How to Create a Balanced Scorecard: Nine Steps to Success
BSI’s award-winning framework for strategic planning and management, Nine Steps to Success™, is a disciplined, practical, and tested approach to developing a strategic planning and management system based on the balanced scorecard. It gives organizations a way to ‘connect the dots’ between the various components of strategic planning, budgeting, operations and management; meaning there will be a visible connection between day-to-day operations, the measurements being used to track success, the strategic objectives the organization is trying to accomplish, and the mission, vision and strategy of the organization.
We develop the balanced scorecard (BSC). Organizations use BSCs to:
- Communicate what they are trying to accomplish
- Align the day-to-day work that everyone is doing with strategy
- Prioritize projects, products, and services
- Measure and monitor progress towards strategic targets
The Four Balanced Scorecard Perspectives
A balanced scorecard looks at your organization from four different perspectives to measure its health. Each of these perspectives focuses on a different side of your company, creating a balanced view of your organization
Learning and Growth
Internal Processes
The learning and growth perspective looks at your overall corporate culture.
- Are people aware of the latest industry trends?
- Is it easy for employees to collaborate and share knowledge, or is your company a mess of tangled bureaucracy?
- Does everyone have access to training and continuing education opportunities?
Technology also plays a major role in learning and growth.
- Are people able to use the latest devices and software, or are your archaic systems stuck running yesterday’s tech?
- What are you doing to make sure your organization is staying ahead of your competition?
The internal business processes perspective looks at how smoothly your business is running. Efficiency is important here. It’s all about reducing waste, speeding things up, and doing more with less.
- Are there unneeded obstacles standing between new ideas and execution?
- How quickly can you adapt to changing business conditions?
This perspective also encourages you to take a step back and get a little philosophical about your company.
- Are you providing what your customers actually want?
- What should you be best at?
Customer
Financial
The internal business processes perspective looks at how smoothly your business is running. Efficiency is important here. It’s all about reducing waste, speeding things up, and doing more with less.
- Are there unneeded obstacles standing between new ideas and execution?
- How quickly can you adapt to changing business conditions?
This perspective also encourages you to take a step back and get a little philosophical about your company.
- Are you providing what your customers actually want?
- What should you be best at?
Just because we’re taking a balanced look at your organization doesn’t mean that we want to ignore traditional financial measures. Quite the contrary, the financial perspective is a major focus of the balanced scorecard.
- Are you making money?
- Are your shareholders happy?
The financial performance of your organization may be a lagging indicator showing the result of past decisions, but it’s still incredibly important. Money keeps companies alive, and the financial perspective focuses solely on that.
Using Your Balanced Score Card
When you see that an objective isn’t performing up to par, it’s absolutely essential to proactively fix the problem. By creating strategic initiatives, you take action to address the source of the issue. For example, if a specific process is undermining organizational performance, it might be time to initiate a training program or invest in new product development to stay ahead of market demands.
Strategy Reviews
The world is ever-evolving, and so should your strategy. Holding strategy reviews at least once a year can be instrumental. These sessions allow your management team to recalibrate objectives, set new measure goals, and ensure that your organization remains aligned with your broader business strategy.
Your balanced scorecard should be a living management tool that grows with your organization. Regular reviews ensure continuous improvement and foster better decision-making.
Automation
Tools like Excel or PowerPoint might get you started on your strategic planning journey, but to truly bring your balanced scorecard to life, you’ll need to leverage balanced scorecard software. Automation not only streamlines your performance management process, but ensures consistency in tracking and reporting. The Harvard Business Review, among other sources, has highlighted the increasing importance of integrating technology and automation in modern strategic management.
Cascading your Strategy
Your organization’s balanced scorecard provides a big-picture view of your overall strategy, but you can also create balanced scorecards for individual business units and teams. This practice, often referred to as cascading, helps to align every part of your organization with your central strategy. Cascading communicates your strategic performance to every employee, and allows low-level teams to understand how their contributions impact financial results and overall organizational health.
