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Primary reasons include too many metrics and overweighting the scorecards with historical financial information.

According to Hackett, companies report an average of 132 measures to senior management each month - nearly nine times the number of measures in most effective balanced scorecards. In addition, half the metrics companies rely on are driven by internal financial data, which places far too much weight on historical performance and not enough emphasis on forward-looking measures such as external financial and operating performance.

The Hackett Group is a best practices research and process benchmarking provider, helping clients achieve world-class performance through continuous improvement initiatives. Hackett offers analysis backed by research at more than 2,400 client organizations, including 93 percent of the Dow Jones Industrials.

The findings are covered in Hackett's 2004 Finance Book of Numbers research, and also in a Hackett Perspective research report, "Balanced Scorecards: Are Their 15 Minutes of Fame Over?" which is available exclusively to members of Hackett's Plan-to-Results Business Advisory Service. It includes the following key research findings:

Few Companies Have Mature Balanced Scorecard Programs - Hackett's 2004 Finance Book of Numbers research found that overall, nearly two thirds of typical companies have some type of balanced scorecard program in place or in development. But Hackett found that only 17 percent of all typical companies have developed mature balanced scorecards that rely on a mix of financial and operational metrics. World-class companies are 159 percent more likely to have reached this level in their balanced scorecard efforts-- but even at world-class companies, only 44 percent have achieved this goal. According to Hackett's research, this suggests that most companies are having significant difficulty taking balanced scorecards from concept to reality.

Most Companies Rely on Far too Many Metrics - Hackett found that companies report an average of 132 metrics to senior management each month (83 financial and 49 operational). This is nearly nine times the number of measures suggested as appropriate when the concept of the balanced scorecard was introduced in 1992.

Companies Focus Too Heavily on Finance Data - Balanced scorecards should focus on a mix of internal and external measures. But according to Hackett's research, 50 percent of the measures companies currently use are keyed to internal financial data. Other measures are incorporated, including internal operating statistics (33 percent), external financial data (13 percent), and external operating (4 percent). But clearly, internal finance data is too heavily weighted to make the scorecards truly balanced.

"Given the way the concept of the balanced scorecard has evolved in practice, it is no wonder that many financial executives look on the concept as an expensive, bloated, and useless substitute for the traditional paper reports. Most companies get very little value out of balanced scorecards, because they haven't followed the basic rules that make them effective,"
said Hackett Senior Business Advisor John McMahan.

According to Hackett Finance Practice Leader Cody Chenault, "If you're tracking nine times the recommended number of metrics, you're confusing detail with accuracy and it's going to be almost impossible to see indicators that might emerge from the data. Companies make the mistake of relying heavily on historical internal finance data. It's what they understand best, and are the most comfortable with. But by putting little weight into forward-looking internal and external metrics, such as sales forecasts, market share, competitor pricing, and broad economic indicators, companies sabotage their own balanced scorecard efforts. They create a system that's about as effective as driving with the windshield covered while looking in the rearview mirror."