Balanced scorecard is a methodology that was developed by professors at Harvard Business School in the 1990s and has changed the way that company directors and managers evaluate their businesses.
But what is balanced scorecard? What are its benefits and how does one implement it in an organization? If you’re interested in finding out more about this subject, keep reading this post!
What is Balanced Scorecard?
Balanced scorecard, or simply BSC, consists of “balanced performance indicators.” It’s a methodology oriented towards the strategic management of organizations that presumes that a company’s management indicators shouldn’t be limited to financial and economic information.
Even though financial indicators are of absolute importance, they aren’t sufficient to ensure that your company is heading in the right direction. It’s fundamental that company performance be evaluated with other objectives that make up your strategic planning.
Thus, balanced scorecard can be defined as a strategic management model that helps verify a company’s progress in reaching its long term goals. To do this, 4 strategic perspectives have to be taken into account:
- Financial perspective;
- Customer perspective;
- Internal process perspective;
- Learning and growth perspectives.
For each perspective, goals should be predefined which will then be measured and their progress followed.
For a company to become more profitable, it needs to satisfy its customers and the market. To do this, it’s crucial to improve internal processes, which will only be possible through learning and innovation.
What are the Benefits of Implementing Balanced Scorecard?
Implementing balanced scorecard can offer the following benefits to organizations:
- Makes it possible to evaluate performance overall;
- Helps leaders develop common sense in terms of company strategy;
- Enables managers to communicate this strategy to other employees, establishing a connection with the established goals;
- Makes it possible for companies to integrate their financial plans with their business plans;
- Makes it possible to evaluate learning and perfect it constantly.
How Should You Implement Balanced Scorecard?
Implementing balanced scorecard should involve the entire company, because it’s imperative that everyone can see where the company wants to go.
The first step is creating a strategy map, which should contain the mission and goals of the company and every department, as well as the points where they intersect and are interconnected – all of this taking into account the perspectives listed above.
Make a BSC presentation to the entire staff encouraging a change in your company’s culture. All employees need to be familiar with this methodology before it’s applied.
Define the strategic indicators that will be used. BSC is a tool that’s based on performance metrics. That being so, it’s essential that the measures present the evolution of the program in a periodic fashion. It’s only in this way that your company will be able to evaluate if it’s heading in the right direction to achieve its objectives.
Each company has its own specific reality, which means that the indicators need to reflect this. It’s absolutely essential that everyone involved is engaged in the same purpose, which can be achieved through broad and efficient communication.
Now that you’ve learned something about balanced scorecard, learn how to manage projects and improve your company’s performance!