Learning and Growth Perspective of the Balanced Scorecard

In the Balanced Scorecard there is a separate “Learning and growth” perspective. Let’s take a closer look at the objectives that one can map inside, and the measures that one can use.

As follows from its name and from the Balanced Scorecard paradigm, “Learning and Growths” perspective answers the question:

How must the company learn and improve in order to achieve its vision?

Education and growth perspective of the Balanced ScorecardIn other words, in this perspective we should explain what the company has to learn in order to:

  • Satisfy customer’s needs,
  • Improve business processes, and
  • Achieve financial goals.

This perspective serves to map some big learning goals; something that is relevant to the current business challenges. Having a separate learning perspective doesn’t mean that the company should stop other learning processes; on the contrary, this perspective just works as a compass to focus on the most important learning efforts. Regular insights, improvements and learning should still be  implemented in each business iteration.

What objectives do we map in “Learning and Growth” perspective?

Take the rest of the article as an example, not as a have-to-follow guide, as it doesn’t make sense using the objectives of other companies.

For example, small businesses will not really benefit from the “Strategy Awareness” objective discussed below, while this might be advisable for any international company.

For sure there are some generic strategies applicable to  most businesses, but the particular objectives inside the perspectives are company-specific.

Objectives need to be aligned with other perspectives

Whatever objective you have in the “Learning and Growth” perspective, it should not be by its self.

For example, if you want to expand information system capabilities in your company by implementing a new CRM system, then it should support some goals from above standing perspectives, like “faster prospect management” or “achieving a higher first contact resolution rate.”

Typical learning and growth objectives

Here are 3 typical objectives for the “Learning and Growth” perspective:

  • Employee capabilities (core competencies and skills). It might include:
    • Employees obtaining the skills necessary to support the strategy.
    • Facilitating people to gain a better understanding of some of the  company’s aspects (marketing, sales, etc.);
  • Information system capabilities
    • Explore what information systems (CRM, ERP, BMP) you might need to execute your strategy effectively;
  • Strategy awareness and motivation
    • Address some typical motivation and alignment issues by running the program that will explain strategy to your employees and involve them in the strategy execution.

Ideally, each of these objectives should be supported by the appropriate leading and lagging indicators. Let’s discuss some typical examples of such measures.

Examples of leading and lagging indicators

We discussed some typical objectives for the “Learning and growth” perspective. The next step is to come up with leading and lagging measures for those objectives.

Learning and growth perspective

Example of measures for employee capabilities

Let’s take “Skills development” as an example. What metrics can we use to measure it? Specific metric suggestion depends on the set of the skills that we believe are necessary to execute the strategy. To obtain these skills employees need to pass some training, thus obtaining expected competencies in the end.

Employee Capabilities

To measure this objective we can use:

  • The number of training hours passed – as a leading indicator;
  • Final exam score – as a lagging indicator;

These two indicators will help us to get a rough idea about how successful our skills development program was.

Strictly speaking these are bad measures as they tell us how successful the training was according to the parameters set by the trainer (the exam score). The better approach is to find a metric that will tell us how gained skills supported other objectives.

For example, if we trained a local partner to work with our product, then the result of the training is not just the final exam score, but the improvement of the first call resolution rate or the number of problems solved without escalation to the head office. You can find more details about measuring training impact in this article.

Other areas to measure:

  • Employee satisfaction
  • Employee retention
  • Employee productivity

An example of measuring IT innovations

Before implementing/improving certain informational system executives need to understand how this new system supports the delivery of the customer value and specific internal business process. A typical pitch by IT is something like “This is a SaaS solutions that will make things easier.” Statements like this are not aligned with any strategy objective and, as a result, are not really measurable. Ask your IT to compare a new solution to an existing one, start a discussion based on your strategy map and its objectives.

IT innovations

A typical metric in this case will be:

  • Leading: Resources (time, money) saved
  • Lagging: Improving customer retention, average shopping cart, etc.

