The bsc method is “balanced” because it relies on both leading and lagging financial measures.

Organisations often begin the scorecard process by reading one of the many books on the topic, attending a seminar, or doing web research. There are many resources for introductory education and training. Once an organisation has committed to the balanced scorecard model, a third-party facilitator can be brought in to manage a strategy workshop and bring an unbiased view to the scorecard development process. Scorecard development can be very rapid (a few weeks), or as long as a year, depending on the scope and complexity of the scorecard and organisation.

Many organisations elect to go with a rapid or intermediate approach, which ensures project momentum and recognise score-carding is an iterative process. It is often better to make and correct mistakes early while an organisation is still excited about the methodology. Initial scorecard work is typically done with Microsoft Excel, PowerPoint, or Word. As the scorecard matures, the methodology is rolled out to the rest of the organisation. The goal is to connect all employees to the organisation’s strategic objectives by using individual or group measures. A software tool will be required to do this efficiently.

Sustaining the Scorecard

The premise of the methodology is to provide an ongoing, living framework that is communicated to the whole organisation. The scorecard needs to be sustainable and easy to roll out. Scorecards should leverage technology to provide automation as far as possible. Ultimately, the scorecard should become part of the organisation’s culture and employees’ work experience. An easy to deploy web-based system will allow for rapid roll-out and a sustainable scorecard.

Culture and Connection

Once the scorecard is developed, it is important to cascade it into the organisation. This will help link groups and individuals to the strategy. Everyone needs to understand the cause-and-effect relationship and how it connects to the organisation’s overall performance. The goal is to translate the strategy into the staff’s “everyday language” and identify measures of success that link to the overall strategic direction.

Using a Software Solution

Using a software product will allow everyone in the organisation to clearly understand cause-and-effect relationships. They can then execute the strategy, align to the organisation, and provide measurement and a continuous feedback mechanism. Look for the following key features when selecting software:

Web Based

Look for a solution where development and deployment are through a web browser. Cross-browser compatibility is essential. Solutions using the latest developments in web technology are always preferable.

Ease of Use

Select a solution that is extremely easy to use. Choose a product that functions, as far as possible, like desktop software. Look for products where data can be entered through the web interface, uploaded from a CSV file, or automated with a database connection. Products should be as easy to use as browsing a web page or shopping online.

Strategy Maps

The key to a good design is the strategy map. Any product selected should be able to create strategy maps with drill-down capabilities. Strategy maps often start out as a blank canvas to which you add images, shapes, gauges, graphs, text, and numbers to create a visual representation of your data. Once you make a strategy map, however, the colours and numbers should automatically update based on the real data in your system. Strategy maps can also be used to track key metrics, visualise geographic data, and monitor trends.

Cascaded Scorecards

An organisation-wide roll-out requires multiple cascaded scorecards. The organisation should start at the top and roll down into a department, group, or even to the employee level. Look for products that allow for unlimited cascaded scorecards. Organisations should be able to drill through to sub-scorecards or individual measure views. The entire organisation should be able to roll up information from multiple scorecards into higher-level scorecards.

Communication

Look for products that allow for commentary on each level of the scorecard. It should be possible to create comments that are either general or period specific. Alerts, such as when your metric needs updating (Notification), or when your metric turns Red (Push) are essential communication components.

Alignment

A good solution will allow for “Aligned Objectives” to be easily created so that scorecards can show the performance of their own objectives and measures, or of supporting objectives across various scorecards.

Automated Scoring and Weighting

A scorecard tool should allow for automated scoring and weighting of structure elements. You should be able to build your structure, define the weighting, enter the measure values, and watch the scorecard “colour-up.”

Initiative Management

Many initiatives will come out of the process. Look for products that have good initiative management modules to manage these scorecard initiatives. It should be possible to create tasks and milestones and assign them to individuals or groups.

