Having a Balanced Scorecard in your organisation

Back in the not-so-distant past, the world of work seemed a simpler place. Businesses and their employees didn’t seem to worry about targets, annual assessments, metric-driven incentives etc.

But then across the pond US organisations started to focus on the goals of increasing their production and efficiencies; and UK businesses started to sit up, take notice and follow in their path.

Early Metric-Driven Incentives – MDIs – were (generally) focused on the financial aspects of an organisation by either claiming to increase profit margins or reduce costs. They were not always successful, for instance driving down costs could sometimes be at the expense of quality, staff (lost expertise) or even losing some of your customer base.

Robert S Kaplan and David P Norton evolved their Balanced Scorecard system from early MDIs and jointly produced their ground-breaking book in 1996. Their have been many other experts who have jumped on the Balanced Scorecard wagon, producing a multitude of books all claiming to be the ‘definitive’ answer on Balanced Scorecards.

The definition of a Balanced Scorecard

What exactly is a Balanced Scorecard? A definition often quoted is: ‘A strategic planning and management system used to align business activities to the vision statement of an organisation’. More realistically, a Balanced Scorecard attempts to translate the sometimes vague hopes of a company’s vision into the practicalities of managing the business better at every level.

A Balanced Scorecard approach is to take a holistic view of an organisation and co-ordinate MDIs so that efficiencies are experienced by all departments and in a joined-up fashion.

Here’s what you need to know and grasp as an organisation when starting along the Balanced Scorecard path:

  • The company’s mission statement
  • The company’s strategic plan/vision

Then:

  • The financial status of the organisation
  • How the organisation is currently structured and operating
  • The level of expertise of your employees
  • Customer satisfaction level

Take a look at the table below – it indicates what sort of areas can be looked at for improvement:

Department Areas
Finance Return On Investment
Cash Flow
Return on Capital Employed
Financial Results (Quarterly/Yearly)
Internal Business Processes Number of activities per function
Duplicate activities across functions
Process alignment (is the right process in the right department?)
Process bottlenecks
Process automation
Learning & Growth Is there the correct level of expertise for the job?
Employee turnover
Job satisfaction
Training/Learning opportunities
Customer Delivery performance to customer
Quality performance for customer
Customer satisfaction rate
Customer percentage of market
Customer retention rate

As an organisation, once you have analysed the specific and quantifiable results of the factors listed above, you should then be ready to utilise the Balanced Scorecard approach to improve the areas where you have deficiencies.

The metrics set up also must be SMART (Specific, Measurable, Achievable, Realistic and Timely) and aligned with your company’s strategic plan – you can’t improve on what you can’t measure!

In our next post on Wednesday, we’ll look at the perspectives and implementation on the Balanced Scorecard approach.