Robert Kaplan and David Norton developed a management system, i.e., a balanced scorecard, in 1992 to measure the effectiveness of a company’s strategic plans.
Around 70% of businesses use a balanced scorecard to measure and manage their strategic plans. It revolutionized how businesses were traditionally only focused on revenue perspective and shifted it to measuring business performance.
This shift has helped businesses with continuous improvement, innovation, and growth.
What is a Balanced Scorecard?
A company excels only when they have a solid measurement system in place. A balanced scorecard is a tool that helps businesses to measure strategic management performance.
Balanced Scorecard identifies, measures, and manages various company perspectives, such as Financial, Customer, Business processes, and Learning and growth. It is used by businesses to:
- Identify and improve multiple business processes
- Gather information in a single report
- Help businesses to interpret the information and make better decisions for the company’s future.
Benefits of a Balanced Scorecard
Apart from helping businesses understand and evaluate their performance, a balanced scorecard has the following benefits:
A balanced scorecard is a tool for businesses to gather data and information in a single report. It allows companies to access information in one report instead of using multiple tools to gather it in various reports. It thus helps the team to access the data efficiently to improve operations and processes, which in turn reduces time, effort, and resources.
Improve Strategic Planning
The balanced scorecard helps managers or business leaders focus on priorities from each vital part of an organization. It then helps to align those priorities into one strategic plan for overall business growth.
A balanced scorecard is an essential tool for a company to keep all the perspectives (Customer, Financial, Business Processes, and Learning and Growth) aligned with the business goal all the time.
Organizational and Skateholder Alignment
Although the managing department always has a clear view of the objectives taken by the company and the strategies to execute them, without a Balanced Scorecard, it is not possible to convey the information to others who are working on the ground level, which may make the organization crawl.
An organization grows when everyone not only understands the strategies but also involves themselves in the execution of those strategies; a Balance Scorecard helps with that. It also aligns the stakeholders to work together towards the same objectives.
More Insightful Information
Balanced scorecards help businesses measure important aspects of a business through key performance indicators (KPIs). These KPIs help create and track strategic objectives.
Elements of a Balanced Scorecard
Four main perspectives of a balanced scorecard focus on their respective four parts of a business’s performance.
The”customer perspective helps”businesses to measure- “How do customers see them?”. In this competitive market, companies have understood clearly that customers and only customers are responsible for their growth and success.
They have made their mission to focus on delivering great value to their customers. The balanced scorecard help businesses to reflect and track factors that improve customer service and satisfaction. It also helps find new customers, increase customer retention, and build brand recognition.
The financial perspective identifies how businesses look to their shareholders. It measures how a business’s strategy, implementation, and execution will affect its financial health.
This perspective has been overly used in the past as a traditional way of measuring business growth. It helps businesses evaluate and track their financial goals by measuring cash flow, quarterly sales growth, return on investment, profit, etc.
#3. Business Processes
This perspective focuses on how well a business performs internally and what it can excel at. It helps companies to identify any bottlenecks, gaps, or delays early and helps improve business processes.
This perspective streamlines business processes and improves their effectiveness and efficiency. The internal business processes must be measured for factors such as employee skills, Productivity, quality, etc., that help meet customers’ expectations.
#4. Learning and Growth
The learning and Growth perspective measures how a company can continue to improve and deliver value. A business’s objective to learn, evolve and innovate continually directly impacts its value.
The more the company continues to launch a new product in the market, the more it can increase revenue, customer value, and shareholder value. This perspective also tracks how quickly the business can adapt to new market needs and requirements.
How to create Balanced Scorecard?
A Balanced Scorecard is more effective if the framework is strategy-driven and easy to point out where to improve. Here are a few steps to create an effective and efficient Balance Scorecard-
Make a List of Your Strategic Goals
Having an outline of all the objectives and how to achieve them makes it simplified for all the employees and motivates them to work as a team. It helps in assessing performance also and helps in becking areas of betterments.
Creating Checkpoints to Measure the Performance
Making goals motivates, but assessing performance creates a competitive mindset that drives the organization to achieve the best outcome possible. It helps align the progress with the goals and find the most hardworking hands to reward them by being thankful for contributing their best.
Build a Strategy Map and Analyze Performance
A strategy map connecting all the individual perspectives will give a broader view of achieving the organization’s long-term goals. It works as a relationship diagram among the teams, departments, or individual contributors with a record of their respective performance metrics.
To sustain the pace of progress of any organization, it is essential to figure out fast if there is any area that is lagging in the organization. A strategy map helps in analyzing that and directs the team to overcome the lag.
