Business owners like to ensure that every process and every internal function runs as efficiently and effectively as possible. To that end, they will employ a variety of tools to learn more about how those processes are carried out and whether there are better ways of doing things. This kind of strategic management often needs the right detail-oriented tools to succeed, and this is where a balanced scorecard will become an invaluable tool.
What is it
The balanced scorecard is an enterprise solution for translating strategy into action at all levels of the organisation. It si the leading methodology providing a framework for communicating, tracking and evaluating the implementation of business strategy. It may also be described as a metric, a planning and management system to help take a closer look at internal processes and functions. Identifying weaknesses in these processes and finding possible solutions can help businesses improve them, which can then improve their external outcomes. Making use of relevant key performance indicators and measuring them before and after changes, they are used to ensure that every decision and change leads to a positive outcome. In the most basic terms, balanced scorecards give business owners and managers the tools they need to describe a strategy, measure it, and to find and fix weaknesses within the strategy. They first became relevant in 1992 when Dr. David P. Norton and Dr. Robert S. Kaplan created them to look beyond the common limitations of reports that were only related to a business’s financial measures.
What is the purpose
The purpose of the balanced scorecard is to separate processes into distinct areas, or “perspectives” that allow for good behaviour to be recognised and reinforced. Though there is some variation, these perspectives are most commonly the following: financial, business processes / internal, learning and growth and customers. By creating appropriate objectives and measuring key performance indicators for all areas, businesses can take a more thorough look at how every new change to business positively or negatively affects each perspective. Strategy maps, often described as the heart of the scorecard, are part of the balanced scorecard process that create a visual depiction of all perspectives on one graphic. Each perspective contains multiple objectives. Every time a new objective is completed, you use balanced scorecards to see how they will impact each perspective and how to improve that impact.
How does it work
Using the balanced scorecard starts off with the objective. What new process are you looking to introduce or what change are you hoping to make? You drill down to track the measures, which are the key performance indicators you use to know whether or not you are succeeding in your objective. You also set strategic initiatives for each objective, these being the tools and means by which you implement it. Then you create action milestones for each initiative, which delegate out the tasks to improve them. Commentary allows stake holders to express their views as to future actions and current issues.
A balanced scorecard allows you to lay out every step for implementing and measuring change in the business, as well as spotting potential difficulty in any of the perspectives to then more specifically communicate which parts of the strategy should change and why.
Balanced scorecards are the tools used to ensure that every strategic decision, process and part of internal management is as effective and efficient as possible with the best possible outcomes. Providing quantitative and qualitative data, it can help improve the decision-making process in any business.
Balanced scorecards can be created in a variety of ways, but there is specific software for creating them that allows businesses to incorporate them quickly and efficiently. Synergise Business Intelligence offers the Synergise Balanced Scorecard which builds on the first framework from Renaissance Worldwide (including Kaplan and Norton), the originators of the Balanced Scorecard. The Synergise Balanced Scorecard Software package, now approaching its eleventh release, quickly and simply implements the Balanced Scorecard methodology and will outperform your expectations and allow your business to thrive!