Balanced Scorecard can help improve your company’s performance without paralyzing your company’s resources due to unnecessary bureaucracy. To facilitate Balanced Scorecard in boosting your business performance, you first have to understand how the system works from the inside.
The big picture with regard to Balanced Scorecard
Get the big picture about Balanced Scorecard and how to use it. The typical mistake is to think that Balanced Scorecard is about Key Performance Indicators (KPIs) or dashboard. Dashboard and KPIs are part of the Balanced Scorecard, but just having these parts won’t improve your business performance.
Explaining Balanced Scorecard by using an analogy always helps. Our analogy will be a nature walk that you normally take to explore beautiful neighborhoods.
The first question you have to answer is, “What are your strategic plans?” or in simple words, “What do you want from your business?” It would be better to begin with the mission and vision of your company. Then involve your team to figure out current business priorities and objectives.
- The results of this analysis are clearly formulated business objectives.
- Check out “Vision and Goals vs. Strategy Map and Objectives” to learn the difference between “goals” and “objectives.”
Nature walk analogy: before going out, you define your most important “business” goals, such as “seeing the beautiful waterfall”.
The next step is to create your strategy map. Key rules about developing strategy maps for Balanced Scorecard:
- It should be small (ideally only 1 page in length)
- It should show how you are going to achieve your business goals
- Critical milestones should be on this strategy map
Nature walk analogy: its obvious that you should have a map with your goal (waterfall) marked appropriately, along with a few important milestones.
KPIs and Benchmarking
To what extent were your strategic objectives achieved? What is your progress? To answer these questions you will need Key Performance Indicators (KPIs). These measures will help you to understand where you are and if you are on the right track.
It is not sufficient to just have measures, as metrics should be targeted on some specific value. Where do these values come from? You might take it from the experience of your company, or you might use benchmarking values, which analyse industry-standard values for these respective KPIs.
Nature walk analogy: you will need a compass or GPS to control your current position. Note that both, you GPS and your map, already have some scale that will be helpful to you in determining your position.
You have your strategic goals, and you know how to measure your progress with KPIs. Now, what is missing? Correct! In order to change anything, you need to act!
Each KPI and business goal should be aligned with a specific action plan, which should describe in detail what initiatives and activities will help you to changing your current state.
Nature walk analogy: with only GPS and map, you won’t see much. You need to pack some water and food with you, and you need to start walking.
Ensuring Balanced Scorecard Success
Now you have a good plan to make your Balanced Scorecard project successful:
- Start with strategic plan.
- Create a strategy map.
- Assign KPIs to business objectives from strategy map.
- Align business objectives with action plan.
There are two more steps that are not included in the list, but they are crucial to a successful Balanced Scorecard.
- Involve your people! From the very beginning, involve people that will work on your strategic objectives, KPIs, initiatives and activities. Most likely, they know more in their specific business area, so collaboration when you define strategic goals, KPIs and a action plan is critical.
- Update Balanced Scorecard regularly! Let’s face the problem head on; it is hard to formulate correct business goals and KPIs from scratch. You will make some mistakes, and your business will change. Plan regular updates of your Balanced Scorecard to ensure successful implementation of this powerful business method in your company.
Automation of the Balanced Scorecard
The Balanced Scorecard framework described above is a complex system. One need to have an automation mean that will do the routine job and will allow to focus on what matters. I recommend to use BSC Designer to follow the Balanced Scorecard framework.
Checklist for all of these ideas
All of the discussed ideas about the Balanced Scorecard might sound very complex for now. I suggest for readers to have a look at this checklist that showcases the most important situations with the Balanced Scorecard and gives some ideas about how to manage with them.