## **Learning Outcomes**

On completing this article, you will be able to explain how the Balanced Scorecard links strategy to performance measurement, assess key risks including measure overload and gaming, and identify good practice in metric selection and implementation. You will be equipped to evaluate Balanced Scorecard scenarios in the ACCA APM exam, recognising system weaknesses and proposing solutions.

## **ACCA Advanced Performance Management (APM) Syllabus**

For ACCA Advanced Performance Management (APM), you are required to understand the use, strengths, and limitations of the Balanced Scorecard in performance management. In particular, your revision should focus on:

- The principles and dimensions of the Balanced Scorecard
- Strategic linkage of objectives, critical success factors (CSFs), and key performance indicators (KPIs) within the Balanced Scorecard
- Common pitfalls, including measure overload and the risk of gaming or dysfunctional behaviour
- How to identify, evaluate, and mitigate weaknesses in Balanced Scorecard systems, especially in exam scenarios
- The importance of aligning performance measures with strategy and avoiding excessive or misaligned targets

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. Which of the following is a potential drawback of including too many measures in a Balanced Scorecard?
   a) Broader understanding of performance  
   b) Improved employee motivation  
   c) Information overload and lack of focus  
   d) Enhanced strategic alignment

2. An operational manager increases reported customer satisfaction scores by encouraging staff to record only positive responses. This behaviour is best described as:
   a) Performance improvement  
   b) Measure overload  
   c) Gaming  
   d) Strategic alignment

3. Name two major risks in poorly implemented Balanced Scorecard systems.

4. Briefly explain how linking too many KPIs to rewards can lead to sub-optimal organisational outcomes.

## **Introduction**

The Balanced Scorecard is a popular performance management tool that helps organisations align their activities with strategy by measuring success in several key areas. However, its effectiveness relies on the careful selection and use of measures. Adding too many KPIs or misaligning measures with strategy can dilute focus and lead to dysfunctional behaviours such as gaming. This article explains how to design and implement a Balanced Scorecard for strategic linkage and examines the main pitfalls—measure overload and gaming—that can undermine its value.

> **Key Term: Balanced Scorecard**
> A strategic performance management framework that translates an organisation's vision and strategy into objectives, measures, targets, and initiatives across multiple dimensions, typically financial, customer, internal process, and learning and growth.

## THE BALANCED SCORECARD: STRATEGIC LINKAGES

The Balanced Scorecard provides a structure for translating the organisation’s strategic vision into operational objectives and metrics.

### Linking Strategy to Performance

To achieve strategic alignment, each Balanced Scorecard dimension—financial, customer, internal process, and learning and growth—must contain objectives linked directly to the organisation's overall strategy. These are operationalised as CSFs and measured using well-chosen KPIs.

> **Key Term: Critical Success Factor (CSF)**
> A key element or activity that is essential for an organisation to achieve its strategic objectives.
>
> **Key Term: Key Performance Indicator (KPI)**
> A specific, quantifiable measure used to evaluate the success in achieving CSFs and strategic objectives.

### Top-Down Alignment

Strategic objectives are derived from the mission and broken down into CSFs and KPIs within each Scorecard dimension. Strong linkage means that day-to-day performance is always driving strategic aims.

### Example of Strategic Linkage

- **Strategic Objective**: Increase market share
  - **CSF**: Strengthen customer loyalty
  - **KPI**: Percentage of repeat customers

## PITFALL 1: MEASURE OVERLOAD

While a comprehensive set of measures is attractive, including too many metrics leads to information overload. This can obscure priorities, overwhelm managers, and diffuse effort.

### Measure Overload Defined

> **Key Term: Measure Overload**
> The inclusion of an excessive number of performance indicators, resulting in loss of focus, reduced clarity, and decreased effectiveness of the performance management system.

### Practical Consequences

- Staff ignore or misunderstand key priorities.
- Managers struggle to determine what matters.
- Resources are wasted tracking trivial or redundant metrics.

### **Worked Example 1.1**

_ABC Ltd introduces 10 KPIs in each Balanced Scorecard dimension, resulting in 40 measures. Six months later, managers spend most review meetings debating minor variances instead of core objectives._

> **Answer:**
> The large number of measures has created information overload, with important issues lost among less relevant data. This reduces focus on strategic priorities, making performance management less effective.

### Good Practice

Limit the number of KPIs per dimension (often 3–5), focusing only on those with direct strategic impact. Measures should be distinctive and clearly linked to relevant objectives.

## PITFALL 2: GAMING

A well-designed Scorecard motivates desired behaviours. However, poorly selected or poorly monitored measures encourage staff to manipulate results (“gaming”) or focus on targets at the expense of overall performance.

> **Key Term: Gaming**
> The deliberate manipulation of performance measures or behaviour to achieve set targets, often undermining the organisation’s broader objectives.

### Types of Gaming

- Manipulating reported results (e.g. shifting revenue between periods)
- Focusing effort solely on incentivised KPIs, neglecting other priorities (“tunnel vision”)
- Engaging in unproductive or counterproductive practices to meet targets

### **Worked Example 1.2**

_A hospital's Scorecard includes "average waiting time" as a key target. Managers respond by moving sicker patients to an unmeasured 'waiting list' category to improve reported averages, even though real patient care does not improve._

> **Answer:**
> This is gaming—staff have adjusted processes to achieve measured targets without delivering real improvement. The performance measure is driving dysfunctional behaviour rather than strategic success.
> **Exam Warning**
> In ACCA APM exams, always look for evidence of gaming or unintended consequences in Balanced Scorecard scenarios, especially where rewards are closely tied to specific targets.

## AVOIDING MEASURE OVERLOAD AND GAMING

### Principles for Effective Scorecard Design

- Limit KPIs to those that are critical and can be clearly linked to strategy.
- Ensure each KPI is understood, measurable, and actionable.
- Review and update measures as the organisation and environment change.
- Monitor for signs of dysfunctional behaviour or gaming.

> **Key Term: Tunnel Vision**
> The inappropriate focus on certain performance measures to the exclusion of other important aspects, often caused by overemphasis on incentivised KPIs.

### **Worked Example 1.3**

_A manufacturing firm's Scorecard rewards only defect rates and production speed. As a result, employees cut corners, ignoring equipment maintenance and staff training, leading to rising breakdowns and lower staff morale._

> **Answer:**
> Exclusively incentivising a few KPIs has led to tunnel vision, undermining broader performance and increasing long-term risk.

### **Revision Tip**

When asked about Balanced Scorecard shortcomings in the exam, always discuss both measure overload and the risk of gaming. Recommend a small number of strategically linked, well-monitored KPIs to mitigate both risks.

## **Summary**

The Balanced Scorecard is a powerful tool for ensuring strategic objectives drive operational action, but its value depends critically on selecting the right measures. Too many metrics reduce focus, while poorly chosen or incentivised KPIs can encourage gaming or tunnel vision. Effective design requires disciplined KPI selection, regular review, and active monitoring for dysfunctional outcomes.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Explain the purpose and structure of the Balanced Scorecard
- Illustrate strategic linkage from objectives to CSFs and KPIs
- Identify the pitfalls of measure overload and its symptoms
- Recognise gaming and tunnel vision as forms of dysfunctional behaviour arising from poor KPI selection or incentive design
- Apply principles for selecting, monitoring, and adjusting Balanced Scorecard measures to maintain performance alignment

## **Key Terms and Concepts**

- Balanced Scorecard
- Critical Success Factor (CSF)
- Key Performance Indicator (KPI)
- Measure Overload
- Gaming
- Tunnel Vision

Balanced Scorecard and strategic linkages - Pitfalls measure overload and gaming