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What is a Balanced Scorecard?

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Last editedDec 20202 min read

A balanced scorecard is a way of strategically managing company performance. It generally provides important feedback and data to organisations. This enables managers, workers and CEOs to improve productivity, boost profits, improve working conditions and streamline ways of working. This in turn can lead to better leadership decisions and increase a company's overall performance.

The balanced scorecard approach was first introduced by academics David Norton and Robert Kaplan and was hailed as the new way to measure company performance. Norton and Kaplan harnessed performance measures used in metrics as part of their scorecard methodology, altering them to enable the inclusion of non-financial information.

You can find many balanced scorecard examples and templates online, and you can use them to take note of and improve areas of your business that may be lacking in performance or not meeting financial targets.

The Balanced Scorecard Model

The balanced scorecard approach separates company strategy into four major sections – otherwise known as ‘legs’. These include growth, company processes, customer relations and financial strategy/profit. Using a balanced scorecard in strategic management, covering these four areas, means your company can easily note those areas of performance that need improvement. The data will enable you to form new company objectives and strategies. You can do this by considering company strategy based on the four ‘legs’ below.

Growth

This part of your balanced scorecard model is assessed by investigating training processes. It’s a good way to assess if staff have adequate training for their job, or feel they need extra training to make their role easier. It also investigates knowledge resources to measure if staff can effectively gather the information they need to do their job well. Lastly, it helps determine if the company is in a competitive position within its market, based on the knowledge of its industry.

Company Processes

The scorecard model allows analysis of strategic management, as well as how products are produced within the manufacturing line. Data provided from the scorecard enables identification of additional waste of time and resources, time delays, shortages of resources, or staff shortages or gaps that need to be filled.

Customer Relations

Customer opinion is collected and analysed to determine product and service satisfaction, as well as the availability of services and whether demand is being met.

Financial Strategy and Profit

Income, profits, financial strategy and sales data are assessed in detail to determine company performance from a financial perspective, and whether profit targets are being met.

Creating a balanced scorecard template

It is possible to find a balanced scoresheet example on various sites and build one in just a few simple steps. These include:

Creating a statement of purpose – how you will be different from competitors, and how you will succeed in your chosen market.
Designing an agenda for change – what changes can you make to your organization to achieve your purpose statement?
Creating a strategy map – this indicates the path you will take in your new business strategy, with links that highlight cause and effect. This should be distributed to everyone in the company so each worker is clear on actions to be taken.
Stating measures – this enables careful analysis of what is working, what isn’t, and how you can keep your company motivated.
Launching new projects or products – this will help you to execute your strategy and statement of purpose.

One major benefit of a balanced scorecard for measuring company performance is that it gives a company a way of seeing the links between strategy, management, profit and projects. By using this simple framework, companies can continue to improve financially while meeting targets.

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