Report Writing

Getting the right information, to the right people, and at the right time is vitally important. A good solution will come with a built-in report writer that contains canned reports like Red Metrics Report, Grey Metrics Report (missing values), and Metric Comparison Report (compares metrics within and across scorecards). The tools should also allow the user to pull data out of a scorecard database for ad-hoc reporting.

Integration to Desktop Tools

The solution should allow the user to export graphs, reports, and scorecards to desktop applications like Adobe Acrobat, Microsoft Word, Excel, and PowerPoint.

Briefings

The tool should be able to create online briefings to consolidate data for management, groups, or users. Briefings should be easy to set up by browsing the model and adding views, reports, and graphs. Once the briefing is created, it should be easily viewed online or allow for export to Adobe Acrobat, Microsoft PowerPoint, Word, or Excel.

Key Benefits

After decades since its introduction, this methodology is now accepted by many organisations as the de-facto method to gather information, make decisions and implement a strategy. It has been estimated more than 50% of medium to large organisations use the approach for business performance management. The key benefits are:

Improved organisational alignment and communication

The approach necessitates that the method is adopted by the whole organisation from department to division to enterprise. It becomes a single standard for all. The immediate benefit is a common language, a common set of strategic objectives and a common metric structure. This does not mean that the Balanced Scorecard must be implemented across an entire organisation immediately, indeed, the best approach is to start small (usually at the executive level) and roll out over a defined period.

Better strategic planning

The creation of a Strategy Map forces an executive team to think hard about the relationship between a strategic objective, initiatives and the metrics required to both help with the success (leading measures) and determine actual success (trailing measures). The strategy map, therefore, becomes the cornerstone of strategic planning. It has the added benefit of being the communication medium of the strategy (and the way it will be measured) to the rest of the organisation.

Improved performance reporting overall

The mind is focused on those things that need to be reported to the management and executive teams. There will be other things that need to be measured and reported upon, but the simple fact that the management and executive teams are clear on what they need will cause the whole organisation to think about what is required and more importantly why. One of the obvious benefits of this activity is that unnecessary reporting will be eliminated. The Balanced Scorecard becomes an extremely powerful tool to ensure organisational alignment, improve communications, achieve much stronger strategic planning and ultimately lead to a better performing organisation that is in tune with its business strategy.

Wikipedia has a good overall description including the history of the Balanced Scorecard.

There’s a lot that goes into explaining this topic, but let’s begin with the Balanced Scorecard definition and basics:

The Balanced Scorecard (BSC) is a business framework used for tracking and managing an organization’s strategy.

The BSC framework is based on the balance between leading and lagging indicators, which can respectively be thought of as the drivers and outcomes of your company goals. When used in the Balanced Scorecard framework, these key indicators tell you whether or not you’re accomplishing your goals and whether you’re on the right track to accomplish future goals.

With a Balanced Scorecard, you have the capability to:

• Describe your strategy.
• Measure your strategy.
• Track the actions you’re taking to improve upon your results.

Chapter 2: The Origin Of The Balanced Scorecard

In 1992, Drs. David P. Norton and Robert S. Kaplan started a working group to examine the challenge of reporting only on financial measures. In for-profit organizations, financial measures provided a lagging report (i.e. they told you what happened last month, quarter, or year), but they were not able to look forward. Norton and Kaplan wanted to specifically look at what measures that look forward in time and act as leading indicators might look like and how that could affect an organization’s strategy.

Chapter 3: Scorecard Lingo 101

If you build a Balanced Scorecard, you’re going to hear the words “objective,” “measure,” “initiative (or project),” and “action item” frequently. Here’s a quick cheat sheet to explain what they all mean.

• You have a high-level goal in mind, which is your objective.
• The measures say, “How will I know that I’m achieving the objective?” (In other words, they allow you to see if you’re meeting your goals.)
• The initiatives are put in place to answer the question, “What actions am I taking to accomplish the objective?” In theory, these are the places you’re spending money or putting forth effort to improve your performance.
• Action items help delegate out small jobs that will allow you to complete your initiatives.

