Looking for a way to align your business goals, improve your internal processes, and refine your strategy?
If the answer is “yes,” a balanced scorecard could be just what you need.
When used correctly, a balanced scorecard helps businesses identify the best growth opportunities. It focuses on a range of different business areas, allowing leaders and managers to align their goals and keep employees on the same page, no matter what their role is in the company.
So if you’re unsure of how to use this framework to help your business grow, keep reading. We’re going to cover everything you need to know, including how and when to use the framework, and a balanced scorecard template to help you get started.
What is a balanced scorecard?
A balanced scorecard (sometimes shortened to BSC) is a strategic planning and management tool. It helps businesses balance and align their priorities.
The framework was created by David P. Norton and Robert S. Kaplan in the early 1990s. They described the concept in an article in the Harvard Business Review and published a book titled The Balanced Scorecard: Translating Strategy into Action.
A balanced scorecard outlines what businesses hope to achieve and whether they’re on track to reach their goals. It’s also used as a measurement system to prioritize tasks and track progress towards specific milestones and targets.
Ultimately, the framework is a performance metric. It shows strategic progress alongside financial results, giving decision-makers a robust view of performance. This information provides them with the insight they need to make informed business decisions.
So what type of information is included in a balanced scorecard?
A balanced scorecard can feature a lot of information, but it typically depends on what you’re trying to achieve.
Here’s some of the information you’d see on a typical scorecard:
- An outline of company goals and strategic objectives
- Prioritization of projects and tasks
- Measuring progress toward strategic targets
What are balanced scorecard perspectives?
There are four main perspectives of the scorecard. When filling in a balanced scorecard template, the following perspectives will be considered:
- Financial performance
- Customer value and relationships
- Internal business processes
- Employee performance and growth
Let’s look at these in more detail.
Financial performance
The financial perspective shows the company’s current financial performance against its target performance. Organizations use these measurements to track progress toward financial targets. In doing so, business leaders can identify if things aren’t going to plan and make adjustments.
Common financial measures include the following:
- Revenue
- Return on investment
- Earnings
- Average revenue per paying user
Using the scorecard, businesses can focus on achieving their commercial goals while continuing to provide value to customers and keep shareholders happy.
Shareholders are often most concerned with this perspective, given their financial investment in the business. Using the balanced scorecard approach is a great way to show them the steps you’re taking to review and improve your financial performance.
Customer value and relationships
Customer value and relationships are sometimes hard to measure. Using the balanced scorecard, businesses can get some insight into the customer perspective with net promoter scores (NPS) and customer satisfaction (CSAT) scores.
Let’s clarify what these are:
Net promoter score: The NPS is a market research metric that measures customer experience. Using a single-question survey, it measures the loyalty of customers to the company. The results range from -100 to +100 — the higher the score, the better it is.
Customer satisfaction score: A CSAT score is often used to measure customer service and product quality. Feedback is collected through customer surveys to determine an overall percentage that represents customer satisfaction. The higher the percentage, the better the result.
Using these scores, business leaders can determine what their consumers think and want. As a result, they can make the required changes to provide customers with a better product or service.
If you don’t have the time or budget to collect NPS or CSAT scores, we’d suggest spending some time better understanding your customers. Our voice of customer template is a great way to do exactly that.
This template helps you review your customer experience and products from your customers’ point of view. This will give you a deeper understanding of their perspective and opinions of your brand
Internal business processes
With the balanced scorecard, businesses can track and monitor the performance of their existing business processes. This can offer opportunities for review and improvement where current output isn’t meeting expected levels.
But how exactly does the scorecard relay this information? Generally speaking, it will show businesses the following details:
- The company’s ability to meet deadlines on time
- The company’s ability to achieve key performance indicators (KPIs)
- The efficiency of various workflows
- Overall productivity rates
By reviewing this information, businesses can identify opportunities to develop a more efficient and streamlined workflow.
Employee performance
With a team of employees to manage, it can be difficult to monitor the daily activities they perform. This can sometimes lead to misalignment throughout the company, confusing the goals and direction of the business.
But with a balanced scorecard, team leaders make sure that employees are working in line with the company’s strategic plan.
It also helps you track employee success and satisfaction, allowing you to measure some of these areas:
- Morale
- Turnover
- Employee knowledge and experience
- Reliability
By tracking these areas, you get a better sense of employee performance and how they’re feeling about their day-to-day work. And with this information, you can facilitate employee learning and growth, which contributes to the company’s overall success.
If you’re thinking about conducting a balanced scorecard to review employee performance, consider using a one-on-one meeting template during the process.
This will help you track and monitor their feedback during the review, giving you a better oversight of how to make improvements.
Why use the balanced scorecard?
You might be thinking that a balanced scorecard sounds like a lot of work. Truth be told, it is. There’s a lot of information to weigh up when creating a scorecard.
But there’s a reason 92% of businesses find them useful. So let’s take a look at some of the key benefits of using a balanced scorecard.
Streamline communication and align teams
Balanced scorecards empower organizations to build and communicate an effective strategy.
Think about it. With all this business information in one location, you have a single source of truth. This makes it easier for teams to communicate about what’s happening and what the plan is for the future. Everyone is on the same page, and there’s no confusion about what the strategy is and how the goals will be achieved.
It also allows individual employees to see the greater purpose of their day-to-day work, and it helps update stakeholders. You can share the scorecard with them to update them on progress and get them to better engage with the strategy.
And if you need a hand figuring out which stakeholders need involvement in this process, take a look at our stakeholder analysis template.
With this template, you can identify which stakeholders require more communication. This will help you pinpoint who needs access to the balanced scorecard and how involved they should be.
