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Category: Articles » Business » Management » Article » Article Code

Balanced Scorecard

In the past, strategy execution has been limited as organizations placed too much emphasis on certain operating areas rather than employing a more comprehensive approach to planning new strategies and crafting improvement goals. With the development and implementation of a top-level Balanced Scorecard (which is just one important aspect of Enterprise Strategy Execution), strategic execution has become much more attainable. Need proof? Recent research suggests that world-class companies are 159% more likely to have Balanced Scorecards in place. So what exactly is a Balanced Scorecard? Besides being an obviously powerful component at the core of strategy execution, ... read more

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Need proof? Recent research suggests that world-class companies are 159% more likely to have Balanced Scorecards in place.

So what exactly is a Balanced Scorecard? Besides being an obviously powerful component at the core of strategy execution, a Balanced Scorecard is a framework designed to help organizations clarify their strategy and then leverage it to create measurable action.

This solution frames strategic objectives within a balanced set of key areas, including Financial, Customers, Internal Processes, and Learning and Growth. While strategic plans of the past failed by focusing on one of these areas, most often Financial, a Balanced Scorecard offers a more holistic and detailed view of an organization's performance and allows an organization to dig deep and access otherwise hidden areas that drive strategic improvement.

By linking the causes to the effects, Balanced Scorecards have proven to be revealing tools which create translatable communication for all employees and ultimately align your organization's different operating areas in pursuit of a common strategy. Deploying this tool also helps an organization focus and determine that it is doing the right things instead of just doing things right (there's a big difference), and establishes responsibility and accountability, both individually and departmentally.

With the above explanation understood, many organizations wonder how to move from strategy to a Balanced Scorecard. Before such action can take place, organizations must understand what Balanced Scorecards are not.

Too often, an application such as this is viewed as being just an executive report when it is actually meant to align everyone in the organization. Furthermore, Balanced Scorecards are not analytics or Business Intelligence tools, which often fail to determine why a problem exists and what improvement initiatives can be enacted to change it.

Balanced Scorecards are also not generic applications that fit organizations all the same, even across different areas in the same organization. As with many other tools, this application should not be viewed as end-all, be-all solutions. Rather, they are just a part of a broader focus of Enterprise Strategy Execution, which should also include Strategy Mapping, Baldridge Assignments, Key Performance Indicators, Management by Objectives and structured problem solving.

With these key differentiations stated, here are some crucial steps to makes a strategic plan more actionable towards a Balanced Scorecard. First, an organization should conduct a thorough SWOT Analysis identifying Strengths, Weaknesses, Opportunities and Threats. Doing so will allow your organization to discover where it stands in relation to competition, market conditions and other factors.

Once an organization knows where it stands, it should pull out its most critical strategic objectives to create a Strategy Map. A simple, visual description of the key components of a strategic plan, a Strategy Map places a high emphasis on the cause and effect relationship of objectives. A Strategy Map should include Perspectives representing your organization's highest level areas of focus and Objectives stating 8-10 of the most important goals.

Once created, the Strategy Map becomes the foundational piece for building a top-level Balanced Scorecard. Begin building your Scorecard by copying the perspectives and objectives from the Strategy Map. From here, your organization should identify Measures (also known as Key Performance Indicators or metrics) to determine if you are on track to achieve each objective. No more than 1-3 metrics should be developed as indicators of achievement for each Scorecard Objective. The final step is identifying initiatives (time-specific projects) that will address critical areas of underperformance.

Whew! Now take a deep breath. As you can see, building Balanced Scorecards requires hard-work, patience and even some consultative help. The top combination of Balanced Scorecard software and consulting experts at ActiveStrategy are just what your organization needs to develop sound strategic plans and achieve successful execution.

Having the experience and expertise with this business application, our team can provide you with the guidance necessary to develop a Balanced Scorecard. From starting with your strategy and keeping objectives to the critical few to defining realistic measurements per objective and cascading and deploying Scorecards throughout the organization, we know what it takes to help your organization attain successful Strategy Execution.

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