Keep in mind, you may have multiple initiatives focused on improving your measures and achieving your objective. And if your projects are not helping you improve in these areas, you may need to rethink your overall strategy.

Chapter 4: A Simple Breakdown Of The Balanced Scorecard Framework

Throughout the process of creating the BSC, Norton and Kaplan realized an organization must first begin with goals that can be broken down into four distinct perspectives that are uniquely connected:

1. Financial goals—“What financial goals do we have that will impact our organization?”
2. Customer goals—“What things are important to our customers, which will in turn impact our financial standing?”
3. Process goals—“What do we need to do well internally, in order to meet our customer goals, that will impact our financial standing?”
4. People (or learning and growth) goals—“What skills, culture, and capabilities do we need to have in our organization in order to execute on the process that would make our customers happy and ultimately impact our financial standing?”

Over time, the concept of a strategy map was created. A Balanced Scorecard strategy map is a one-page visual depiction of an organization’s scorecard. It has the ability to show the connections between all four perspectives in a one-page picture. If you want some examples in your industry, download one of our free ebooks:

Chapter 5: How is the Balanced Scorecard typically put to use?

A Balanced Scorecard is most often used in three ways:

1. To bring an organization’s strategy to life. Those in the company can then use this strategy to make decisions company-wide.
2. To communicate the strategy across the organization. This is where the strategy map is critical. Organizations print it and include it in interoffice communications, put it on their intranet, communicate it with business partners, publish it on their website, and more.
3. To track strategic performance. That’s typically done through monthly, quarterly, and annual reports.

Who should use the BSC?

The Balanced Scorecard has been proven to be applicable in all industries—for-profit, nonprofit, government, healthcare, and more—and for organizations of all sizes.

Download Now: Balanced Scorecard Excel Template

Typically it’s used by leadership teams either at the executive level of the organization or at the division or department level. One of the keys to an effective scorecard is having leadership buy-in. That might seem obvious at first glance, but it’s easy to get enthusiastic about the scorecarding concept, see that it is relatively simple to implement, and move forward without the true buy-in and understanding from the leadership team you need.

The reason this can be such a struggle is because in order to make the BSC work in your organization, you have to change the way you’re currently managing. You will have to stop the weekly KPI reports or weekly leadership meetings and integrate any strategic management tactics into your scorecard. Of course, if your leadership team doesn’t buy into this concept, they’re not going to be obliged to change the way they handle their strategy and management.

Note: The Balanced Scorecard has made it very easy to communicate the way you talk about your strategy—but having a strategy and discussing it is only one piece of the puzzle. For your scorecard to be effective, you need to be able to execute your strategy—which includes managing it, making decisions around it, measuring it, and implementing it. If you want to get started quickly, take a look at the Strategy Execution Toolkit. It’s a free 42-page guide that walks you through how to write a purpose statement, build a change agenda, create a strategy map, and more.

2 Balanced Scorecard Success Stories

Below are just two examples of the many ClearPoint customers who have successfully executed their strategies with the help of the Balanced Scorecard.

Louisiana State University (LSU) College Of Engineering

When Richard Koubek became Dean of the College of Engineering, he devised an ambitious five-year strategic plan that would promote growth and provide Louisiana employers with first-rate engineers.

Armed with data from SWOT and gap analyses, he came up with eight areas to focus on:

• Preparing LSU Engineers for a Dynamic World
• Conducting Research to Improve the Quality of Life
• Innovating Through Diversity
• Improving and Diversifying Louisiana’s Economy
• Enhancing Recruitment and Retention
• Improving the College’s Visibility Locally, Nationally, and Globally
• Developing Diverse Streams of Support
• Fostering an Environment of Effective Decision Making

Each area had its own strategy, including specific goals, measures, and projects that were clearly aligned.

