Balanced Scorecard - Reports, Examples, Guides

Balanced scorecards have been subjected to a lot of scrutiny these days. This is why steps to make balanced scorecards work have been developed by experts and analysts.

Yes, we all know how important the balanced scorecard is as a managerial tool these days. With all the hype that has been going on about this managerial tool, it is somewhat hard not to hear about how effective it has been. However, with the onset of recession and its frustrating effects on global economy, there has been a lot of talk and speculation regarding the efficacy of balanced scorecards. There are even some analysts who go as far as saying that balanced scorecards are mere tools of the past – that they do not really have that strong an effect as they used to have on the success of companies and enterprises nowadays. Still, these are just claims that are not really supported by stats and figures. But if you take time and really go back to the basics of balanced scorecard designing and development, you would see that there is still much promise to behold with these managerial tools. More importantly, there are also steps to make balanced scorecards work that your company itself can take.

The first step is to translate the mission, vision, and strategies of your company into implementation by means of four perspectives – financial, customer, business process, and learning and growth. By compartmentalizing, it would be easier for your company to monitor not only its present performance but its future performance as well.

To better compartmentalize everything, there is a need to raise a few questions. For the financial perspective, you need to ask yourself how the company should appear to its shareholders so that it would success financially. For the customer perspective, the company should then focus on its appearance to its customers. For business processes, the company should ask which business processes it needs to be good at so that both customers and shareholders are adequately satisfied. And for learning and growth, the company has to determine how it can sustain its ability to adapt to changes and make necessary improvements in order to achieve its vision.

The next step is to monitor and score or evaluate four areas for each perspective discussed above. These four areas include objectives, measures, targets, and initiatives. Objectives pertain to the major objectives that the company wishes to achieve; for instance, profit and growth. Measures are the observable parameters used in measuring the company’s progress towards achieving those objectives. Targets are more specific values in nature that are used in the process of measuring progress. Initiatives, meanwhile, are the programs or the projects that are implemented to meet set objectives.

Lastly, outcome metrics need to be implemented as well. The logic behind this is quite simple – what you cannot measure, you cannot improve. Thus, outcome metrics need to be implemented with the priorities of the company’s strategic plans as bases. Moreover, these priorities give managers the criteria and key business drivers that they need to look out for in the desired metrics. Information is then collected and implemented in numerical form for analysis, thereby providing your company necessary feedback regarding its progress.

These are the necessary steps to make balanced scorecards work that companies need to keep in mind. With this as your guide, you are sure to have an effective balanced scorecard in your hands.

Scorecard Best Practices Articles balanced scorecard, Finance, Managerial Tool

Preparing BSC implementation is the first step towards successful use of the managerial tool. With sufficient preparation, the tool can be maximized and used to its full potential.

It is not enough for businesses to develop and design a balanced scorecard or BSC that they can use to monitor and evaluate corporate performance. They have to go the extra limb, especially when it comes to BSC implementation. A lot of companies neglect to undergo preparation procedures, assuming that these are no longer necessary. Nothing could be further from the truth because BSC implementation does entail much preparation. Why? This is because implementing the BSC as a managerial tool that would be used to evaluate not just the performance of the company, but that of the employees themselves would certainly bring about a lot of changes. Yes, these may be positive changes, but these are changes nevertheless. And we all know how people react to changes at first bat – most tend to resist them, no matter how positive the changes may be. Thus, preparing BSC implementation becomes a must for all companies to undergo.

Going back to the basics, the BSC generally covers four aspects, namely finance, customers, internal business processes, and learning and growth. The interplay of all these four aspects would then be indicative of the company’s performance. More importantly, this would indicate whether or not the company is performing well. This is all the more reason why the scorecard is termed as “balanced scorecard”, to connote the “balanced” nature of the tool itself. Thus, it is important to incorporate balance, cohesion, and order across these four perspectives.

The success of BSC implementation is largely dependent on whatever strategies would be employed by the management team – more specifically, the members of higher management, that is. Thus, upper management should be wary and extremely careful when it comes to choosing which strategies to use towards effective BSC implementation. Whatever strategy or combination of strategies a company employs, all of these should be sound, stable, and deemed effective by the larger population of higher management. Effective management is then the logical beginning of effective BSC implementation.

Pertinent facts and figures should support the procedure carried out by the implementing body. Do not think of foregoing this just because this is still quite early when it comes to implementing the whole procedure. In fact, much focus should be placed here because this is the foundation of success – or failure – for the BSC as a managerial tool. This is why everything should be backed by facts and figures.

Communication is also another aspect that should be given much focus. As mentioned above, employees tend to shy away from whatever changes implemented by the management, especially the ones that are implemented quite suddenly. This is why it is important to foster open communication lines, so that early on, employees would already be aware of the coming changes brought about by the tool. Moreover, the purpose of the tool as well as how it would be used should be discussed to the employees themselves. This way, it would be easier for employees to fully grasp just how beneficial the use of the tool really is.

Preparing BSC implementation is indeed necessary, from all the information discussed here. With sufficient preparation, the company itself would be ready to deal with whatever curveballs that may come its way.

Scorecard Best Practices Articles balanced scorecard, Businesses, Managerial Tool

Today’s financial struggles call for a lot of changes – including planning balanced scorecards. To do this, we all have to go back to the basics in balanced scorecard development.

