 2002; Ioannou activity groups will help companies identify the dif-
et al., 2002; Letza, 1996; Lohman et al., 2004; Papalex- ferent skills required to complete each activity group.
andris et al., 2004; Speckbacher et al., 2003), while It also distinguishes the core BSC activities which ac-
incorporating critical issues that have not previously count for fundamental building blocks of the BSC
been considered systematically. In this way we at- and which are project independent, from the support
tempt to generalise new and previous findings so activities, which generally vary according to the com-
that the principles presented in this paper can be ap- plexity, time and budget of the project. Thus, the cate-
plied universally. Finally, shortcomings and critical gorization along two axes demonstrates the vertical,
success factors from similar implementations and cross-functional tasks that must be performed within
methodologies are identified in order to propose a each phase by people with different skill sets. Further-
methodology that can maximize the benefits and more, this categorization provides strong inter-func-
capitalise on the identified critical success factors of tional coordination which is seen to be positively

Project Phases

Phase Phase Phase Phase Phase Phase

(I) (II) (III) (IV) (V) (VI)
Prepare Understand Identify Select Operationalize Implement

Core Activities (e.g. Clarify vision, Identify strategic objectives, select measures)
Activity
Groups
Supporting Activities (e.g. Change mgt, QA, process and project mgt, IT)

Figure 1 BSC Project Implementation Approach

European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005 215
AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

correlated with achieving the desired project out- people and technology), which must be considered
comes (Matta and Ashkenas, 2003). during implementation.

The phases that have been selected aim at encom- The Support Activity group aims at identifying all
passing groups of activities, to a degree of detail that these additional/supporting activities that have a
will incorporate all the value-added information large impact on the organisation and should be con-
whilst not compromising the generalization that we sidered during the whole project’s lifecycle. The
attempt to offer. There is no interdependence be- support activity group also specifies the different
tween the proposed sequential phases, thus the re- competencies needed to undertake each activity,
sults of the previous phases are not reconsidered/ thus contributing to defining the different skill sets
altered within the next phase. To further increase required by the members of the BSC implementation
the independence between phases, it is proposed to project team. The support activities involve:
end each phase with a deliverable report and gain
commitment on this deliverable by the management (a) Change Management. As the introduction of a
committee of the project. Balanced Scorecard is equal to the introduction
of a new performance measurement system
Below we discuss the phases and activity groups of and a new performance management approach,
the proposed methodology. it comprises important changes in organisation,
management and systems. Change efforts, how-
ever, often result in failure (Strebel, 1996). In par-
ticular, we have encountered numerous
Activity Groups instances where the introduction of a BSC has
met resistance, especially from middle manag-
The seeming simplicity of the Balanced Scorecard ers, since the BSC is a management tool that
concept makes people underestimate the difficulties makes organisational performance transparent
of putting it in place (Olve et al., 2004). However, to the whole organization. Also, the fact that
the process of introducing a BSC in an organization the BSC requires frequent maintenance and con-
is a challenging endeavour that constitutes a signifi- stant monitoring creates a decisive need for
cant change initiative. employee buy-in. Seen as a change effort, the
BSC implementation should holistically take into
The proposed BSC methodology introduces the con- account strategy, structure, process and HRM
cept of activity groups in order to account for all levers for implementing change initiatives
these levers that constitute to a large degree the suc- (Scott-Morton, 1991; Prastacos et al., 2002). The
cess or failure of a BSC implementation. The two aim is to minimize resistance to change by ensur-
activity groups used also cluster the main activities ing that people understand the need for change,
performed in each of the methodology’s phases are properly motivated to change (e.g. formula-
while demonstrating the most important areas of tion of incentive programs) and participate in
concern, which must be considered throughout the the process of designing and implementing the
BSC project. new performance management system (Neely
et al., 1996). Furthermore, these activities deal
The Core Activity group is concerned with all main with the development and management of
strategy related activities that must be performed in knowledge relative to the BSC concept in the
order to design, implement and deploy a BSC. They organization.
start from the analysis of the vision and strategy of (b) Risk Management & Quality Assurance. Identi-
the company, encompass the identification and link- fication of project risks and the need to effec-
age of the strategic objectives in a strategy map, cover tively manage them is strongly emphasised in
the selection of the measures and extend up to the the project management literature (Williams,
development of the targets and the strategic initia- 1995). However, even though risk management
tives. These core activities relate to the building approaches have been found to be positively
blocks of the BSC, and therefore have been exten- correlated with meeting time and budget goals,
sively analysed in the literature, both by Kaplan few projects in general integrate specific risk
and Norton and other researchers. Thus, only a brief management practices (Raz et al., 2002). The
description of these activities is provided, placing the proposed tasks related to risk management com-
focus on the more critical implementation factors prise a two-stage approach, namely risk assess-
which have been seen to arise/emanate from other ment and risk control. Risk assessment should
BSC implementations. be done in the beginning of the BSC implementa-
tion project and is concerned with identifying
However, dealing with the strategy aspect of a BSC possible risks and uncertainties, analysing and
project and thus undergoing the core activities will prioritizing these risks, and planning for contin-
not ensure the success of the project, since, as men- gency and mitigation actions. Risk control is a
tioned above, there are other components/levers that continuous activity, which involves measuring
constitute an organization (structure, processes, and controlling the progress of the project in