Then, with the help of ClearPoint, all of the College’s departments began tracking their performance. They developed simple red/amber/green status indicators that reflected the success level of their metrics, initiatives, and strategies. This simple classification helped people focus their performance discussions on areas of strategic importance. And the transparency of the tracking system overall proved to be motivational, too—when people could easily see the results of their efforts, they worked harder to do their part.

The Balanced Framework kept the College focused on strategy execution for the duration of the five-year period. As a result, they were able to accomplish most of the key elements in their strategic plan. At the end of the five-year period, the College and its staff members had:

• Boosted enrollment by 41%
• Earned double the number of patents in just one year alone
• Raised $52 million for building renovations
• Attracted a record number of companies and industries at its annual career fair
• Partnered with Louisiana Economic Development and IBM to develop a new curriculum

City of Fort Lauderdale

Fort Lauderdale launched its first-ever strategic plan in 2012 and adopted the scorecard framework at the same time. Called Press Play Fort Lauderdale 2018, the plan was created as a vehicle to bring the city’s vision statement, Fast Forward Fort Lauderdale 2035, to life. Citizen satisfaction went up as a result of its successful execution; the city also won the National Civic League’s All-America City Diversity and Inclusiveness Award for its community-based problem solving and civic engagement efforts.

The city’s current plan, Press Play 2024, builds on the momentum that began in the earlier years, and continues to use the scorecard framework as a mechanism for achieving the vision.

The 2024 plan has six focus areas:

• Infrastructure
• Public Places
• Neighborhood Enhancement
• Business Development
• Public Safety
• Internal Support

In accordance with the vision statement, which was developed as the result of a massive community outreach effort, it includes a total of eight goals (one for each focus area and two for both Infrastructure and Internal Support), 35 objectives, and 35 performance measures. The plan emphasizes cross-departmental collaborations, with teams working in concert so their objectives, measures, and initiatives are in sync. Cross-functional teams also meet regularly to address issues, solve problems, and discuss how to implement initiatives.

The City has used ClearPoint since the beginning to monitor performance. It serves the city’s need to facilitate data input, simplify reporting, and improve transparency both internally and externally, with city residents. (You can see its 2024 public-facing dashboard here.)

ClearPoint also supports Fort Lauderdale’s PerformanceSTAT model of performance review meetings (based on the CitiSTAT model developed by Baltimore in 2000), which it has branded FL2STAT (for Fort Lauderdale, FL). Because data can be displayed in numerous ways, departments have been able to streamline reporting outputs, expanding their capacity for more strategic work. Progress with the commission’s action plan initiatives, for example, is monitored and reported from ClearPoint, eliminating the need for any duplicate reporting to elected officials. Thanks to its strong leadership, dedicated staff, and a little help from ClearPoint, Fort Lauderdale is well-positioned to see its vision come to life.

Chapter 6: Options For Tracking Your Scorecard

We’ve seen everything from pen and paper, Excel, PowerPoint, numerous scorecard-specific applications, and business intelligence tools used to track Balanced Scorecards. Aside from pen and paper (which we do not recommend for obvious reasons), there are pros and cons to each:

A Microsoft Office Application (Excel Or PowerPoint)

Positives:

• It can be easily managed by individuals.
• It can be customized to meet the nuanced needs of your executive team.
• Each element can be done entirely to your specifications.

Considerations:

• It is very difficult to manage from one reporting period to the next.
• It is very hard to keep track of versions, so different executives might be seeing different numbers in their report if they do not have the most up to date version.

See Also: How To Create A Balanced Scorecard In Excel

A Business Intelligence (BI) Solution

Positives:

• It’s typically connected to your data warehouses or your information analytics systems.
• You can store a lot of your data and information in one place.

Considerations:

• It is very hard for your typical business user to use, and you’ll likely need an IT team to be involved with the integration.
• It is very hard to generate your executive-team reports.
• It is hard to include qualitative information with your project information.
• It can be cost-prohibitive.

