Many companies large and small, including financial, non-profit and government organizations, have applied the Balanced Scorecard approach to their management strategies. The main concept of this business management system is quite easy to understand, however, receiving the desired results is practically impossible without conducting a thorough investigation of the Balanced Scorecard company.
The Balanced Scorecard differs from conventional management approaches. The main distinguishing feature of this approach is the performance evaluation based on four perspectives. The growth of a company in general is impossible without these perspectives. Unlike traditional management strategies, Balanced Scorecard suggests evaluating the financial and non-financial aspects of the organization. There are four perspectives that we must consider: customer, business process, learning and growth, and financial perspective. It is necessary to remember that all perspectives are closely connected and cannot function independently. Therefore, to evaluate the performance of the entire organization, it is critical to consider each perspective. The financial perspective is used to measure financial aspects of the company, such as return on investments and general income. The customer perspective helps measure the level of customer satisfaction, as well as track the rate of loyal and repeat customers. The learning and growth perspective is necessary for the evaluation of performance and employee satisfaction. Finally, from the perspective of business processes, monitoring the amount of costs allows investing in various business processes, as well as evaluating the efficiency of internal processes aimed at the implementation of strategic objectives.
Each of the perspectives mentioned above is measured with relevant key performance indicators. To make the evaluation process easier and more accurate, it is recommended to assign three to four measures for each perspective. An excessive number of metrics will make evaluation difficult, so it is necessary to choose only the most important KPIs. Then, all the elements measured are integrated into the company’s scorecard, which helps to evaluate its performance.
Since the time of its invention, the Balanced Scorecard framework has been used by many companies around the world and is considered the most efficient management and strategic planning tool. One of the benefits of this system is that it is used not only to assess business productivity, but also to help create strategic plans and establish various business development activities. However, we must not forget that the successful implementation of the Balanced Scorecard requires some knowledge and experience. In other words, understanding its main concepts is not enough to get the expected results. Before introducing the system to your company, you need to do a tedious business analysis.
When integrating Balanced Scorecard concepts into the organization’s management approach, it is necessary to have a strategy map that reveals the connection between planned objectives and strategic activities. To automate the management process and therefore make it easier and more efficient, it is essential to use the Balanced Scorecard software. You can choose between desktop and web-based software. Just be sure to consider the pros and cons of both types.
The Balanced Scorecard is a powerful business tool that can take your business to a whole new level of management. However, you will not notice any changes unless a proper analysis has been done. Incorrect implementation of this system will lead to failures and disappointments, as well as huge monetary losses.