Lesson 6: The Balance Scored Card: A Tool to Implement Strategy

A ___________ is a strategic planning framework that companies use to assign priority to their products, projects, and services; communicate about their targets or goals; and plan their routine activities.

A balanced scorecard is a strategic planning framework that companies use to assign priority to their ________; __________; and _________.

acts as a structured report that measures the performance of company management.

The management team can be evaluated against __________ to show their contributions to the strategy and attainment of the targets set forth. WCommunication across team members and departments becomes easier when everyone is speaking the same language. In other words, having a streamlined performance measurement system means that it’s easier to talk about strategy and progress within the organization.

What KPIs stands for?

Organizations use balanced scorecard (BSCs) to:

Who developed balanced scorecard and in what year?

Developed by Robert Kaplan and David Norton in the early 1990s, the balanced scorecard is more than a measurement system—in fact, it's a _________.

What is the title of the book of Kaplan and Norton?

In their book The Balanced Scorecard: Translating Strategy Into Action, Kaplan and Norton describe the balanced scorecard as a __________________.

According to Kaplan and Norton, because financial measures report on the past, they offer "_________________________" but not "_________________________".

In the ______________, organizations must "create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

The Benefits of a Balanced Scorecard

A balanced scorecard can help your organization both articulate and act upon your vision and strategy. Use it to:

The Balanced Scorecard approach

To understand The balanced scorecard approach, it’s important to understand that it looks at business through four distinct perspectives. These perspectives are:

The measurement of the organization’s success in terms of finances. This includes items like sales numbers, profit margins, and return on investment (ROI). The financial measurements that are the most important will differ based on the specific goals of the organization.

Looking at the organization from the viewpoint of a customer or stakeholder. This helps businesses understand what is working with their customer base and make necessary adjustments. Some metrics to measure this might be the number of tickets resolved, customer satisfaction surveys, and customer service calls.

Examining the efficiency and quality of the organization’s performance internally. On the balanced scorecard, this perspective helps organization leaders analyze how well internal systems and processes are working, or if something could be improved/changed to increase profitability.

Looking at what’s important to performance, from technology used to company culture to human capital and infrastructure. All of these items force company leaders to look at items (that often get overlooked) and assess how they are all serving the company as far as goal achievement goes.

Advantages of a balanced scorecard:

Different departments within an organization may have their own way of measuring performance and what they consider to be important in terms of metrics. With a balanced scorecard, different leaders and departments can still individualize their performance measurement, but it all falls within a set structure that can be understood across the organization. It gives a common place to everyone in the company to measure success.

Communication across team members and departments becomes easier when everyone is speaking the same language. In other words, having a streamlined performance measurement system means that it’s easier to talk about strategy and progress within the organization.

With a balanced scorecard, members of the organization can easily link their objectives and goals at different levels of the company. It takes the guesswork out of trying to understand everyone’s responsibilities and it gets teams and departments synced up under one structure. This also leads to having a much clearer picture over projects and initiatives, which hopefully turns into a shorter turnaround time with more optimal results.

A balanced scorecard helps employees “keep their eyes on the prize” so-to-speak in terms of goals. Individual workers may find it helps their own performance when they can see the greater purpose behind the goals and objectives they’re aiming to hit. It also has the added benefit of helping employees find purpose in the organization, thus keeping them engaged in their work.

Disadvantages of a balanced scorecard

A balanced scorecard is supposed to provide a framework from which to work from, however, it will still need to be customized to every organization using this system. This can take up a lot of time, and while examples are helpful, they can’t be copied exactly due to the unique needs of every business.

For the balanced scorecard system to be fully effective, it must be implemented from the bottom all the way to the top of the organization. This means getting buy-in from leaders, which can sometimes take some convincing, not to mention the learning curve involved with getting the whole organization to use the new system.

The framework itself of balanced scorecards takes some time and dedication to understand. There are countless resources and case studies to read from and it’s easy to get bogged down with the many different ways of using this method.

Most of the time balanced scorecards require managers and team members to report information, which means logging data. Many don’t like this because they find it tedious and also, it can get in the way of doing the work required to meet objectives.