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What is a balanced scorecard? The balanced scorecard (BSC) is used for strategic planning by companies and organizations. Some of the purposes of a balanced scorecard include the following:
A company scorecard looks at the company’s strategic initiatives and attaches them to financial measures to provide a balanced view of performance. One of the main benefits of company scorecards is that they use a structured framework and give the organization a way to connect different components of their strategic plan and day-to-day management. Key performance measures, such as KPIs, tell an organization how well they are matching their strategic goals with the desired outcomes for the business. To understand how a scorecard can work for your company, let’s first look at how they are structured.
What Are Balanced Scorecard Perspectives? There are four different perspectives that help companies develop objectives, measure progress, and create initiatives. Here's a closer look at the four balanced scorecard perspectives.
What are balanced scorecard measures? For each identified objective, the company creates at least one Key Performance Indicator. KPIs are quantified and tracked so that leaders and managers can measure their success over time. Managers use KPIs to keep their departments on track and to create new strategic initiatives when necessary.
So now that we’ve outlined the four perspectives, let’s take a closer look at each.
What are the four perspectives of the balanced scorecard?
Let's take a closer look at the four strategic perspectives one at a time. We’ll share some balanced scorecard perspectives examples.
1. Financial Perspective
The financial business perspective ensures that an organization invests time and money to keep the key risk of business operations in check. These goals involve shareholders, suppliers and customers. in public companies, shareholders provide capital and have a huge stake in the financial success of the business. Therefore, they want to make sure that the business is generating revenue and that all initiatives tie into this purpose. Financial perspective balanced score cards improve the value proposition of the company by reducing costs and increasing revenue.
2. Customer Perspective
The customer perspective of a balanced scorecard shows how an organization provides value to its clients and customers. It also determines customer satisfaction and creates measures to improve customer retention. Customer satisfaction is considered a main indicator of success since it directly impacts profitability. This scorecard shows how your reputation compares to competitors and allows organizations to challenge their internal perspectives.
3. Internal Business Processes Perspective
The internal business processes perspective shows how well the company is being run. This scorecard measures the effectiveness of the business. It also helps evaluate services and products to determine whether they meet the needs of the customer. This scorecard tells a company what they're good at. This can help companies formulate marketing strategies to show off their strengths and to pursue initiatives to strengthen areas where they need to improve their performance to meet the needs of the customer.
4. Organizational Capacity Perspective
The organizational capacity perspective helps companies optimize objectives and goals. Employees in each department must demonstrate high performance in terms of culture, leadership, and the application of knowledge and skills. The scorecard can often lead to organizational changes that help departments live up to the expectations of managers. Typically, changes are made to smooth out the workflow of activities.
Some of the most popular companies using balanced scorecards include Volkswagen and Apple. These companies have created scorecards that other companies emulate to attain the same level of performance and professionalism. It's relatively easy to find balanced scorecard example pdf files to share with colleagues online when you're looking to create your own scorecards.
The Volkswagen balanced scorecard focuses on the financial performance of the company and includes measures for learning and growth, customer relations, and internal business processes. In doing a quick search for a free Volkswagen balanced scorecard there are plenty of resources available to help structure your initial scorecard. The scorecard looks at past performance and tries to predict future performance. Creating a unique balanced scorecard helped the company understand how serving its customers ties directly into financial goals. Volkswagen was also able to increase value to each customer. By looking for cause and effect, scorecards provide learning and growth for employees and help them sell more cars.
The Apple balanced scorecard helps managers elevate innovation and improve performance beyond expectations. The company uses the scorecard to measure its performance against other tech market competitors. It has well-set expectations and ties into the financial and technology goals of the company.
The Harvard Business Review found the following performance indicators stressed on the Apple scorecard:
Apple didn't always focus on customers, but has dramatically shifted their focus on customer satisfaction since the company began using scorecards. The company even went so far as to create its own customer satisfaction surveys designed for the tech industry. Apple's commitment to aligning it's priorities with customer satisfaction helped increase its market share and help shareholders increase the value of their stake in the company
These five indicators provide a framework for long-term control over financial performance.
For those wondering how to create a balanced scorecard, it starts with finding templates that you would like to mimic for your own company. This might come from other companies in the industry or online examples. Some companies hire consultants to show them how to create a balanced scorecard template specific to their business.
Begin by listing your company’s strategic goals. This can take some time to do and may involve input from several different departments. Once you have identified the strategies, you can create a balanced scorecard strategy map to help you figure out how to meet them.
A strategy map diagram shows connections between different strategic objectives. This allows you to quickly distribute information about organizational goals and how each department an individual can contribute to the overall goals of the company. It contains directional arrows for workflow and relationships between different departments.
Next, you can outline the measures to meet your strategic goals. For example, your internal business process goals may include becoming a leader in innovation in your industry. You could use this to measure the success of new services that you offer.
The balanced scorecard model first appeared in the Harvard Business Review 1992 edition. It gives executives a way to create a framework to measure core performance objectives. You can find many examples of balanced scorecard PDF files online. Other companies keep their balance scorecard template in Excel. You can also create balance scorecard PPT files for presentations to show the company is meeting its goals and how each Department can contribute to new goals.
However, in today’s dynamic, high growth environment, many companies have shifted to leveraging solutions that allow them to track data in real-time and measure success through KPI reporting that can be customized for any leadership team. It isn’t enough just to set and forget when it comes to scorecards, as much of the value comes through the ability to interact proactively with the changes occurring in your business.
Scorecards measure four different perspectives, as discussed above. They complement financial indicators to go deeper into how internal processes, customer service and innovation can drive the company toward better financial performance. The measures on scorecards differ from traditional measures such as return on investment and net income, although those are obviously very important too.
Companies use scorecards to evaluate the performance of departments, managers and individuals, as well as the company as a whole. They also use scorecards to strategize how to set future goals. Unlike conventional measures, the four perspectives provide external measures such as operating income and connect them to internal measures impacting new product development. It's a proactive way of doing business that forces a company to look outside of itself when measuring its own success.
Balanced scorecard examples can help your organization understand how to refine its own measures and to create a unique scorecard.
Approximately 57% of large companies around the world use balanced work cards in evaluating individual and departmental performance. This includes government entities and private organizations looking to compete on a global level.
Looking at balance scorecard company examples helps your organization establish clear future objectives. Choose indicators from your own unique perspective as well as monitoring the performance indicators used by your competitors. By choosing indicators wisely and monitoring your performance you can move ahead of competitors and find new markets that align with your company's skillsets.
Balance scorecard should include action plans, goals and initiatives to help your company meet the goals set by shareholders and other stakeholders. It should also take into consideration what's important to your customers.
Following these points can lead to an effective scorecard. However it's important to constantly re-evaluate how you measure your company so that you can continue to remain competitive and improve performance over time.
For company’s looking for guidance on how to build and implement their company scorecards, Elate is here to help. From working with hundreds of strategy and ops leaders across high growth companies, Elate was built to easily and intuitively allow companies to align their strategic vision with execution. Through our company scorecard, you are able to easily connect the data sources needed to integrate KPIs and prioritize company initiatives that align with your balanced scorecard approach.
From sales and marketing to product and engineering, Elate is helping companies unify all of their data in a single source of truth to measure their company’s initiatives.