Weighted metrics – When would you use weighted metrics across a Balanced Scorecard? This seems to be a real bone of contention for many practitioners. You can see why. The essence of the Balanced Scorecard is balance. That is to say, real thought needs to go into the structure and make-up of the elements, both objectives and metrics, to ensure that the right ‘balance’ is obtained across the business. If though some mathematical mechanism the weighting of the customer perspective was increased as compared to the other perspectives then the scorecard would no longer be ‘balanced’. However, it can equally be argued that depending on what point a company is in its business lifecycle, there may be a need for a different emphasis (or balance) in a particular area. A business start-up may be more concerned with customer marketing and internal processes than with financial results. Even so, surely the key here is to not artificially weight different areas but to carefully chose the right business objectives and associated metrics based on the companies needs. The point of the exercise is to ensure several aspects of the business are looked at and not to simply concentrate on financial results.
With all of the above in mind, there are still times when individual metrics will need to be weighted. This tends to happen at the micro level. A strategic objective may have several metrics associated with it. Often these metrics need to be weighted based on their impact on achieving the strategic objective. For example, for the strategic objective: Improve Customer Knowledge Base, there may be three metrics 1. Number of items in the knowledge base, 2. Number of hits on the knowledge base per month, 3. Total number of industry templates. It may have been determined that the third metric was the one that would make the biggest difference to the companies strategic standing in the marketplace and therefore had the greatest value. In this instance, giving the metric a greater weighting as compared to the other two should be seen as perfectly acceptable. Equal weightings for each metric may result in a false view of the success of the objective.
In every case, it is important to first think very carefully about the mix of strategic objectives and the associated metrics. if a balance can be achieved without weightings all well and good. If not, then carefully considered selective weighted metrics can provide the means to include minor but important metrics.