216 European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005
 AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

order to locate risks before they become prob- ment draw upon Frame’s (2002) model for
lems, and fine-tune or implement the mitigation scheduling, budgeting and resource allocation
and contingency actions. Risks associated with and deal with the initiating, planning, executing,
BSC projects include frequent and uncontrolled controlling and closing of the project. These tasks
changes to the building blocks of a BSC (strategic focus on assessing the business requirements,
objectives, measures, etc.), poor time and cost managing the overall project effort, planning
estimates, poor communication and tensions the timing of the project activities and resolving
between the project team (especially in designing problems that may appear during the implemen-
the strategy map and establishing the targets tation. Furthermore, with the introduction of a
for the measures), project inertia and changes BSC, certain existing processes must be altered
in the company’s strategy during BSC imple- and others incorporated in the performance
mentation. Quality assurance (QA) is concerned management processes of the organisation.
with the fitness (efficiency and effectiveness) Thus, there is a need to identify and assess
of the BSC solution to meet the needs of the current performance measurement processes
users. For this reason a process should be and also to redesign/fine-tune these pro-
implemented for reviewing, performing neces- cesses according to the needs that will arise
sary changes/enhancements and approving the from the introduction of the new management
work done by the BSC project team. Also, a system.
special QA team, which will be responsible for
ensuring the quality of the project, should be
composed. Description of the Phases
(c) Information Technology. Due to the data-inten-
sive nature of BSC implementations, companies Phase I (Prepare for the Project)
engaging in a BSC project should also prepare
to implement a BSC Information Technology v Plan and initiate the project
(IT) solution, which can range from customizable v Gain commitment
large software vendor BSC solutions to simple v Assess change readiness
off-the-shelf applications. However, IT should v Establish QA mechanisms
not only be viewed as a means for automating v Select the project team
low value-added activities, but as a strategic ena- v Establish communication plan.
bler to efficiently use the BSC and as a mecha-
nism which enhances coordination and control The first step in order to assure the success of any
abilities throughout the firm (Grant, 2002). For project is the establishment of a project vision, the
this reason, it is imperative that the IT planning identification of the scope and budget, and the draft-
begins simultaneously with the BSC project initi- ing of a detailed project plan including critical mile-
ation so that the budget, time and process stones and alternative contingency scenarios (see
aspects can be correctly evaluated. In this con- Figure 3). Decisions concerning such issues should
text, the IT activities proposed by this methodol- be taken jointly, and committed to by the project
ogy relate to specific tasks for the assessment of management committee and the steering committee
existing technologies, the detailed definition of of the company.
technology requirements, the evaluation-selec-
tion-procurement-customisation of vendor solu- Another issue of utmost importance is resistance to
tions, the interfacing to existing systems, and change. The BSC is a management system that is
the testing of the final system. founded on ‘‘transparency’’, thereby shedding light
(d) Project and Process Management. The imple- on the performance of different departments.
mentation of a BSC project requires the involve- Therefore, BSC implementation has been seen to re-
ment and management of employees from sult in managers’ fear of losing control and power
different departments, thus, project management and is also often met with resistance to change
is one of the key activities that must be per- from employees. In order to minimize resistance
formed to ensure timely, accurate and within to change, it is essential to establish senior manage-
budget implementations. Even though the intro- ment’s commitment, motivate key managers to gain
duction of a BSC is a relatively small project, sev- ownership of the BSC deployment process (e.g. by
eral cases have been recorded where BSC providing incentives) and develop communication
projects have deviated significantly from the mechanisms with the employees so that they can
budgeted time and cost. The majority of the time track and understand the progress and the inherent
delays were the result of poor project planning benefits of the project. This action is crucial, since it
and diverging agendas among project team has been empirically proven that the active involve-
members, while the excess costs mainly origi- ment of employees in the design of a performance
nated from the implementation of the data-min- measurement system will lead to a significantly lar-
ing technology required to gather and calculate ger performance increase, compared to an introduc-
the BSC performance measures. The tasks per- tion of an identical system whereby employees do
formed in terms of project and process manage- not participate (tell-and-sell) in the deployment

