Imagine that your work performance is rated against an established reference frame. All of your work leading to the completion of a process, product, or project is measured against a standard. Every milestone achieved ticks a box in the scorecard, and every misstep is equally registered.
When you check all the entries in your scorecard, you'll know if you are on the right track or need to shake things up a little. This is the Balanced Scorecard Framework, as discussed in this article.
What is it?
The balanced scorecard (BSC) is a strategic planning framework that organizations use to align their daily activities with their goals and visions. It provides a visualization tool that features performance metrics, team objectives, and project goals.
These metrics feature financial and non-financial parameters that define a company's success and drive performance. The team is only said to have completed a task or met a target if its performance scales up to the set standards.
The sum of the team's efforts is examined in relation to four predefined perspectives.
Financial (or Stewardship)
This demands that you check if the business is financially rewarding for its stakeholders. It also helps you determine your best financial position.
Customer/Stakeholder
This demands that you look at how best to satisfy your customers. So you're constantly aiming to meet their expectations and provide value to them.
Internal Process
This demands that you assess your organization for the efficiency and quality of its performance across key areas.
Organizational Capacity (or Learning & Growth)
This demands that you make provisions to encourage growth and development. These provisions include physical infrastructure, technology, etc.
When do we use it?
Below are some use cases where the BSC framework can make a difference.
Performance Appraisal
A BSC can come in handy if you ever need to assess the level/quality of your team's efforts in a task or project. You can spot underperforming sectors or persons by measuring their inputs against an established standard.
Quality Control
You can also use the BSC to examine the quality of your products before rolling them out to the public. You can achieve this by assessing the product from two perspectives; your customers' perspectives and your company's internal process perspectives.
Progress monitoring
You can stay abreast of the latest developments in your workplace by subjecting your internal processes to a BSC analysis. It'll expose any gaps that exist and help your decision-making going forward.
Goal Setting
A BSC establishes important milestones and other benchmarks that become measuring standards. It'll also provide your team members with the general objectives to keep in mind and work towards achieving.
What business questions is it helping us to answer?
What is the quality of the work done?
Is your work going according to plan? Is your team living up to expectations and meeting its targets?
What areas require the most attention?
The BSC framework helps you properly visualize the state of your business, so you can easily spot the problem areas.
What strategy is best for your business?
If you're unsure what direction your business should be headed, a BSC analysis can help make your job easier. It'll give you an idea of the clearest pathway to effect positive change.
What gaps are available in your business?
A balanced scorecard analysis can help you find the gaps in your business. Unfortunately, these gaps upset the balance in certain areas of your business and cause it not to perform optimally.
How do we use it?
There is no standard template on which you can frame your BSC analysis. This is so because no two organizations are structured the same. However, below is a typical procedure you use to conduct it in your workplace.
Define Perspectives
A BSC approach uses perspectives to define its framework. These four perspectives (as discussed earlier) must be developed to reflect the company's profile.
Establish Goals, Mission, and Vision
Your goals and mission are an integral part of your balanced scorecard framework. They provide motivation and can help you rally efforts in the workplace.
Set Measurement Parameters
This helps you determine if your efforts are on course to deliver the desired results. They may vary across different organizations.
Communicate Your Plans
The next critical step is communicating all the BSC framework elements to the relevant persons. These persons are those responsible for converting the company's inputs into outputs.
Implement The BSC Framework
Put the BSC framework to test once it is set up. Subject every work process to the framework's predefined metric and check if it is on target.
Practical example
A power-generating plant uses the balanced scorecard approach to check if its operations are going on as planned. For example, it can always check how many kilowatts of electricity it produces. And when it encounters any departure from standard operations, it can immediately activate a corrective action.
When it observes a drop, it traces the problem to a faulty power line. This way, the company consistently knows if it is performing below or above capacity. This knowledge ensures that it can meet its generation targets.
Advantages
1. It defines an organization's strategy
The balanced scorecard framework provides a template against which organizations can define their business strategy. In addition, it provides performance measurement metrics and other measuring standards that you can use to streamline operations.
2. It creates effective communication channels
The BSC framework can pave the way for more efficient communication across all organizational levels. It does this by setting clear, measurable goals that your team can understand at a glance and work towards.
3. It helps to align departments with goals and objectives
A well-structured BSC can keep all members of an organization on the same page. This way, the teams across all levels can work in unison and achieve their goals more quickly.
4. It is simple to understand and use
You don't need to break any bounds in search of the resources needed to execute a BSC framework. You'll only need to contact knowledgeable people within your organization to provide the right data.
Disadvantages
1. There is no clear roadmap to using a BSC framework
Scour the web, and you'll find a pile of informational material on the BSC subject that it'd be hard to settle for one. This makes it quite difficult to choose a particular template.
2. It is not a shoe size that fits all
Even after you've found a BSC template that works for you, you'd still have to adjust it to fit your company's profile.
3. It is difficult to get everyone in line
Every organization will struggle at some point to get everyone in line with its objectives. Questions will be asked about individual aspirations and commitments and if they align with the larger collective.
4. It may become too rigid to implement
What happens when a new development upsets the balance and requires you to change course? If this is your reality, you might find it difficult to adjust the terms of your BSC framework without causing some shock.
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