If you need a strategic management framework for your company or business, you have probably come across the Balanced Scorecard (BSC) methodology. The approach was created in the 1990s by Dr. Robert Kaplan of Harvard Business School and David P. Norton as a means to measure organization performance comprehensively rather than just focusing on a company’s financials.
While scaling is preferable, it’s not easy to achieve. While you can successfully scale outputs, processes, and the work itself, you simply cannot scale people.
Are you wondering if using the Balanced Scorecard would help optimize your business more than 20 years later?
The answer is YES.
Today, the Balanced Scorecard is one of the top-performing frameworks in use today. A 2015 study by Bain & Company found that about 44% of companies in North America use the Balanced Scorecard and a study in Germany, Switzerland, and Austria found that 26% of firms used Balanced Scorecards. Currently, the US, the UK, Northern Europe and Japan use the Balanced Scorecard most widely.
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Organizations that have successfully adopted the Balanced Scorecard system have identified many benefits of using it. Here are the seven most significant benefits of implementing the BSC Methodology:
The Balanced Scorecard provides a dynamic and powerful framework for building strategy. This framework facilitates communication and adoption throughout a company. The Balanced Scorecard’s use of a one-page strategy map helps managers look at their business model and think about cause-and-effect relationships between different strategic objectives. Performance outcomes, as well as key drivers or enablers of future performance are identified, creating a comprehensive strategic map. This strategy map ensures consensus is reached over a group of interrelated strategic objectives and initiatives. As the plan is cascaded through the company tiers, every department or division becomes aligned with the strategic plan. Specific goals can be further broken down into individual elements or initiatives and actionable plans by a group or individual.
Using a Balanced Scorecard framework provides managers with a logical and organized way to look at business performance comprehensively. This visual picture of a strategy allows a company to communicate both internally and externally, the vision, mission and strategy that will drive the company’s success. The strategy map facilitates understanding of the company’s strategy and helps engage staff, external partners and stakeholders, in both the delivery and review of the outlined strategy. This graphical map will allow your company to regularly view, as well a focus on, your organization’s most critical goals and objectives. Within your company, business units and supporting functions will work toward the same goal. As the goal is cascaded through the business, each area will be aligned. Strategy is linked to all areas of operations.
The Balanced Scorecard approach assists companies todesign key performance indicators (KPIs) that are specifically tailored to their strategic objectives. Companiesonly measure what actually matters to their businessand help them analyze and predict future performance.Quantifiable metrics will show the true health of thecompany and strategic threats can be pinpointed beforethey impact profits.
Using the Balanced Scorecard, key performance indicators (KPIs) are tied to overall business objectives which are linked to core strategy. KPIs are used by businesses at multiple levels to evaluate their success at reaching key targets. High-level KPIs focus on the overall performance of the business, while low-level KPIs may focus on the processes in departments such as sales, marketing, HR, and support. These metrics provide focus to management and allow early detection of any issues or opportunities.
A well implemented Balanced Scorecards aligns organizational processes, such as budgeting, risk management, and analytics with strategic priorities. Managers can determine how projects should be linked to larger enterprise-level projects and how each initiative rolls-up to the parent company. The Balanced Scorecard creates a truly focused organization.
The biggest reason why the Balanced Scorecard has been so successful and popular for over 20 years is because it is a proven framework that companies and businesses use to organize their various strategies. It doesn’t matter whether you run a global franchise or a local business, the Balanced Scorecard is beneficial to achieving strategic goals.
As Kaplan and Norton called it, the Balanced Scorecard is the “framework of frameworks.” Your best practices and approaches can be integrated into a Balanced Scorecard and the end product will be a fully-customized solution that is tailored to your needs. The Balanced Scorecard drives operational excellence, product innovation, customer intimacy, or whatever is important to you and your business. By collecting high quality management data, you will have critical information to develop and hone strategic goals, measures, initiatives and action plans. It will save you time, money and resources year-over-year. Using the Balanced Scorecard will help you optimize business performance and improve your company’s health for long-term growth and success.
The balanced scorecard requires change. Explore organizational change management and how to lead the adoption and transformation of new behaviors, systems, and processes.
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Our balanced scorecard implementation processes are a highly effective way for businesses to improve their organizational performance and achieve their goals. We offer expertise and specialized tools that can help organizations navigate the challenges involved in major changes.