European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005 217
AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

process (Kleingeld et al., 2004). For this reason, at ture, and identify the gaps between the As-Is and
the beginning of the BSC project, interviews must the To-Be situation so that appropriate action plans
be scheduled and questionnaires could be distrib- can be taken. It is also important to develop contin-
uted to selected employees from all hierarchical gency plans, which will encompass alternative action
levels, in order to assess change readiness, establish plans for cases where certain obstacles appear during
buy-in for the imperative to change and clarify the the implementation (e.g., deviations from time and
role of each employee along with the personal and budget, resistance to change, conflicts within the pro-
corporate level benefits from the implementation of ject team, shifts in strategy during BSC implementa-
this strategic management tool. tion, data inefficiencies) so as to ensure the value
added of the project and meet the timeframe and
Also, within this phase, the project team that will budget constraints.
be responsible for the design and successful imple-
mentation of the BSC should be assembled. The After a better understanding of the special needs of
typical structure of the project team involves a the organisation has been achieved, the first task
steering committee, a team of experts (Financial, for designing the BSC is the assessment and under-
HR and IT experts), a Quality Assurance team standing of the mission, the vision and the overall
and the main project team. We have established strategy of the organisation. In order to establish a
that the project team should encompass no more thorough understanding of the above, semi-struc-
than eight employees of various hierarchical levels. tured interviews should be arranged with the senior
Every effort must be made in assembling a diverse managers involved in developing and formulating
project team possessing motivation and team skills. the organisation’s strategy. The questions should be
We should also note that constructive arguments aimed at: ‘‘Where are we now, where do we want
have been recognized when both employees sup- to go, and how are we going to get there?’’ Following
porting the BSC initiative and others more scepti- this first assessment, workshops with the project
cal of this endeavour are included in the project team should be arranged, where the strategy of the
team. organisation will be broken down into a handful of
areas of focus, that is, two to five strategic themes.
The introduction of a BSC is a labour-intensive These strategic themes will be based on the overall
endeavour, which will require the BSC project team corporate strategy (stability, growth or turnaround)
to commit between 50% and 90% of their work-time and could involve issues on revenue growth, in-
for the duration of the project. During this time, a crease of productivity, cost reductions, market or
lot of new knowledge will be formed and numerous product development, diversification, horizontal or
decisions will have to be made, thus there is a need vertical integration etc.
for efficient communication and a knowledge trans-
fer plan which will foster swift decision making This phase will be the first instance where the pro-
and transfer of knowledge to the whole ject team will have to collaborate. Thus, considerable
organization. input will be provided concerning resistance to
change from employees, and the change manage-
ment approach may have to be modified
Phase II (Understand the Vision and the Strategy) accordingly.

v Assess external and internal environment

v Develop a contingency plan
v Clarify the organisation’s vision and mission Phase III (Identify the Strategic Priorities and
v Identify the strategic directions Objectives)
v Develop a change management plan.
v Identify strategic objectives
In this phase, the project team must first gain a better v Design Strategy Map
understanding of the external and internal environ- v Present findings to stakeholders and gain
ment of the organization, which will aid in clarifying approval.
the strategic direction that is being pursued. For the
analysis of the forces that drive the company’s strat- In this phase, the objective is to reach consensus on
egy and for a better understanding of the strengths the strategic goals of the organization and prepare
and weaknesses that drive the organization’s strate- the strategy map. The principle of ‘‘keeping it sim-
gic priorities, the project team can gather information ple’’ should guide the identification of strategic
from a Porter five forces analysis model and a SWOT objectives that should commence from the financial
analysis. Alternatively, if this information is not and proceed to performance drivers in the other per-
available, the project team may have to conduct a ser- spectives, whilst ensuring a cause and effect relation
ies of interviews with certain key department manag- between them. The selection of the 10–15 most
ers. In this step, the project team should also appropriate strategic objectives can be achieved in a
determine and assess the business processes used project team workshop by ranking each strategic
for performance management and the IT infrastruc- objective on four criteria:

218 European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005
 AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

