How to Maximize Results With the Balanced Scorecard (Free Template)
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Published:
August 6, 2023
Reading Time:
7 minutes
Let’s suppose your business makes $1 million a year. But, your approval ratings on Glassdoor is 2.5 only. Now picture this: you are the superstar at the office, but due to inefficient processes, you always end up working late nights. And you hate it.
Oftentimes, being a champion in one aspect of business doesn’t necessarily indicate success. There needs to be a balance among different elements. Since this article is about the ‘balanced’ scorecard, you can imagine where all this is going, right?
So, without wasting any more time, let’s dive into it.
Oftentimes, being a champion in one aspect of business doesn’t necessarily indicate success. There needs to be a balance among different elements. Since this article is about the ‘balanced’ scorecard, you can imagine where all this is going, right?
So, without wasting any more time, let’s dive into it.
What Is the Balanced Scorecard?
Let’s start with a story. A team leader is guiding their group to victory. Everybody is well-prepared and focused—aiming straight for the goal! But there’s a catch. To win the game, they are required to consider more than just the final goal. In fact, they’ll be judged on many different goals. That's where the balanced scorecard comes into play.
The balanced scorecard is a strategic management tool that takes a holistic approach and goes beyond just financial numbers. The idea is to capture the complete picture of your organization's performance, not just profits. It’s estimated that around 70% of companies worldwide use the balanced scorecard!
You see, a few decades ago, companies relied heavily on financial metrics to measure success. Meaning that if your business was making money, you’d be considered successful—completely ignoring other aspects like customer satisfaction, employee treatment, efficiency of internal processes, etc. However, with the balanced scorecard, it’s all about balance. A balance between different elements that are crucial to run a successful business. Let’s discuss what these elements are and understand why striking a balance among them is so important.
Customer satisfaction: Even though cash flow, revenue, and all those financial indicators are crucial, how you treat customers is also key. “Are customers happy to give us their money?” That’s the question you need to ask your team. Delighting customers is essential if you want repeat business, positive word-of-mouth, and increased market share.
Internal processes: All that revenue and customer satisfaction may be futile if your business isn’t running smoothly. To be a business person who’s truly successful, you must focus on creating efficient internal processes. From product development to logistics and everything in between, optimizing internal processes boosts efficiency, reduces costs, and enhances the job satisfaction of employees.
Growth and development: The business world is very dynamic. What’s trending today may become obsolete next year. If you want continual improvement as a business and also have an edge over your competitors, you should invest in your team's learning and growth. When your employees are trained well and upskilled, they deliver exceptional service, drive innovation, and create a positive workplace environment.
The balanced scorecard is a strategic management tool that takes a holistic approach and goes beyond just financial numbers. The idea is to capture the complete picture of your organization's performance, not just profits. It’s estimated that around 70% of companies worldwide use the balanced scorecard!
You see, a few decades ago, companies relied heavily on financial metrics to measure success. Meaning that if your business was making money, you’d be considered successful—completely ignoring other aspects like customer satisfaction, employee treatment, efficiency of internal processes, etc. However, with the balanced scorecard, it’s all about balance. A balance between different elements that are crucial to run a successful business. Let’s discuss what these elements are and understand why striking a balance among them is so important.
4 main elements of the Balanced Scorecard
Financial performance: It’s a business, not a charity. That’s why profits must certainly be a priority. The balanced scorecard can be used to evaluate financial metrics like revenue, profit, cash flow, and return on investment. By doing so, you can improve the financial strength of your business.Customer satisfaction: Even though cash flow, revenue, and all those financial indicators are crucial, how you treat customers is also key. “Are customers happy to give us their money?” That’s the question you need to ask your team. Delighting customers is essential if you want repeat business, positive word-of-mouth, and increased market share.
Internal processes: All that revenue and customer satisfaction may be futile if your business isn’t running smoothly. To be a business person who’s truly successful, you must focus on creating efficient internal processes. From product development to logistics and everything in between, optimizing internal processes boosts efficiency, reduces costs, and enhances the job satisfaction of employees.
Growth and development: The business world is very dynamic. What’s trending today may become obsolete next year. If you want continual improvement as a business and also have an edge over your competitors, you should invest in your team's learning and growth. When your employees are trained well and upskilled, they deliver exceptional service, drive innovation, and create a positive workplace environment.
KEY TAKEAWAYS
- The balanced scorecard is a strategic management tool that takes a more comprehensive approach to measuring organizational performance, including more than just financial performance.
How to Make the Most of the Balanced Scorecard
Alright, now that you have a little background information on this world-renowned strategic tool, it’s time to dive a little deeper. So, let’s understand how to make the most of a balanced scorecard and actually get results.
For example, if you consider the customer service element of the balanced scorecard, a specific objective could be to achieve a customer rating of 90% or higher within the next six months. To achieve this, you may create training programs for customer service representatives, develop new processes to ensure prompt response, and collect feedback from customers for ongoing improvement.
For example, if the organization's strategy is to improve operational efficiency, the balanced scorecard can incorporate metrics such as cycle time reduction, defect rate, and process automation percentage. So, by reducing cycle time, you could achieve faster turnaround times; and by monitoring the defect rate, you could improve the quality of your products and reduce the number of defective ones.
For instance, let's consider the growth and development element of the balanced scorecard. Let’s assume that a company wants to teach its staff how to use a new machine. This machine can increase the rate of production by 40%, so it’s crucial that employees learn it before Christmas sales. In this case, the KPI could be the number of employees who have successfully completed the training and are well-versed in using the new machine.
For example, if a specific KPI routinely falls below the target, it may suggest the need to reassess the action plan and make necessary changes. So, if a product is missing the sales target because of a competitor, it may indicate that adjustments are required to make the product a bestseller. This could be done by analyzing customer feedback or hiring experts to make changes to the product.