An example of measures for strategy awareness and motivation

It’s a tough task to measure strategy awareness or motivation in absolute figures. The easiest way is to implement a survey to estimate an employee’s awareness about the company’s strategy. The results of the survey might be a base for further training.

  • Strategy awarenessLeading indicator: resources spent on improving strategy awareness (for example, training time);
  • Lagging indicator: average score of the strategy awareness survey.

Talking about motivation and engagement issues, top managers can use the same approach with a survey and support it with the analysis of factors that influence the engagement level. As it was discussed in the previous articles, there are certain drivers of employee engagement. A learning and growth plan might include the work done using  those drivers.

  • Leading indicator: resources spent on engagement drivers;
  • Lagging indicator: engagement according to the survey.

Finding the right metrics

As you can see in this article I’ve used some generic metrics, to give an example. Most companies continue with these metrics in their business scorecard, measuring the number of hours spent on training or employee engagement index according to the regular survey. This is fine for the beginning, but it’s better to make a shift from these generic metrics to something tailored to the company’s objectives.

  • Instead of measuring employee engagement, focus on effectiveness aspects that are specific for your objectives (engaged employee is not necessary one that deliver you the right results on time).
  • Instead of measuring training hours focus on specific skills obtained and their application.

I know that is a difficult task, especially for the leading indicators. Here is an article that will help you to find better leading indicators for your project.

Example of cascading

A typical strategy map from business books is actually for a company’s top managers only. It needs to be translated (cascaded) to the lower levels. Let’s take “Strategy awareness objective” to give an example of the cascading.

Cascading in Learning and Growth Perspective

Top management scorecard

Objective: Achieve strategy awareness among line-level employees

  • Leading measure: Average number of hours spent in strategy awareness training per quarter per employee;
  • Lagging measure: Average strategy awareness score according to the survey conducted in all departments;

Marketing unit scorecard

Objective 1: Do strategy awareness training among marketing personnel;

  • Leading measure 1: Average number of hours spent on strategy awareness training per quarter for all marketing managers;
  • Lagging measure 1: Average strategy awareness score according to the survey with marketing managers;

Objective 2: Teach employees what marketing activities support company strategy and how;

  • Leading measure 2: The percentage of current marketing activities explained in the context of the strategy;
  • Lagging measure 2: Marketing and company strategy alignment awareness score according to the survey;

Marketing employee scorecard

Objective 1: Attend strategy awareness training;

  • Leading measure 1: Hours spend on strategy awareness training;
  • Lagging measure 1: Training exam score;

Objective 2: Link marketing department activities with strategy objectives on the strategy map;

  • Leading measure 2: Hours spend on strategy discussion;
  • Lagging measure 2: The number of correct cause-and-effect connections between marketing activities and company’s strategy map;

Learning out of the “Learning and growth” perspective

Following some discussions on the Internet about the Balanced Scorecard and its four perspectives, I had a feeling that authors tend to overestimate the focus on “Learning and growth” perspective. Some even imply that they have formalized all learning objectives of the company.

Actually, in this perspective executives formalize the top priority learning objectives, while “normal” learning process is still there. Ideally, continuous improvement needs to be implemented in company’s DNA. For more ideas about this I recommend learning about the Plan-Do-Check-Act cycle discussed before

Key takeaways

  • Objectives from “Learning and growth perspective” support objectives from Customers, Internal Business Processes, and Finance perspectives;
  • 3 areas to look at are: Employee capabilities; Information system capabilities; Strategy awareness and motivation;
  • Learning is a never-ending process that needs to be implemented in company’s DNA, not only in a “Learning and Growth” perspective;
  • Most likely your business will have its own learning objectives.

Other perspectives of the Balanced Scorecard

Aleksey Savkin is a business performance expert at BSC Designer. His areas of expertise are Balanced Scorecard, KPIs, Business Performance Management. Aleksey is the author of a number of articles and books on Balanced Scorecard.

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