Using a Balanced Scorecard to Measure Your Economic Development Strategy

by Athar Osama, Ph.D., Senior Executive, ANGLE Technology Group

A common adage goes: “What gets measured, gets done.” Finding actionable and meaningful measures for assessing economic development performance has long been a particularly challenging puzzle. Much of what happens in our regional economies is a result of complex interactions among numerous actors that are not understood comprehensively enough to permit wellinformed strategic planning. Our inability to measure the success or failure of our economic development strategies further denies us the possibility to fine-tune, adapt and learn from them.

Yet we must not only engage in regional economic development planning but also follow through with implementation of our plans, often at great expense to taxpayers.We must also continually evaluate our efforts and justify them by demonstrating value to our communities. A well-functioning performance measurement system that could provide credible, meaningful and actionable insights into the success of our economic development strategies (or lack thereof) would be a welcome addition to the economic development professional’s toolkit.

The measurement problem

The issues in performance measurement hover around two key elements: namely, the performance metrics themselves and the overall framework that holds them together.While the choice of the right set of metrics is important – and is partly determined by a host of technical and political factors – the difficulty of constructing an overall framework in which these metrics must be organized to present a coherent story about a region’s economic development strategy is vastly under appreciated.

Setting up such a framework requires answering questions such as:

• What constitutes success in economic development, and how should it be measured?

• Do simple metrics suffice, or should composite measures be developed?

• How should these metrics be organized into a system of measurement that provides actionable guidance to key stakeholders?

• How should the information gleaned from such a performance measurement system be used?

• How should various kinds of metrics (e.g., leading indicators vs. lagging indicators, qualitative measures vs. quantitative measures, hard financial measures vs. soft measures and tangibles vs. intangibles) be balanced?

Such choices continue to challenge the profession, and thus undermine the successful implementation of even the most carefully constructed strategies.

In a 2004 survey of economic development organizations (EDOs) conducted by Brigham Young University, 93 percent of respondents indicated that they were likely to increase their use of performance measures in decision-making, yet only 20 percent thought that performance measures were effective in increasing awareness of program results, setting strategies and improving programs. It is worth noting here that we are not yet introducing the performance measurement framework, only the performance measures themselves!

This lack of perceived utility of performance measurement may be explained partly by the absence of an organizing framework that transforms a bundle of performance metrics (data) into insightful and actionable guidance (information), and leads to learning about the region’s economy and the multi-faceted relationships among various actors in the economy (knowledge).

Practitioners often do not understand many of the intricate relationships among various political, social and economic actors that intervene between their actions (causes) and the results (effects). Performance evaluation must, therefore, generate knowledge as it consumes information and iteratively improves our understanding of how our economies respond to our actions.

The good news is that there is a strategic planning and performance measurement approach that provides coverage for most of the critical ingredients of a comprehensive performance measurement system.

» Page 2 of 3