(a) Strategic significance. The central and departing v Appoint a performance measurement owner
point for a BSC project is the organization’s strat- v Identify gaps between existing and desired busi-
egy. In assessing the strategic significance of a ness processes and IT infrastructure.
particular objective, team members will be called
to evaluate the importance of the particular stra- The strategy map designed in the previous phase is
tegic objective in achieving the overall organiza- the starting point for selecting the BSC performance
tional strategy. measures, which will be used in order to quantify
(b) Improvement potential. The strategic objectives the attainment of the strategic objectives. A practi-
with the highest potential for improvement cal approach to selecting the performance measures
should be favoured, since they will also accom- is to first create a pool of possible measures that
modate the establishment of feasible strategic represent each strategic objective to a satisfactory
initiatives for improvement, which will be degree. These measures can originate from three
selected in phase V of the project. possible sources: (a) existing performance measures
(c) Feasibility of implementation/applicability. The which are familiar and commonly understood by
objectives that are selected to constitute the strat- employees, and which also integrate existing per-
egy map will later (Phase IV and V) have to be formance measurement efforts, (b) case studies of
quantified and measured. Thus objectives that similar implementations,1 which have proved to
may present serious measurement complications be a valuable source of information in many pro-
should be omitted. jects, and (c) new measures proposed by the project
(d) Correlation to other strategic objectives. The strategy team, using methods for creative thinking and idea
map is founded on the positive correlations generation such as brainstorming, alternatives from
(cause and effect relations) between the individ- fixed points, etc.
ual strategic objectives in different perspectives,
so that the simultaneous attainment of all the
A typical BSC is composed of a balanced blend of
objectives will lead to improved performance.
measures. These measures are split into two catego-
Thus, the project team should rank higher the
ries: Performance drivers, which are leading indica-
objectives with the strongest potential
tors of performance; and performance outcomes
correlation.
which represent lagging measures of performance.
Since it is harder to identify measures for the leading
The final selection of strategic objectives along with
performance perspectives (Learning and Growth and
their interdependencies will lead to the design of a
Internal Process perspectives), Kaplan and Norton
strategy map, which consists of a graphical represen-
(2004b) propose using certain clusters that group
tation of the strategic objectives categorized accord-
similar value creating processes in an organization.
ing to the theme and perspective they represent,
The clusters for the internal process perspective are
along with the cause and effect links between busi-
operations management, customer management, innova-
ness performance drivers and outcomes in the differ-
tion and regulatory & social, and for the learning and
ent performance perspectives.
growth perspective they are human capital, informa-
tion capital, organization capital (Table 1).
The design of the strategy map is perhaps the most
critical endeavour in the whole project (Niven,
2002), since the selection of only a few strategic objec- After the measures are gathered, the project team se-
tives is likely to lead to disagreements between the lects those that are thought to be most suitable for the
project team members from different departments organisation (in most cases one or two measures for
who may have different goals and agendas. Also each strategic objective). A method that we have
the subjectivity in establishing the correlation be- found to minimize tensions between the project team
tween possible strategic objectives may lead to con- is the ranking of the performance measures accord-
troversy. There are various techniques to avoid ing to the following indicative list of criteria:
these clashes. From our experience the most effective
is voting and selecting the highest-ranking objectives, (a) Correlation of the measure with the correspond-
combined with the strong project leadership. ing strategic objective,
(b) Applicability of this measure in the particular
Finally, due to the significance of this phase, the organisation,
management committee must accept and be commit- (c) Communication potential,
ted to the results of the strategy mapping, and there- (d) Ease and feasibility of measurement,
upon, the findings of this phase must also be (e) Improvement potential of the particular mea-
presented and explained to selected stakeholders. sure, etc.

The process of selecting the measures should result

Phase IV (Select Performance Measures) in 15–25 measures, balanced between the four BSC
perspectives. However, it has proved more effective
v Gather, rank and select performance measures to incorporate more measures in the leading perspec-
v Establish way of measurement tives than in the lagging (financial and customer)

European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005 219
AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

Table 1 Sample Measures and Measure Clusters

Perspectives Possible Measures

Financial Perspective Revenue growth, costs, margins, profitability, cash flow, Return on Investment (ROI),
Return on Equity (ROE), Economic Value Added (EVAÒ)
Customer Perspective Customer satisfaction, retention, acquisition, profitability, market share, customer referrals,
cross-selling, price relative to competition, brand recognition
Internal Process Perspective
Operations Management Quality, lead-time, inventory, productivity, efficiency, non-value adding activities,
risk minimisation, alternative distribution channels
Customer Management Customer complaints, complaint resolution, hours with customer, products
per customer, segmentation
Innovation Number of new products, R&D, patents, new opportunities, product and service diversification
Regulatory & Social Employee safety and health, environment, regulatory employee acquisition issues,
donations, charities
Learning and Growth Perspective
Human Capital Employee turnover, acquisition, satisfaction, average workforce age, education, training
Information Capital Knowledge sharing, IT infrastructure development, system response rate, down time
Organizational Capital Corporate values adoption, culture development, teamwork, leadership efficiency,
organizational alignment

