“The Balanced Scorecard provides managers with the instrumentation they need to navigate to future competitive success.”
– Robert S. Kaplan
The balanced scorecard (BSC) was brought up in the 1990s. It quickly gained popularity among organizations, both large and small. This revolutionary management tool turned the traditional focus on revenue and financial health into a more holistic approach towards the business’s performance.
According to a survey, 80% of balanced scorecard organizations reported improvements in their operating performance.
What is a Balanced Scorecard?
The Balanced Scorecard is a management system for enhancing business performance.
Basically, it is a framework to execute and manage the business strategy. It connects a business idea to strategic objectives, measures, targets, and initiatives. Also, it balances financial measures with performance measures and goals related to all other parts of the organization. All in all, it is a business-performance management tool.
Turning strategy into action
A balanced scorecard helps to break your big, fuzzy strategic vision into specific, actionable steps.
More than just money
Businesses often judge their soundness by how much money they make. However, the financial measures tell only the short-term part of the story.
A balanced approach
The name “balanced scorecard” comes from looking at strategic measures to get a more “balanced” view of performance.
A basic breakdown of the balanced scorecard framework
Any organization must first begin with objectives that can be broken down into four distinct perspectives that are connected uniquely :
Financial goals
Though financial health is the result of past decisions, it’s still incredibly important.
- What financial goals do we have that will influence our organization?
- Are you making money?
- Are your shareholders happy?
Customer goals
This talks about how well you are serving your customers and your organisation’s
stakeholders.
- What things are essential to our customers, which will, in turn, impact our financial standing?
- Are you winning new business?
- How about keeping your existing customers happy?
- How are you viewed in your industry compared to your competitors?
Process goals
It focuses on how well your internal processes are operating.
- What do we need to do well internally to meet our consumer goals that can affect our financial standing?
- How quickly can you adapt to changing circumstances?
- Are you providing what your customers actually want?
People (or learning and growth) goals
This perspective looks at organizational performance via the lens of human capital, culture,
technology, and infrastructure.
- Is everyone having access to training and continuing education opportunities?
- Are people aware of the latest industry trends?
- What are you doing to ensure your organization stays ahead of your competition?
A quick cheat sheet to a Balanced Scorecard
As per the definition above, if you build a Balanced Scorecard, you’re going to hear these
words more often – “objective,” “measure,” “initiative,” and “action item.”
Here’s a quick view of how these items work in a Balanced Scorecard:
- Your high-level goal in mind is your objective
- “How will I know that I’m achieving the objective?” are the measures
- “What actions am I taking to accomplish the objective?” are the initiatives
- Action items help task out small jobs that will allow you to complete your goals
Thus, with a Balanced Scorecard, you have the ability to:
- Define your strategy
- Measure your strategy
- Keep track of the actions you’re taking to improve upon your results
Partnering with Stratefix Consulting to create your own balanced scorecard
At first, it can seem a little confusing; however, the Balanced Scorecard isn’t that complex. It’s just a way of looking at your organization that focuses on your strategic goals.
The beauty of the balanced scorecard is in its flexibility and simplicity. With the help of Stratefix Consulting, you can quickly structure a strategic management system that works seamlessly across the entire organisation.
