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Handbook of Budgeting, 6th Edition by William R. Lalli

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CHAPTER TWO

Strategic Balanced Scorecard–Based Budgeting and Performance Management

Robert E. Paladino, CPA, MBA

Senior Vice President of Global Performance Crown Castle International (CCI)

INTRODUCTION: WHY MOST COMPANIES FAIL TO IMPLEMENT THEIR STRATEGIES

Corporate America is littered with examples of failed strategies, mergers and acquisitions, and bankruptcies that have left large groups of investors dismayed and perplexed. As a result, public outcry has increased for increased regulatory action and controls and reporting transparency to protect investors. Publicly traded companies now face increased disclosure and mandatory compliance with the Sarbanes-Oxley Act, one of the most far-reaching acts of its kind in recent memory. How could so many bright and energetic executives and their teams fail to understand the key drivers of value in their businesses and poorly execute their company strategies? Unfortunately, some companies resorted to the unsavory practice of fabricating results rather than executing on sound business strategies supported by solid budget and performance management practices. But just what are the barriers to success? How do balanced scorecard-based budgets support achievement of company strategy objectives?

Exhibit 2.1 provides some empirical evidence to help us understand the reasons why nine of ten companies fail to implement their strategies.

Exhibit 2.1 Why Do Nine of Ten Companies Fail to Implement Their Strategy?

Source: Balanced Scorecard Collaborative, ...

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