We have a guest blogger that I have been working with for quite some time.Â He wanted to offer up this write-up on BSM scoring.
As the name implies, Microsoft’s Balanced Scorecard Manager (/Builder) does something more than just reporting a number, a percentage or a score â€“ it develops a balanced score. This sounds simple enough until the real meaning is carried forward into the presentation of some odd looking numbers. Users and developers alike often question whether the numbers are plain wrong â€“ an undocumented â€œfeatureâ€. But the BSM Score is not simply the actual value expressed as a percent of the scale. Hereâ€™s how it actually works.
The range of a measure is the basis for calculating the score â€“ but equally important is the choice of the number of bands. Each band has an equal weight. And that is the factor most easily overlooked in analyzing BSM scores.
Suppose you have 2 or more Key Performance Indicators and want to get a balanced score. Letâ€™s take KPI #1 â€“ and call it market share. To simplify (and remove percentages) image the total market is 12,000 items. You plan 3 bands: 0 to 4,000; 4,000 to 6,000 and 6,000 to 12,000. Since 12,000 is the absolute maximum that might be achieved, what would be the score if you achieved a market share of say 9,000? Not 75%. If you hover your mouse over the shape (green light?) youâ€™ll see a score of 83.3%. So what happened?
Remember that BSM assumes that each band carries the same weight â€“ in other words each band represents the same achievement increment â€“ even though the widths may be quite different. Hence each band is worth 33.3%. So if you are in the 3rd band (having an actual of 9,000) you have already picked up 66.7%. Also, the 3rd band ranged from 6,000 to 12,000 â€“ and you got half way â€¦ so you picked up 50% of the bandâ€™s weight â€“ (ie. half of 33.3%) or 16.6%. So your balanced score is 66.7% plus 16.6% – or 83.3%.
Why this extra complexity? Because it allows us to average the scores (which are now â€œbalancedâ€).
Hence â€“ in addition to market share â€“ letâ€™s assume we have Financial KPI having 5 bands â€“ which could reflect a set of targets skewed the opposite direction to market share â€“ with the longest band being at the lowest end.
Suppose our band limits are 80, 100, 110, 115 and the highest feasible is 120 million. If we score 90 million our actual would be 75% of our scale again. This time, however, we have only reached band #2 and our score would be 20% from having hurdled the 1st band â€“ and 10% for having got half-way through the next band â€“ to give us a total of 30%.
If we combined only these 2 scores our balanced score would be (83.3% + 30%) / 2 or roughly 57%.