Let’s consider an example of a company that’s developing a new CRM platform. The visionary CEO has implemented a balanced scorecard to enhance the company’s operational efficiency. After four weeks, the ‘internal processes’ aspect of the scorecard is reviewed and the development team is invited for a meeting. They suggest implementing the Agile software development methodology to streamline the product development lifecycle. The employees mention that this could enable shorter development cycles and improved collaboration among teams. You see, the CEO wouldn’t have realized this if it wasn’t for the feedback. That’s the benefit of bringing the whole staff on board when using the balanced scorecard.
1. Define objectives
As a general rule of thumb in business, everything starts with clearly defined objectives. When implementing a balanced scorecard, setting objectives for each element is essential for effective implementation. Furthermore, to make objectives more robust, they should be specific, measurable, achievable, relevant, and time-bound (SMART).For example, if you consider the customer service element of the balanced scorecard, a specific objective could be to achieve a customer rating of 90% or higher within the next six months. To achieve this, you may create training programs for customer service representatives, develop new processes to ensure prompt response, and collect feedback from customers for ongoing improvement.
2. Align the balanced scorecard with the organizational strategy
To implement a balanced scorecard efficiently, don’t forget to align it with your organization's overall strategy. Every organization has unique goals and challenges. So, don’t just copy-paste someone else’s scorecard and use it in your company. This way, you can ensure that your scorecard reflects your strategic objectives, providing a clear roadmap for success.For example, if the organization's strategy is to improve operational efficiency, the balanced scorecard can incorporate metrics such as cycle time reduction, defect rate, and process automation percentage. So, by reducing cycle time, you could achieve faster turnaround times; and by monitoring the defect rate, you could improve the quality of your products and reduce the number of defective ones.
3. Set key performance indicators (KPIs)
You may already know the importance of measuring everything in the corporate world. The board of directors doesn’t want to hear “business is good”. They want numbers. They want KPIs. KPIs provide tangible data that reflects the organization's true performance. By identifying the right KPIs, organizations can effectively track their progress toward achieving their objectives.For instance, let's consider the growth and development element of the balanced scorecard. Let’s assume that a company wants to teach its staff how to use a new machine. This machine can increase the rate of production by 40%, so it’s crucial that employees learn it before Christmas sales. In this case, the KPI could be the number of employees who have successfully completed the training and are well-versed in using the new machine.
4. Review your balanced scorecard from time to time
A balanced scorecard is not set in stone. In fact, you should review it on an ongoing basis and also make changes if required. By conducting regular reviews, your organization can measure the extent to which the balanced scorecard is actually useful in achieving strategic objectives. During the review process, you should analyze the data collected from all four aspects of the balanced scorecard and identify areas of improvement.For example, if a specific KPI routinely falls below the target, it may suggest the need to reassess the action plan and make necessary changes. So, if a product is missing the sales target because of a competitor, it may indicate that adjustments are required to make the product a bestseller. This could be done by analyzing customer feedback or hiring experts to make changes to the product.
5. Get the whole team on board
It’d be incorrect to think that only top-ranking officials in a company use the balanced scorecard. In reality, it should be part of the company culture and every employee should be made aware of it. Regularly seeking feedback from staff and customers plays a vital role in generating new ideas to enhance internal processes and customer experience. By leveraging the balanced scorecard, organizations can cultivate a culture where continuous improvement is embraced and everyone is clear on the company’s vision and goals.Let’s consider an example of a company that’s developing a new CRM platform. The visionary CEO has implemented a balanced scorecard to enhance the company’s operational efficiency. After four weeks, the ‘internal processes’ aspect of the scorecard is reviewed and the development team is invited for a meeting. They suggest implementing the Agile software development methodology to streamline the product development lifecycle. The employees mention that this could enable shorter development cycles and improved collaboration among teams. You see, the CEO wouldn’t have realized this if it wasn’t for the feedback. That’s the benefit of bringing the whole staff on board when using the balanced scorecard.
Download the Free Template of the Balanced Scorecard
Are you looking for an easy and effective template to implement a balanced scorecard for your organization? Consultport is offering a FREE template to anyone who is ready to strategically take their business to the next level.
Some key points to note about this template:
User-friendly Excel format: This template is designed in Excel which makes it easy to use and customize for consultants and businesses of all levels.
Compatible with Google Spreadsheet: In addition to Excel, the template is also compatible with Google Spreadsheet. This provides extra flexibility, allowing you to work with the template using your preferred spreadsheet software.
Easy customization: The template is easily customizable, enabling you to adapt it to your specific organizational or consulting projects. You can effortlessly modify the template to align it with your unique requirements.
Download link on email: The template is not currently accessible on mobile, so you’ll receive an email containing the template. Hit the download button and work with the template on your desktop. Easy-peasy!
So, what are you waiting for? Download the template now and make the most out of this highly efficient tool.
Some key points to note about this template:
User-friendly Excel format: This template is designed in Excel which makes it easy to use and customize for consultants and businesses of all levels.
Compatible with Google Spreadsheet: In addition to Excel, the template is also compatible with Google Spreadsheet. This provides extra flexibility, allowing you to work with the template using your preferred spreadsheet software.
Easy customization: The template is easily customizable, enabling you to adapt it to your specific organizational or consulting projects. You can effortlessly modify the template to align it with your unique requirements.
Download link on email: The template is not currently accessible on mobile, so you’ll receive an email containing the template. Hit the download button and work with the template on your desktop. Easy-peasy!
So, what are you waiting for? Download the template now and make the most out of this highly efficient tool.
