One of the main advantages of applying a Balanced Scorecard as a strategic management performance metric is that it considers the company as an ecosystem and it involves all the main aspects and perspectives that will help a business thrive. Why Is a Balanced Scorecard Useful and Valuable for Any Business? To measure the common KPIs -customer satisfaction and customer retention- different strategies and measures apply: surveys, interviews, feedback, and customer growth. For this pillar, managers must find different strategies to compare to the competition and understand the client’s perspective.

This perspective seeks to answer how customers see the company. Among the usual KPIs that managers acknowledge for this category are: employees’ skills, satisfaction, training, and education.

The main focus is improvement, this includes finding solutions to how it can be done. This angle analyses the human capital, the company culture, and the infrastructure and technology in use. The common KPIs for this perspective are: Inventory, quality control, and production lead time. Business managers should answer the main question: What must the company excel at? Considering this aspect helps organizations align with internal goals, performance, and product or services quality. Internal Business PerspectiveĮfficiency is essential for every organization and usually there are several activities, technologies, and strategies that can be improved. This pillar must answer how the company looks to stakeholders and usually, the key performance indicators (KPIs) are: income, expenses, revenue growth, return on investment, financial goals, net income, and others.

The analysis of the financial performance is crucial for every business and it is usually every profitable organization’s main measure. To create a successful and organized strategy, the Balanced Scorecard methodology proposes that businesses consider four main perspectives that will become the pillars of the measurement structure: Financial Perspective Managers want a balanced presentation of both financial and operational measures”.Īfter years of successfully applying this management strategy for different businesses, they also published a book in 1996 to explain in detail the methodology. They realize that no single measure can provide a clear performance target or focus attention on the critical areas of the business. In observing and working with many companies, we have found that senior executives do not rely on one set of measures to the exclusion of the other. “Managers should not have to choose between financial and operational measures. It was first shared as a paper for Harvard Business Review in 1992. Robert Kaplan of Harvard University and Dr. This integral management tool was developed by Dr. What makes a BSC compelling is that this approach combines financial measures, internal business functions and activities, and the company’s values, vision, and mission. It is usually created and presented to team members or executives by managers-deeply involved with the organization- as a structured report every quarter. What is a Balanced Scorecard?Ī Balanced Scorecard (BSC) is a powerful planning methodology and a strategic management performance metric that allows companies and organizations to define activities, reach goals, and keep track of their results. This strategic work-frame has raised attention in the past few years and well-known companies and organizations in the private and public sectors-such as the Federal Bureau of Investigations (FBI), University of Virginia, Volkswagen, Philips, and Apple- have been applying it to improve performance and increase efficiency. But how can a company develop a system with a solid structure and an integral goal-focused strategy? A Balanced Scorecard might be the right answer.Ī Balanced Scorecard is the third most popular management tool according to the Bain Management Tools & Trends survey. Without a solid structure, a measurement system, and clear communication with every member of the organization, not only money can be wasted, but also time and energy. Every company needs structure to move forward, achieve goals and grow.

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