What is a Balanced Scorecard?
- fruiStrategy
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- July 18, 2022
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“Balanced Scorecard is a framework that translates an organization’s strategy into a set of objectives and measures, and aligns the organization to them though it’s planning and control processes”— David Norton
A balanced scorecard is a strategy and performance management tool which consists of Strategic objectives, measures, targets, and actuals. The strategic objectives are the result of strategy translation from the strategy plan. The cause and effect of achieving strategy help to define strategic objectives.
The strategy map has to be framed first to translate the strategy in form of a cause-and-effect structure with strategic objectives. The strategy map consists of four perspectives Financial, Customer, Internal Processes, and Learning & Growth.
As a standalone Balanced Scorecard is used for both planning and performance reporting. The key factor is to define the correct set of measures and targets which should be relevant to business strategy and combined to deliver an overall business performance score.
The basic terminology is as below:
Perspectives:
A balanced Scorecard looks at your organization in four different ways to measure its health. This strategy is divided into four areas (called ‘Perspectives’). These perspectives focus on a different side of your organization. Perspectives are the areas of the overall business strategy addressed by groups of objectives. Commonly here we can see four perspectives like Financial, Customer, internal process, and Learning & Growth.
Financial Perspective:
The First Perspective is ‘Financial’ (all about Financial Objectives), here maintain key Financial Objectives of the organization, and Performance might be included in it. The sample objectives are Grow Revenues, Increase Profit Margins, etc.,
Customer Perspective:
Customer Perspective focuses on Performance Objectives that are related to Customer and Market. It helps to achieve financial Objectives. The sample objectives include improving on-time delivery, product availability, customer satisfaction, market share, etc.,
Internal Process:
Here set out the Internal Process Goals and Objectives to achieve the process to deliver Customer and Financial objectives. The sample objectives are Capacity Utilization, Supply chin efficiency, Quality Optimizer, new product introductions, innovation, etc.,
Learning & Growth:
It focuses on Human Resources, Organizational and Information Capital. The sample objectives can focus on optimizing Talent and Knowledge, Networks and technology infrastructure, Teamwork and Knowledge management, etc.,
Strategic Themes:
Strategic Themes can help to achieve your organization’s vision and each theme has Strategic results’. And it provides the mechanism for aligning the organization’s strategy, they provide business context for decision making. These themes initiate in the internal process perspective and connect to customer and financial outcomes, as well as sliding to the enabling objectives of the learning and growth perspective.
These Themes are often similar from Organization to Organization. Here we find;
Strategic Objectives:
Strategic objectives are statements that indicate what is critical or important in your organizational strategy. In other words, their goals, and objectives must be what your organization is trying to achieve for the next 3 to 5 years. Finding Strategic Objectives is considered a group activity, It develops for Strategic Themes, managers can find Strategic Objectives/Goals from “What do we have to do on a continuous basis to achieve the strategy. In a balanced scorecard the third step is creating “Strategic Objectives”. You need to identify the owner and their responsibilities while adding strategic objectives and identifying them against perspectives.
Strategic Measures:
The final building block of a balanced scorecard measures. Every strategic objective should have one or more Strategic Measures that you measure to determine how it is performing. These measures need goals and should be measured on a regular schedule.
After you determine your organization’s objectives, you need to identify measures to know the performance of the objectives.
The above picture explains the linkage of strategic objectives, measures, targets, performance gaps, and how to close the gaps through strategic initiatives. A strategic theme is an area in which your organization must excel in order to achieve its vision. The set of strategic objectives is grouped to deliver the strategic intent. In practice, strategic themes are used from an internal perspective.
While defining the measures to make it effective translation, value drivers can be used to link objectives to measures.
The above picture explains the linkage of strategic objectives, measures, targets, performance gaps, and how to close the gaps through strategic initiatives. A strategic theme is an area in which your organization must excel in order to achieve its vision. The set of strategic objectives is grouped to deliver the strategic intent. In practice, strategic themes are used from an internal perspective.
The following is a sample Balanced scorecard.
Key Points:
fruiStrategy empowers you to execute strategies consistently by linking strategy plan to strategy execution and aligning the whole organization’s actions towards the strategic direction. You can establish a robust strategy execution process empowered by plug-and-play modules to achieve overall organizational transformation in a systems driver approach.
Please contact Shaik Abdul Khadar, Strategy Management Expert at [email protected] or +917799798333 for a quick demo or more information.