Focus on performance management in more than one area
To create an effective business strategy, you need to be aware of how all areas of the business environment are performing. From sales and profits to employee performance and customer experience, you need the full low down.
This is where a balanced scorecard can help.
By using a scorecard, you can focus on performance measurements in more than one area of the business. As a result, you have a unique oversight of the entire company and how to drive performance across the board.
This level of visibility can make the process tricky to manage, but it’ll help you create an effective business growth strategy.
Improve performance reporting
58% of companies use balanced scorecards specifically for reporting.
Why?
Because scorecards make it easier for businesses to track their performance.
Creating a scorecard requires a structured approach. Every element is broken down into smaller categories, and the details are laid out clearly for everyone to see. This makes it a lot easier to manage and review performance.
With all this information in one location, business leaders can easily create meaningful reports and dashboards to review strategic performance. With solid reports in place, businesses can ensure that their strategy and employees are set up for success. And it’s simple for leaders to share key information with stakeholders.
Get a better understanding of the business
As we’ve already mentioned, a balanced scorecard gives business leaders a unique perspective of business performance and functions.
For example, they’ll be able to review financial performance alongside employee performance. This allows them to identify any trends between areas and create solutions or improvements across the business.
Not only does this help with the overall growth and success of the company, but it also helps the employees get a new perspective on their role within the business. They can see how their day-to-day work impacts the growth of the business, which gives an extra boost of motivation and accountability.
When you have a better understanding of the business, it’s easier to identify new ways to grow and expand. This can help you provide more value for your customers, increase your market share, and gain a competitive advantage. It’s a win-win.
When to use the balanced scorecard
Now you know the benefits of using balanced scorecards, you might be wondering when you should use them.
Let’s take a look at some of the common scenarios where a balanced scorecard would be helpful.
Updating your business strategy
A balanced scorecard is a great way to update your business strategy. By outlining all your goals and activities across different areas of your business, you can make sure they align with your new strategy.
So if you’re looking to firm up your business strategy and align your objectives, a balanced scorecard can help. In fact, 88% of businesses use a balanced scorecard for strategic management, so it’s clear that it’s a good choice for rolling out a new strategy.
Improving your internal processes
A balanced scorecard is used for strategic planning, so it’s unlikely that it’ll show you how to improve specific processes in your workflow.
However, it can show department leaders where other department’s KPI results are better than their own. As a result, this can prompt them to review and improve their processes to improve their KPIs.
Let’s use an example.
Your team’s working hard, and they’re getting tasks completed on time. But using the scorecard, you notice that another department is completing a similar level of work at a faster pace.
And so you start to wonder if there’s a way to speed things up and streamline the workflow.
After reviewing your workflow in more detail, you notice there’s no process in place to move completed tasks along automatically. To speed things up, you suggest adding automation to your work management system so that tasks move from one employee to the next without any holdup.
And voila — you’ve improved an internal process.
So if you want to identify areas of improvement in your current processes and streamline your workflow, a balanced scorecard is the way to go. You can plan, monitor, and execute the improvements using this framework.
Planning structural changes
When you decide to restructure your business, there’s a lot of work that needs to happen to pull it off successfully.
You can use a balanced scorecard to make the process easier to plan and manage.
Using this framework, you can identify the best way to roll out large structural changes to your business. It allows you to roadmap the entire structure change in one location, giving you the chance to visualize how it will work and the steps you’ll need to take to bring it to life.
It’s also a great way to explain a new business structure to your team and external stakeholders. It’ll break it down in a way that’s easy to visualize and understand, showing everyone involved how each part of the business will be affected.
So if you’ve got some big structural changes planned for your company, consider using a balanced scorecard to map out the process. It’ll help you keep on top of planning and make sure that the changes are manageable and realistic.
How do you create a balanced scorecard?
Balanced scorecards vary from business to business, but you should follow some crucial steps when creating your own. Let’s find out what they are.
Identify strategic goals
Before you create a balanced scorecard, you first need to identify your goals.
Start by figuring out what you want to achieve from the scorecard and build your goals from there. You can have multiple goals that span across different areas of the business.
When it comes to creating your goals, we’d suggest using the SMART goals framework. SMART is an acronym for Specific, Measurable, Attainable, Relevant, and Timely. Using this framework helps you create clear and concise goals.
If you’ve never created SMART goals before, take a look at our SMART goals template. Using this template, you can make sure that your goals are achievable and realistic.
With these goals in place, you’ll be able to create a scorecard that’s aligned with your objectives.
Use a strategy map
Once your goals are finalized, it’s time to create a strategy map.
A strategy map shows the relationship between your goals. It takes you out of the short-term mindset and illustrates how all your objectives tie into the bigger picture. It’s a great way to visualize your company strategy and make sure that all your individual goals are aligned.
To save yourself time creating a strategy map from scratch, consider using an online strategy map template.
If you opt for our template, you can start with our pre-made design before making changes to suit your particular needs.
Create the balanced scorecard
With your strategy map in place, you can start to structure your balanced scorecard. Using the balanced scorecard template, fill in the four main sections and add the relevant information into each category. While doing this, make sure that everything aligns with your strategy map.
With the balanced scorecard template, our simple and intuitive whiteboard tool helps you create and share your balanced scorecard in no time.
Create a balanced scorecard framework
By now, you should have a pretty solid understanding of what a balanced scorecard is. You know why it’s helpful, how it helps business leaders with their decision-making, and when it’s best to use it.
If you’re thinking about creating a balanced scorecard, use our ready-made template and see if that works for you. It’s fully editable, and you can easily create your framework according to your organization’s needs. And remember, the balanced scorecard is a great tool to align your business strategy to your vision, improve your processes, and bring teams together.
