An important aspect of running any business is the ability not only to manage it in there the here and now, but to set your sights on the future, to have goals and objectives, and to understand how to direct your team’s efforts and resources toward achieving that. One strategy that has become remarkably helpful in doing that for a lot of business owners is the balanced scorecard. Here, we’re going to look at the technique and approach and break down how it can be a game-changer when it comes to setting and meeting your objectives.
What are balanced scorecards?
First of all, it’s worth understanding what, exactly, BSC is, before you think about how you can use it. Effectively, they are tools that you can use to plan out how your business runs. They allow you to separate the business into different projects, services, internal processes, targets, and goals. They lay out these various elements and, more specifically, allow you to track your performance and progress in each of them, helping you get a better idea of how effective your business is more comprehensively. It’s often used to better get an idea of the business’s priorities and to address shortcomings using real data.
Turning your vision into something concrete
One of the biggest benefits of the balanced scorecard is that it makes it a lot easier to take your vision for your business, and your mission, and to turn it into something a lot easier to understand. From it, you create your strategic objectives, which can include things like your financial objectives, your service delivery, your customer satisfaction, internal processes, and more. Then, with a strategy map, you can connect the activities within each of these categories together, allowing you to better see how interconnected they are. For instance, improving your internal processes helps your team better deliver your services, which results in happier customers, and this, in turn, leads to healthier finances.
Making it all measurable
One of the best things about a balanced scorecard is that it doesn’t allow your business to deal with abstractions, but rather breaks them down into metrics that you can measure for a direct understanding of your effectiveness in meeting those aforementioned strategic objectives. The way it does this is with the introduction of KPIs, or key performance indicators. KPIs are used to track performance, effectiveness, goal progress, and efficiency across a wide range of disciplines, and balanced scorecards help you find the best applicable KPIs for any given strategic objective. As such, as your business progresses, you’re able to take a look at how any single objective is doing in terms of its KPI, which can help you get an idea of where your business is falling short and where it’s doing just fine.
Start by assessing your direction
In order to make the best use of balanced scorecards, the best thing to do is to assess the standing of your business as it is. Analyzing your internal and external processes and relationships, and reevaluating your mission, values, challenges, and needs can help you get a much better understanding of where your business is and where it needs to be. Balanced scorecard software can help you get a better understanding of your business in terms of four major perspectives. It can help you see things from your organizational capacity’s perspective, your internal processes, your customer satisfaction and retention, and your financial health. By breaking down your analysis into these four perspectives, you can ensure that you have a holistic understanding of where your business is, and where you might want it to be.
Setting a strategy
Once you have this analysis of your business complete, then you have to decide what the strategy is. This strategy is going to be based on the findings of your analysis, as you will likely have identified shortcomings or needs that you have to fulfill. From there, the best way to process is to break it down into strategic objectives and use strategy mapping to see how each of these objectives influences one another, as mentioned above. When you understand the cause and effect of the challenges and problems in your business, solving the root issue can make it a lot easier to solve the other issues that are caused by it.
Setting and tracking your goals
From there, you take those objectives that you have set and you turn them into concrete goals using those aforementioned KPIs. With the right KPIs, you track whether you’re meeting the metrics that you want, or making the progress that you need towards more long-term goals. If you’re not meeting some KPIs, then it’s time to analyze the performance in that particular objective. What is stopping your team from meeting their objectives? Are there more efficient ways for them to complete certain processes, do they require more training, or could communication and organization with other workers offer them the help that they need?
Reassess and repeat
Once you’re able to improve the metrics and meet the objectives you have using those key performance indicators, it’s time to reassess. You may not have to analyse the entire company as you did when you were first setting up your balanced scorecard but, with the help of your strategy map, you should be able to see all of the other processes and objectives that are influenced by those that you just improved. If you’re seeing improved KPIs in one objective, then it makes sense you should see improved KPIs in those that follow it through cause and effect. If not, then you might need to re-evaluate your understanding of how those objectives influence one another.
Creating strategic alignment throughout the company
One of the big benefits of using a balanced scorecard is that it allows everyone in the organization to see it from the same perspective. It offers a great bird’s eye view of all the different processes, goals, and priorities in the business, but is able to break down each perspective in detail so that the concerns of individual workers and teams can be taken more seriously. What’s more, it allows your management and executive teams to see how the concerns of your workers directly influence their goals, through your strategic mapping. This allows a lot more common ground to be shared between the workers and those above them, which can make for better cooperation across the board and can help your team feel like their needs are being taken seriously. Better alignment between employees, managers, and bosses is always a positive.
Improving how you communicate your goals
One of the issues related to those problems of organizational alignment is that, without shared language and terminology, it’s easy for managers and employees to have two different conversations when talking about goals and strategic proposals. By being able to create a single-page picture of your entire organizational direction, using those four perspectives mentioned above, each and every person in the organization can see the terms that are being used to refer to different objectives, processes, and goals. As such, it’s a lot easier for your team to talk about them, with that shared frame of reference, which cuts down on the miscommunication issues that can be so costly to a business.
Allow for better accountability
All too often, when we fail in certain objectives or certain processes are not working as they should, it’s all too easy to blame nebulous organizational or structural failings when that might not be the case. While systemic issues can certainly be at the root of difficulties within the business, a balanced scorecard makes it easier to break down systemic problems using cause and effect. What’s more, you’re able to take specific strategic goals and processes and assign them to specific employees or teams, so that you can always see who is responsible for any given aim. This can help improve accountability and allow managers to pinpoint who they need to work with to find a solution when there’s a problem.
Help your employees feel like a part of the bigger picture
For larger organizations, it’s all too easy for employees to feel like a cog in the machine. Not only can this decrease their motivation and engagement with their work, but it can also lead to issues with their work. If they don’t see how what they do directly contributes to wider organizational goals, then their priorities within their own work might be out of balance. Balanced scorecards help you see the direct influence of employees and teams on the greater picture, which can help you ensure they are aligned with greater goals, while showing the importance of their work, helping them feel more appreciated.
Balanced scorecards do the work of turning your goals from nebulous desires into concrete objectives, and help you see how those various objectives are all interconnected while offering a real way to measure your progress towards them. Implementing it in your business can help you get much better at setting the direction your team should take.