A Scorecard-Specific Application

You may have noticed that scorecard management is in many ways “hard” for both the Excel/Powerpoint and BI solutions above—that’s the primary reason why organizations using those tools are less likely to execute their strategies. Not only do tracking and reporting become a burden, but it’s also more difficult to see how your daily activities contribute to the big picture.

Many organizations experience these problems eventually and turn to a scorecard-specific application.

Positives:

• It is typically very adept at managing the Balanced Scorecard and can do so out of the box.
• It can handle multiple users.
• It can create the reports you want.

Considerations:

• Sometimes you may have trouble linking to other applications.
• It requires a learning curve.
• It can be expensive.

See Also: The 6-Part Scorecard Software Checklist

Chapter 7: How To Read A Scorecard

Take a look at this sample strategy map:

Here’s how you can “read” this map:

This company—a chain of fruit stands called “Kosmo’s”—will invest in culture and build an employee training program in order to partner with local and organic produce suppliers to “find the new kale.” This will help match their offerings to hipsters’ needs and attract the hipster crowd. They’ll also invest in emerging neighborhoods and create a dynamic pricing system that will drive revenue. By carefully managing costs, they’ll drive overall profitability.

Sample Measure & Project

As stated previously, an objective says, “What are we doing?” A measure says, “What are we doing well?” And a project says, “How will we close the gap?”

One of Kosmo’s objectives in the “Process” perspective is to partner with local and organic produce suppliers. So, a corresponding measure may look at “The number of organic farmers signed up.” And a corresponding project (also called an initiative) may be using the Local Hudson Valley outreach program.

To learn more about measures and projects, check out A Full & Complete Balanced Scorecard Example.

Chapter 8: Common Questions

This Q&A section is built to provide easy, quick answers to the most-asked questions about the Balanced Scorecard. For more in-depth responses, scroll up to the preceding article or click on the links within each answer below.

This Q&A section is built to provide easy, quick answers to the most-asked questions about the Balanced Scorecard. Click To Tweet

What are the four perspectives of the Balanced Scorecard?

The Balanced Scorecard perspectives mimic the priorities of a traditional for-profit organization. The four perspectives are:

1. Financial Perspective
2. Customer Perspective
3. Internal (Process) Perspective
4. People (Or “Learning And Growth”) Perspective

If you’re not a for-profit organization, your perspectives may change to reflect the priorities of your organization.

The perspectives should also link together in a logical way, demonstrating the need to have the right people, doing the right things that will make your customers happy and lead to positive financial results.

What is the Balanced Scorecard approach?

The Balanced Scorecard (BSC) offers organizations a useful framework for tracking and managing their strategies. The approach identifies leading (driver) and lagging (outcome) indicators that are essentially barometers of success—these indicators will signal whether you’re accomplishing your goals.

Why would you use a Balanced Scorecard?

An organization uses a Balanced Scorecard for five main reasons:

1. To execute the strategic plan, aligning the company’s efforts and decisions with the strategy.
2. To communicate the strategy across the organization (such as with the strategy map).
3. To track strategic performance (typically via reports).
4. To align the organization’s divisions and departments around a common strategy.
5. To link individuals to the strategy, showing how they contribute to the organization’s goals.

How do you create a Balanced Scorecard?

Take these five proven steps to build your scorecard:

1. Create a purpose statement (outward view).
2. Design a change agenda (inward view).
3. Draw a strategy map with strategic objectives.
4. Choose measures to help drive the strategy.
5. Align initiatives or key projects to the strategy.

Download Now: Sample Balanced Scorecard In Excel

If you are just getting started with the Balanced Scorecard, this Excel template can help get you started immediately. You may find sooner than later that you’ve outgrown this template and you need to look at scorecard-specific applications to manage your strategy—but this free template will get you headed in the right direction.