perspectives, since the latter are usually already clo- Phase V (Operationalize the Project)
sely monitored and managed by most companies.
v Set stretch targets for the measures
After the measures have been selected, a mathe- v Determine measurement frequency
matical formula must be applied for each measure. v Develop strategic initiatives
Since measurement consumes valuable company v Establish budget
resources, measures need to be simple whilst v Redesign/Fine-tune performance management
incorporating all value adding information for the processes.
organisation. Several companies have found it
helpful to normalize the measures, whereby in- Numerous companies implementing a BSC choose to
stead of reviewing the actual figures of the se- omit this phase (Speckbacher et al., 2003). However,
lected performance measures, the values are by the processes comprised here, the BSC evolves
deduced to a scale of five or ten numbers (Loh- from being a tool that simply measures, to being a
man et al., 2004). After the means of measuring tool that manages strategy (Epstein and Manzoni,
performance have been established, a performance 1998). Many scholars analysing BSC implementa-
measure owner (what Olve et al. (2004), call a BSC tions separate the first four activities inherent in this
‘‘ambassador’’) must also be decided for each mea- phase (e.g., Olve et al., 2003; Ahn, 2001; Butler et al.,
sure. The decisive factor in selecting a performance 1997). We argue, however, that there exists a strong
measure owner is to choose an employee who interdependence between them and thus they should
holds a high position in the hierarchical level, not be split into different phases.
has control over this measure, can track its perfor-
mance and who endorses both the selected mea- Target setting is one of the key activities required to
sure and the BSC initiative. making strategy work (Niven, 2002), as it involves
setting challenging targets for each of the measures
In this phase, finally, the project team analyses the previously defined (see Figure 2). In order to achieve
gaps between the existing and the to-be perfor- commitment and amplify the likelihood of attaining
mance management processes and proposes targets, the latter should be ascertained by the perfor-
changes. This step is critical since the BSC mea- mance measure owners as depicted in the previous
sures will need to be calculated and managed fre- phase (Levinson, 2003). Assuming theory Y applies
quently (typically every 1–3 months) and the (McGregor, 1960) whereby employees are motivated
strategy map along with the strategic objectives, by rewards and incentives associated with goals they
the correlations and the strategic initiatives will helped determine, the goal setting procedure is ex-
have to be reconsidered (typically every 6 months pected to lead to increased motivation and effort to-
to 1 year). Thus, establishing processes will con- wards improving the selected measures and
tribute towards the utilization and maintenance achieving the goals. The aim should be to set stretch
of the BSC. In this context, a gap analysis for the targets for the leading performance measures and
Information Technology requirements must also less stringent goals for the lagging measures (e.g.
be prepared, which must also consider the avail- financial performance), since short-term results may
ability, reliability and security of the organization’s have to be to some extent compromised in order to
IT infrastructure. achieve the desired long term performance of the

220 European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005
 AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

Strategic Theme:
Offer High Quality Services to Targeted Customers

Strategic
Strategic Goal
Goal Measure
Measure Target
Target Measurement
Measurement Initiatives
Initiatives Budget
Budget
New Customers Freq.
Freq.
Increase
Increase by
by 10%
10% Intensify
Intensify 200,000
200,000 for
200,000 for
Total Customers
Add
Add and
and retain
retain for
for retail
retail Quarterly
Quarterly marketing
marketing retail
retail customers
customers
customers
customers Measure
Measure owner
owner (beginning
(beginning Reactivate
Reactivate 100,000 for
100,000 for
Mr. th
………..
……….. Mr. Smith
Smith Increase
Increase by
by 5%
5% January 20th))
January 20 dormant
dormant customer
customer corporate
corporate
(Sales
(Sales &
& for
for corporate
corporate accounts
accounts customers
customers
Marketing)
Marketing)