Planning balanced scorecards is something that today’s companies in the corporate setting should very well do. With the economic meltdown that we are all experiencing today, more and more companies are dropping like hot potatoes off the grid. Now, members of the senior management team might think that the implementation of balanced scorecards in the face of everything that we are going through now does not really make that worthy an investment to begin with. However, balanced scorecards have always been the managerial tool to use when companies aim to maintain balance in all sorts of aspects across department levels and divisions. Who’s to say that the same role cannot be carried out today, in the midst of the economic and financial struggles all enterprises are going through? If anything, balanced scorecards just might be the perfect tools to use now that we are going through financial turmoil in the corporate world.

Thus, we need to go back to the basics of developing balanced scorecards because the scorecards that you have right now just might need revamping. First and foremost, you need to understand that balanced scorecards cater to the four strategic perspectives that encompass the complete functioning of any enterprise. These four perspectives are Financial, Customer, Internal Business Process, and Learning and Growth. To further analyze this framework, let us break down each perspective.

For the Financial perspective, you need to ask yourself how the company should appear in the eyes of its shareholders so that it could achieve financial success. For the Customer perspective, you then need to ask how the company should appear in the eyes of its customers to achieve its vision. For the Internal Business Process perspective, the question to pose would be what types of business processes should the company excel at so that it would be able to satisfy both its shareholders and its customers? And for the Learning and Growth perspective, you need to determine how the company can sustain its abilities to foster change and improvement, and in turn, it could then achieve its vision.

Now that we have defined the four perspectives that comprise the framework, the next step is for you to come up with metrics for each perspective. Bear in mind that the metrics or the measurements here should all be centered on a particular strategy and they should be linked with one another in a consistent fashion, thereby creating mutual reinforcement.

For the Financial perspective, the following would make great metrics – cash flow, sales growth, economic value added, and the return of capital employed. For the Customer perspective, market share, profitability, customer satisfaction, customer retention, and customer acquisition make great metrics.

For the Internal Business Process perspective, you need to break this down a bit. The metrics would then have to be geared towards innovation, operations, and post sales service. Metrics for innovation would measure how well the enterprise is able to identify with the future needs of its customers. Operations metrics would measure cycle time, costs, and quality. Post sales service, on the other hand, would measure repair, warranty, the treatment of defects, as well as returns.

For Learning and Growth, metrics for people would include training, employee retention, morale, and skills. Metrics for systems, meanwhile, include the availability of crucial real time information that is needed for rank and file employees.

When planning balanced scorecards, especially during these trying and frustrating times, it really helps to go back to the basics. Revamp your scorecard and make it a tool better equipped to deal with today’s economic struggles.

Scorecard Best Practices Articles balanced scorecard, Economic Meltdown, Finance

Implementing the balanced scorecard can be a delicate process on its own. The important things to remember here are cohesion and communication.

Just how important is preparation when it comes to implementing the balanced scorecard? The answer to this question is VERY IMPORTANT. The balanced scorecard or the BSC, for short, is a managerial tool that is used to measure and ultimately manage the performance levels of all departments and divisions of a certain company or enterprise. Originally, the BSC was actually meant to be used in company activities that were small-scale. With these activities, the BSC was then used to compare these small-scale activities of a certain company with activities of the same company that were large-scaled in nature. This was done to check if activities of both natures that were occurring within the enterprise were still aligned with the company’s objectives, goals, and strategies. Thus, when you are preparing for the implementation of the BSC, there is then the need to understand each and every aspect used and incorporated in this tool.

Four aspects are generally covered by the BSC – finance, customers, internal business processes, and learning and growth. How these four aspects interplay with one another indicate the performance of the company – specifically, whether the company is performing well, well enough, or not at all. This is precisely why “balanced” is used in the term “balanced scorecard”, to connote that there is balance, order, and cohesion across all four aspects of the company.

How successful the implementation of the BSC would be is completely dependent on the strategies employed by members of the upper management team. Whatever the strategies employed, all of them should be effective, stable, and sound. Thus, you can safely say that effective implementation of the BSC starts with effective management.

The implementing body – in this case, the management team – should make sure that the whole procedure is well studied and supported by facts and figures. This might be quite the early stage in terms of implementation but it is still vital to ensure nothing goes wrong here. Do not be conscious of time because there is no time limit here. In fact, the implementing body should take all the time that it needs to ensure everything is in the right place for implementation.

Once initial implementation is underway, we can then start the ball rolling. A plan of implementation should then be created, with all the steps listed down, as well as plausible solutions to whatever problems that may arise along the way. More importantly, the recipients of this implementation process – in this case, the employees – should be well informed of the whole procedure so that no surprises or curveballs would be tossed their way. Definitive and concrete methods of quantifying results when it comes to attaining performance measures for each of the four aspects should also be implemented. The attained measures should then be communicated to all employees to ensure that there is equal treatment in data collection for the sake of evaluation.

Change is inevitable in the office setting but you can never discount the fact that there just may be people who would resist change. This is something you should also be prepared to deal with. This is precisely why open communication is very much needed here. Implementing the balanced scorecard would definitely be made easier if you openly discussed this with members of your workforce in the first place.

Scorecard Best Practices Articles balanced scorecard, Customers, Finance