Articles and Advice

The Balanced Scorecard: Striking the Perfect balance for Success 

Say you’re the leader of an expedition party about to set off into foreign lands. I imagine plotting your course on a map is one of the first things you’d do. And wouldn’t you also have a plan for when you should reach the halfway point and what time you need to return? Most likely, you’d also communicate what key landmarks and significant dangers the team would need to watch out for along the way. And what about a plan for food and water rations and emergency procedures? Surely, no leader would dream of heading off without such a plan and sharing it with the rest of the team?

Isn’t it the same for your startup?

It would be folly to embark upon on any new venture without a clear plan and a clear strategy on how you’ll identify where you are and how you get to where you want to go. In the world of startups, the best way to create such a framework is with a Balanced Scorecard.

What is a Balanced Scorecard?

The Balanced Scorecard provides a single framework to impartially:

  • Map out the strategy
  • Measure the strategy
  • Track the actions you are taking to improve results

The Balanced Scorecard measures all aspects of the organisation (not just KPIs) by identifying the balance between the drivers and the outcomes of a company’s goals. So if you’re launching a startup, a Balanced Scorecard is an astute way to establish solid metrics to determine how productive your new business is.

Breaking down the Balanced Scorecard

Harvard Business School Professors Robert Kaplan and David Norton first introduced the Balanced Scorecard in 1992. They wanted to create a one-page document that would track an organisation’s performance across all areas. Kaplan and Norton identified four elements to analyse to achieve a harmonious balance. These are:

  1. Financial Goals  “How do we look to shareholders?” “What financial goals do we have that will impact our organisation?”
  2. Customer Goals  “What things are important to our customers, which will, in turn, impact our financial standing?” “How do customers see us?”
  3. Process Goals  “What do we need to do well internally, to meet our customer goals that will impact our financial standing?”
  4. People (or learning and growth) Goals  “What skills, culture, and capabilities do we need to have in our organisation to make our customers happy and ultimately impact our financial standing? “Can we continue to improve and create value?”

Put all of this into a one-page visual representation and you have your strategy map. And most importantly, you have the ability to see instantly the connection between (and track performance of) each of these perspectives.

Why use a Balanced Scorecard?

A Balanced Scorecard ensures that decisions are based on cold hard facts (instead of ‘gut instinct’). Joseph Luco from ClearPoint Strategy outlines 6 major benefits of the Balanced Scorecard:

  1. Provides a simple, visual representation of the strategy. It’s far easier to remember a strategy map that looks good than something scribbled down or typed out in an email. Put it up on the office wall for all to see.
  2. Unifies all goals into a single strategy. If organisations have an unclear company strategy, team members don’t know which strategic ideas are important and things become muddled and confusing. The Balanced Scorecard puts everything on one page in the same language.
  3. Gives every employee a clear goal to keep in mind while accomplishing tasks and measures. If the leadership team are the only people who know the strategy and objectives, you’re going to have a very confused team. The Balanced Scorecard becomes the authority on strategy.
  4. Helps identify your key goals. Creating a strategy map will ensure you are setting the organisation’s high-level goals. This can be done at the very beginning.
  5. Allows you to better understand which elements of your strategy need work. When all of your high-level goals are laid out in plain sight, it’s much easier to notice what needs improvement.
  6. Helps you see how your objectives affect others. By looking at the four perspectives, financial, customer, process, and people on a strategy map, you can see which objective is the most critical, and how the success or failure of each objective changes the whole strategic ecosystem.

How to integrate the Balanced Scorecard

There are a few options for creating a Balanced Scorecard. Most experts warn against a hard copy version. You enter dangerous territory if you cannot easily track new versions or share.

  1. Excel or Powerpoint – This is a fairly simple solution that allows for a customised solution.
  2. A specific Balanced Scorecard App – A fit-for-purpose app gives you the exact reports you need and can handle multiple users. This option will require some expense.
  3. Business Intelligence Solution – This is a system that is connected to your organisation’s database or analytics systems. While this may be the Rolls Royce solution, it will require significant IT expertise and can also be cost-prohibitive.

Any business that implements a Balanced Scorecard framework will benefit from its impartiality. You can’t fool yourself (or anyone else) when it comes to the Balanced Scorecard.

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