Figure 2 Example of a Strategic Goal Breakdown

organisation (Ittner and Larcker, 1998; Banker et al., strategic initiatives, a practical ranking model is gi-
2000). However, when setting targets, the company ven by the Wells Fargo Online Financial Services
should bear in mind that ‘‘Outstanding non-financial BSC implementation (Kaplan and Tempest, 1998)
performance is not always beneficial’’ (Ittner and whereby initiatives are ranked by the project team
Larcker, 2003, p.92). This is because the effort and re- according to the following criteria: (a) Strategic
sources that may be needed to improve a non-finan- Importance, (b) Cost, (c) NPV, (d) Implementation
cial performance attribute may be greater than the Period, (e) Interdependencies and (f) Risk/Complex-
benefit from the particular improvement (e.g., the ity to Implement.
cost of having 100% satisfied customers or having
no quality errors in the manufactured products). The next step involves the planning of financial and
Due to lack of experience with this type of target resource requirements (budgeting). The preparation
setting process, it is advisable to proceed by trial- of the budget can be supported by a business case
and-error where practice combined with experience that will provide economic justification for the
ultimately will lead to a final selection of targets. In investment. The budgeting process must be associ-
this context, and in order to minimise resistance to ated with the strategic objectives and communicated
change, management should avoid linking compen- to the whole organization in order to achieve align-
sation to target achievement at this stage. A new ment of employee efforts. Starting from the total bud-
compensation scheme should be implemented after get (financial and human resources) that can be
the BSC has been in use for some time and once appointed to the BSC initiatives and keeping a time
the stakeholders have recognized its applicability horizon of no more than 3 years, the budget must
and inherent benefits. be allocated to both the budget intensive initiatives
(e.g. R&D, marketing campaigns, data warehousing
This phase also involves the determination of the fre- projects, process reengineering) and to the less bud-
quency of measurement for each measure. It is com- get intensive initiatives (e.g. cultural, teamwork,
mon for financial measures to be collected quarterly, alignment issues). It should be noted that the targets
semi-annually or annually depending to their inher- and the initiatives themselves may also have to be
ent periodicity and data availability constraints. The fine-tuned according to the available financial and re-
remaining measures, provided that they are not af- source budget, hence the two-way arrows of Figure 2
fected by seasonality and other factors that would and the incorporation of all the above mentioned
make the results misleading, could be examined at activities (targets, frequency, initiatives, budget) in
shorter time-intervals (every 1 to 3 months). a single phase.

The next activity involves the development of strate- This phase marks the end of the BSC design, thus the
gic initiatives, which are groups of actions that the organisation must also redesign the performance
company is going to undertake in order to achieve management related processes in order to bridge
the targets that it has set (Figure 2). Before proposing the gaps identified in the previous phase. Also the
initiatives to achieve the targets, the project team basic requirements of the IT solution that is going
should examine existing strategic initiatives and to support the BSC have to be determined (require-
those proposed during the project interviews. After ments analysis), and the change impact for the orga-
existing initiatives have been analysed and adjusted, nisation must also be roughly established so that a
we have found it useful to use questionnaires or sug- training program can be formulated.
gestion boxes in order to involve the whole organiza-
tion in the development of new strategic initiatives.
The initiatives should range from quick hits, which Phase VI (Implement and Rollout the System)
are initiatives that can be performed in short time-
frames and require a minor budget, to long-term v Select and customise the IT solution
strategic initiatives having implementation time v Roll-out the project
frames of 2–3 years. Finally, in order to rate these v Prepare periodic re-evaluation plan

European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005 221
AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