Communicate and Exchange Feedback
After analyzing the Scorecard, the next step is to share the results with the stakeholders and team members to acknowledge the areas that need to be worked on. Arming up those areas with equipment and skills and providing feedback will help the organization in the process.
Develop and Implement Chcompany’s a Better Growth
After evaluating and aligning the progress to the company’s vision, it is important to take the necessary actions to develop and implement some strategic changes to the current plan by collaborating.
Consider sending clear communication to everyone about the new initiatives taken and why it is taken with proper support to make all the brains work, keeping the same goals in mind.
How does a Balanced Scorecard affect a business’s efficiency and performance?
A Balance Scorecard not only measures your company’s financial growth but also gives you an analytical view of the business performance. Here is how a balanced scorecard affects a business’s efficiency and performance:
Making Strategy Easier
A Balanced Scorecard makes it easy to find out which department is falling behind and which one is performing well. It helps in mapping the individual strategies to the bigger objectives of the company.
Which strategy is working better and where it is failing, which may do the job done, and where to focus less? A Balanced Scorecard works as a monitoring system for the organization.
Makes Communication and Execution Easier
It provides a comprehensive view for the stakeholders to visualize the strategies on a single page and communicate or share them easily with the team members. It helps everyone to understand and review the strategies and prevents miscommunication.
Helps in Managing Information and Reporting Performance Better
A Balanced Scorecard helps in managing the areas where it needs improvement. It helps in designing effective reports containing concise information that helps in taking important decisions. This makes it easy to measure where the organization is standing in achieving its goals.
Helps in Aligning Processes
Achieving goals gets smoother when all ongoing processes are heading forward to attain the same objective. Aligning all the processes like budgeting, risk managing, and analyzing altogether drives the organization strategy-focused.
Examples of a Balanced Scorecard
Following are a few examples of the balanced scorecard:
Strategy Balanced Scorecard
Bank Balanced Scorecard
Vision Balanced Scorecard
Balanced Scorecard Makers
Canva is one of the most popular tools allowing non-technical users to easily create, share and download balanced scorecards. The tool enables free design unless you use some of their premium images, priced at $1.
- Canva has a library of pre-built templates professionally designed to fast-track workflow.
- It has over 20 types of graphs available for its users.
- Users can create, share, and download balanced in high resolution and even embed it in their presentations and reports.
- The drag-and-drop feature allows users to create a balanced scorecard quickly.
Canva has mobile/desktop applications, but users can create balanced scorecards without creating an account using their website.
#2. Design Cap
Design Cap is another free software to create a powerful and professional balanced scorecard. The platform has a library of customizable examples which users can use.
- It has Professionally designed various templates like Business objectives, E-commerce charts, Marketing Balanced Scorecards, Mission and Vision, and more.
- It allows easy customization to pre-built templates saving time.
- It offers a powerful editing tool.
Creating a balanced scorecard with Design Cap is quick and simple, and it allows sharing it via social media as well.
#3. Visual Paradigm
Visual Paradigm allows users to create a professionally balanced scorecard within minutes easily.
- It has a library of over 2000 templates.
- It allows importing, editing, and collaborating in Visio Drawing
- Drag and drop feature to position shapes correctly.
- Allow seamless embedding of balanced scorecards in MS Word, Powerpoint, and Outlook.
The software allows teams to collaborate and communicate with its real-time diagram editor, teams can add comments for discussions.
Vizzlo is a performance management tool allowing users to keep track of their company’s strategy with a balanced scorecard.
- The software has drag-and-drop shapes to position them on the diagram precisely.
- It provides various themes to refine your chart.
- Vizzlo’s balanced scorecard is very easy to edit and customize as per the user’s needs.
The platform has various custom colors and fonts to make your balanced scorecard more interesting.
Creately is another popular tool for creating a balanced scorecard and implementing, managing, and improving your business’s strategy.
- It has a library of customizable pre-built templates.
- The platform offers teams to collaborate in real time.
- It allows for setting goals and measurable KPIs.
- It also allows the creation of action plans on the platform’s infinite canvas.
With this platform, you can clearly define your company’s mission, strategy, values, and key partners to share common goals with the team.
The balanced scorecard is an important tool to drive performance and keep track of your business’s vision and strategy. But choosing the right software to effectively create and manage your balanced scorecard is equally important.
You should choose software that provides customizable templates, powerful editing tools, and real-time team collaboration (If required). You can go through the software mentioned in the article and choose the one that fits perfectly your business and team’s requirements.
You may also explore how you can define your business goal with strategy mapping templates.