In many of the companies that have abolished traditional budgeting, the balanced scorecard has become a true cornerstone in the new management process, instead of a competitor to the traditional budget with the two often sending conflicting and confusing signals to bewildered managers. Leaving the budget in Statoil in 2005 resulted in a turbo-charging of our scorecard process, after having operated with budgets and scorecards in parallel since 1997. Now the organisation realised that we were serious about the scorecard, it was no longer just a new box on top of all the old ones.

But abolishing the budget and going for the scorecard only is not necessarily enough. In the hands of those that still believe in yesterday's way of leading and managing, the balanced scorecard can actually be a dangerous weapon. A scorecard allows for much more centralised micro-management than what a budget does. It provides a much broader menu of buttons to push and strings to pull in the corporate control room, where the wisdom is placed and decisions are made. Much more can be cascaded in a scorecard than in a budget, tying local teams much tighter on both hands and feet.

The way scorecards are used are therefore just as important as if organisations use them or not. Used in the right way, with the right balance between alignment and ownership, the balanced scorecard is a great and powerful management concept that can make a significant positive difference in team and company performance. Used in the wrong way it can easily end up doing just the opposite.

"Cascading" is a frequently used word in the balanced scorecard community. The bigger our organisations, the more important the word becomes, because it addresses a key question. When the corporate scorecard is established, how do we bring the concept and the content out and make it alive in the entire organisation, so that we don't end up with a detached top level thing only? The question is important, and so is the way we choose to make it happen. The "cascading" route is unfortunately the chosen way in many organisations, because it comes with some serious side-effects. There are however a better alternative, based more on pull than push.

Strategy is about making choices. If you never say no, you don't have a strategy. Scorecards are about implementing choices made. It is about ensuring that we actually do what we have said "yes" to, and that we don't do what we have said "no" to. To make strategy happen, we need to reflect the choices and priorities of the corporate scorecard in local scorecards across the organisation. These need to point in the same and not in opposite directions. We can't have corporate goals pointing right and local business goals pointing left. Centralised cascading of the corporate scorecard content is an effective and popular way of avoiding "anarchy" and securing "order in the house".

But reconciled alignment and everything perfectly synchronized like a Swiss clockwork does not mean mission completed. We also need people in local teams to take ownership of their scorecards. If your own scorecard is nothing but a landing ground for cascaded instructions from above, ownership tends to immediately walk out the door. Ownership cannot be created without involvement. It can't just be copy-paste, instructions and directives. Local teams must be actively involved; strategic objectives must be discussed and formulated in a way that make them relevant and understandable and make teams tick. KPIs must be perceived as sensible and meaningful, and KPI targets should be felt as stretched but not overstretched. The need for stretch must be also understood and accepted. People must own the actions and initiatives which they shall execute and implement.

There must also be space for good local initiatives even if these are too small for the corporate radar screen or not necessarily 100% aligned with corporate strategy. There must be sufficient local freedom and flexibility to allow opportunities to be grabbed and threats to be fenced off when the unexpected occurs. This is difficult if the scorecard is carved in stone like an annual budget, and any new decision must be sent nine floors up for approval.

It is in striving for this important balance between group-wide alignment and local ownership that "cascading" can create serious damage. Cascading is typically a top-down, one-way instruction about local scorecard content. It is a great way of achieving alignment, but the price paid is often a lack of local commitment, ownership and motivation.

There is however a different way, which better balances the two purposes. Sufficient alignment can be created without sacrificing local ownership. It starts with using a different word; "translation". Translation is not a one-way top-down exercise. It involves two parties, and in switched roles. The level below has now moved into the driver seat, responsible for translating strategy from the level above. We go from push to pull.

Let us take an example of translating a business area scorecard into business unit scorecards. The business units are now in the lead. Each business unit team looks at the business area scorecard above (and at other business areas and corporate if necessary) and asks:

• What should our scorecard look like to reflect the direction and priorities of those scorecards above?
• How should we formulate our strategic objectives; should we simply copy or should we translate into something more concrete, but still strategic at our level?
• Which KPIs can best measure that we are moving towards our strategic objectives? Should we copy, replace or add new ones?
• Which KPI targets do we need to set and which actions are required to move towards and ultimately deliver on our strategic objectives?

The role of the business area now becomes to oversee and support the business unit scorecard work, to secure that these are pointing in the right direction. If needed, it can challenge ambition levels, KPI selection and targets set, as well as supporting actions and initiatives. The business area has of course the right to decide if disagreements, although this authority should be used with caution. It shall also stimulate learning and sharing of good scorecard practices among the different business units, and also secure that business units consider the horizontal alignment necessary.

This process is replicated level by level in the organisation, always involving two levels. The level above is ultimately responsible for securing sufficient alignment between the two. Everybody has, however, the possibility to check alignment with everyone else, because all scorecards should be open for all (with the exception of sensitive information, and with the hurdle for defining something as sensitive set as high as possible). Remember that transparency is an important Beyond Budgeting principle, stimulating learning and providing self-regulating control.

The translation principle does of course not exclude the possibility, in special circumstances, for applying traditional cascading. It will from time to time be both right and necessary to instruct from above, but this should be the exception and not the rule.

The word translation already exists in the balanced scorecard vocabulary, but I hope it will become a household term not just in the books but also in company practices. I also hope that the word "balanced" will take on the meaning of balance between alignment and ownership. And I hope cascading in the future will be found on the list of things we did much less of, because we learned from practice and hard experience that local ownership, commitment and enthusiasm are just as important as alignment and mechanical consistency.

Maybe we also should consider parking another popular management phrase, namely "roll-out". When front line teams hear corporate talking roll-out, what they actually often hear is "roll-over", and guess why.... Maybe we instead should talk about "rolling in"? This is something you do yourself, while "rolling out" is something others do to you......

This article is also posted on XPC (Execution Premium Community)