v Plan other BSC related projects Finally, in this phase, the BSC implementation team
v Transfer knowledge. must assure the transfer of knowledge to the whole
organisation and should start using the newly imple-
Many BSC software solutions exist, ranging from mented BSC within 60 days (Kaplan and Norton,
BSC modules of ERP systems, to standalone BSC 1996), in order to avoid the danger of inertia which
applications offering only a representative medium has caused many good projects to remain on the
for performance measures and targets. Given that ‘‘shelf’’. In this context, selected stakeholders who
the majority of organizations experience serious will be involved in the BSC use and maintenance
problems in developing the information systems should be presented with an overview of the BSC
needed to support Balanced Scorecards (Towers implementation, as they will be called upon to fully
Perrin, 1996), it is imperative to select the most effi- grasp and undertake the actions needed to support
cient and effective software solution for each orga- the BSC (e.g. measurement, target setting, develop-
nization. The front-end of the IT solution should ment of strategic initiatives, re-evaluation of perfor-
enable easy viewing and monitoring of perfor- mance measures etc).
mance measures, while the back-end should have
the possibility of collating all information and pro-
vide analysis possibilities for detecting patterns be-
tween the various performance measures. The main Integrating and Linking the Six Phases
concern when choosing an appropriate IT solution
is the balance between the effectiveness of the soft-
ware and the time it takes to implement. Managers The tasks described above have been presented in
should seek to minimize the time it takes to initiate chronological succession based on the phase during
implementation of the Balanced Scorecard in order which they must be performed. However, one of
to reduce the risk of inertia and resistance to the enhancements of the particular BSC methodology
change. is that these tasks also correspond to certain activity
groups which may require different skill-sets in or-
In this phase, the project team should also develop a der to be implemented. Thus, Figure 3 summarizes
plan for the periodic re-evaluation of the appropri- the grouping of the BSC implementation tasks both
ateness of the strategic objectives, the performance per activity group and per phase, so as to foster for
measures and their assumed links (cause and effect better planning and allocation of the different human
relations between presumed driving factors and resources that will take part in the implementation of
expected results). A small-scale re-evaluation and the BSC project.
fine-tuning can be performed quarterly or semi-
annually, with a large-scale re-evaluation taking
place yearly or whenever there is a significant shift
in the organisation’s strategy. It has been established Discussion and Managerial Implications
that companies alter approximately a third of the se-
lected measures within the first year of BSC imple- A key issue in many BSC implementations is the
mentation, mainly due to the BSC learning process. number and type of measurement perspectives that
From the second year, approximately a fourth of are going to be used. Contrary to Kaplan and Nor-
the measures change every year mainly due to shifts ton’s model, many researchers propose using addi-
in strategy, environmental factors and new measure- tional or different perspectives which are thought to
ment needs. be more informative or more representative in cer-
tain market segments. For example Maisel (1992)
Another issue for consideration in this phase is the used a human resource perspective instead of the
planning of complementary BSC related projects that Learning and Growth one. Olve et al. (2003) pre-
will help in the integration of the BSC with a variety sented case studies where companies have added
of organisation operations. The projects that are most Human Resources as a fifth perspective and pro-
frequently undertaken involve: vided examples of enterprises that have considered
other perspectives such as the environment. Fur-
v Rollout of the measures to all hierarchical levels thermore, some scholars argue that customers
of strategy (business unit, functional/depart- should not be the sole consideration when it comes
mental level). to external stakeholders (Atkinson et al., 1997; Maltz
v Formulation of an employee performance et al., 2003), as in many cases suppliers, partners,
appraisal system and a compensation plan unions, etc. play crucial roles for organisational
based on the BSC. performance.
v Implementation of complex data warehousing
techniques to automate the calculation of the However, our experience with BSC implementations
performance measures and the presentation of has led us to use the original four-perspective BSC
company performance. model originally developed by Kaplan and Norton.
v Execution of training seminars concerning the The rationale behind keeping the model unchanged
use and requirements of the BSC project. lies mostly in its simplicity and compactness, which

222 European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005
 AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

Project Phases

Phase Phase Phase Phase Phase Phase

(I) (II) (III) (IV) (V) (VI)
Prepare Understand Identify Select Operationalize Implement
Core Activities

Assess the Assess ext. and int. Gather, rank and Set stretch targets
environment Identify strategic Select KPIs Roll-out
vision of
objectives Determine the project
the project
Clarify vision Establish way measurement freq.
and mission of measurement
Determine the Develop initiatives
Design Develop periodic
scope of Identify strategic Appoint
strategy map re-evaluation plan
the project directions measure owner Establish budget
Management

Change Imperative Assess resistance Present findings,

Train end users
/ Readiness to change gain approval
Assess change
impact
Change

Establish Develop change Plan other

Communications leadership / incentives plan related projects

Gain commitment Transfer Knowledge, Communicate and gain approval from management committee
Supporting Activities

Management

Establish QA Identify & research

Develop Business Case
Mechanisms best practices
QA & Risk

Develop and fine-tune the

Identify, assess and mitigate business risks
contingency plan

Manage risk, Assure quality

Select, procure, design, construct

Assess ICT infrastructure Prepare gap analysis
IT

and test the IT solution

Develop the scope Identify existing Identify gaps in Propose changes Transfer and
Management

Plan the project performance the performance to the performance close the project
Project &

management management management Redesign performance

Process

Select project team processes processes processes management processes

Initiate the project Monitor plan and manage the Project

Figure 3 Breakdown of Phases and Activities Inherent in the BSC Methodology

accounts for its communication potential. The se- and budget, resistance to change from employees,
lected measures that relate to human resources and lack of management and employee commitment,
environmental factors can be incorporated into both unexpected obstacles resulting in partial implemen-
the Learning and Growth and Internal Process per- tation or termination of the project, and issues related
spectives and the ones that relate to suppliers and to the information system needed to monitor and
any other stakeholder can be incorporated in the control the progress towards the achievement of
Customer and Financial perspectives. the targets. Other issues of high importance, which
we have found to be underestimated in practice
Based on an extensive literature research, consulting and superficially dealt with in the literature are the
experience, and applied field-work in the areas of difficulty in designing the strategy map, the issue
performance measurement/management, and sev- of reaching consensus on the various performance
eral documented BSC field implementations in the measures, the ascertainment of the strategic initia-
manufacturing and financial sectors (e.g. Ioannou et tives, the agreement of targets, and the determination
al., 2002; Papalexandris et al., 2004; Godener and of the strategy budget. The objective of the paper was
Soderquist, 2004), we have identified certain short- to address these issues and propose practical advice
comings associated with the ways in which Balanced on how to tackle them through the core and support-
Scorecard projects have been designed, managed and ing activities suggested in the methodological
implemented. These include overruns in the time framework.

European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005 223
AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

Our framework and methodology has proven effi- The implementation of a BSC project is a relatively
cient in implementation projects conducted in the short endeavour, with a timeline typically ranging be-
financial and manufacturing sectors. More precisely tween four (Kaplan and Norton, 1996) and six
the organizations have achieved: months, the latter accounting for engaging in the sup-
porting activities. Since the project is labour-intensive
v Better performance management. This was and a long implementation process increases the pos-
attained by understanding what creates value sibility of a swing in the organisation’s strategy dur-
in every organization, aligning business pro- ing the course of the project, every effort should be
cesses with the BSC and providing the techno- deployed in keeping this compressed timeframe from
logical platform that enables swifter decision- project initiation to roll-out (notwithstanding the
making. development of a full-blown IT infrastructure).
v Reduced resistance to change and enhanced
team cooperation. Especially in large organiza- Based on field experience using the proposed meth-
tions where resistance to change is a major con- odology, we have established that the amount of
straining factor, an integrated change man-effort required to implement a BSC varies sig-
management approach consistent with the nificantly according to the size and the complexity
actions detailed in this paper, was seen to have of the project. However, the pattern of the man-ef-
a positive effect on employees’ perceptions fort intensity is seen to exhibit similar characteristics
about the BSC project. Furthermore, since the in almost all implementations (see Figure 4). More
methodology (particularly phases II to IV) is specifically, the implementation man-effort is ob-
based on a collective development of the BSC, served to intensify and weaken consistently in most
improvements in cross department communica- projects, depending on the phase, and correspond-
tion and collaboration were achieved. ing activity group. For the purposes of effectively
v Respect of time and budget constraints. Main- planning and managing the different resources re-
taining the time and budget plans is achieved quired to implement a BSC project, Figure 4 details
by using a methodology composed of distinct the man-effort intensity, divided according to the
phases, and by applying a strict project manage- different phases and skill sets (activity groups) of
ment approach. the project.
v Employee buy-in and transfer of knowledge.
This was achieved by maintaining an effective The project & process management man-effort is mostly
communication plan with the employees (e.g. concentrated in the middle of the project, since most
via a company knowledge sharing portal, news- of the effort of coordination, communication and busi-
letters, meetings) and by concentrating the man- ness analysis is performed in phases II through V of the
effort in phases II, III and IV, whereby achieving project. Quality assurance & Risk management requires a
the transfer of knowledge and ownership to the steady man-effort throughout the project since issues
whole organisation in phases V and VI. that could endanger the project and the deliverable

Figure 4 The Man-effort Per Phase and Activity Category

224 European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005
 AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

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226 European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005
 AN INTEGRATED METHODOLOGY FOR PUTTING THE BALANCED SCORECARD INTO ACTION

ALEXANDROS PAP- GREGORY P. PRAS-

ALEXANDRIS, Athens TACOS, Athens Univer-
University of Economics sity of Economics and
and Business, Manage- Business, Management
ment Sciences Laboratory, Sciences Laboratory, Eve-
Evelpidon 47A & Lefka- lpidon 47A & Lefkados,
dos, 113, 62, Athens, 113, 62, Athens, Greece,
Greece, E-mail: alexp@ E-mail: [email protected]
aueb.gr
Gregory P. Prastacos is a
Alexandros Papalexandris Professor of Management
is a Doctoral Candidate at Science and Head of the
the Athens University of Management Sciences
Economics and Business with research interests in Laboratory at the Athens University of Economics and
performance measurement using state of the art tools Business.
and methods.
His professional interests lie in the areas of manage-
ment science and IT, and their use in business trans-
formation in the information society.

KLAS ERIC SODER-

QUIST, Athens Univer-
GEORGE IOANNOU, sity of Economics and
Athens University of Eco- Business, Management
nomics and Business, Sciences Laboratory, Eve-
Management Sciences lpidon 47A & Lefkados,
Laboratory, Evelpidon 113, 62, Athens, Greece,
47A & Lefkados, 113, 62, E-mail: [email protected]
Athens, Greece, E-mail:
[email protected] Klas Eric Soderquist is
Assistant Professor at the
George Ioannou is Associ- Athens University of Eco-
ate Professor at the Athens nomics and Business.
University of Economics Leadership through guiding visions and performance
and Business. His research measures, organizational learning and knowledge
merges operational methods with IT for business management in corporate transformation are central
problem-solving. themes in his research.

European Management Journal Vol. 23, No. 2, pp. 214–227, April 2005 227