A balanced scorecard (BSC) is a framework for managing business strategy. It maps strategic choices to aspects of your business.

It looks at four strategic choices:

  • Objectives: high level, long-term goals.
  • Measures: metrics that help you check your progress toward your objectives.
  • Initiatives: key large scale actions that you’re taking to meet your objectives.
  • Action items: small scale actions that you’re taking to support your initiatives.

It covers four aspects of your business:

  • Financial: Your income and outflow. Decreasing costs, increasing income, opening new sources of revenue.
  • Customer: How your customers relate to you. Satisfaction levels, market share, brand awareness, brand sentiment.
  • Internal Processes: streamlining processes, improving production quality, boosting efficiency.
  • Learning and Growth: employee skills, knowledge transfer, intellectual property, company culture.

It’s called a Balanced Scorecard because it helps you to balance your strategy across all areas of your business. This is a key component of successfully growing a company.

Video: What is a Balanced Scorecard – Bernard Marr

Sample balanced scorecards

A sample balanced scorecard. It has four rows: financial, customer, internal business processes, and learning and growth. In the Financial row is a box titled Maximize shareholder value. In the Customer row are two boxes: Exceed customer expectations and Inspire loyalty. In the Internal business processes row are three boxes: Create quality partnerships, Maximize operational effectiveness, and Create high quality products. In the Learning and growth row are two boxes: Recruit quality staff and Train employees.
Image: Sample balanced scorecard

In the example above, objectives are mapped across the four aspects of the business. You can see at a glance which aspect every objective relates to. You can also see how each objective connects to the others.

The sample above has a few differences to the first. Firstly, the business aspects are in a different order. This business has different priorities. Secondly, it contains more goals. Thirdly, not all goals are clearly located in a single aspect. These are important points: create your scorecard to suit your business.

Image: Balanced scorecard in cycle format

While most balanced scorecards will use rows, you’ll find some in other formats. The scorecard above is an example of the cycle format.

When to use a balanced scorecard

Use a balanced scorecard when:

  • You’re developing strategy for an entire business.
  • You need a big picture approach.
  • You want to address all aspects of your business.

How to create a balanced scorecard

There are a few steps to follow in creating a balanced scorecard for your business.

Identify the aspects of your business

Firstly, decide which aspects of your business are key to its success. Most will use variants of the four used above:

  • Financial
  • Customer
  • Internal processes
  • Learning and growth.

However, you might have other areas that you prioritize. For example, a fintech company might have a ‘Technology’ aspect. Or a startup might include ‘Innovation’.

Decide your priority order

Your priorities might be in a different order to the standard. You might value learning and growth because employee well-being is a cornerstone of the business. Or customer satisfaction might be your primary goal.

Your aspects could look like this instead:

  • Customer
  • Technology
  • Learning and growth
  • Financial
  • Internal processes.

Choose your goals

You need some business objectives. Thinking through these questions can help:

  • Where do you want your business to be in five years?
  • How does your business need to improve?
  • What are the main flaws that you could fix?
  • Where are the opportunities in the market?
  • Does the company culture work well?

What will you include?

Many balanced scorecards just display objectives. However, you might want to include your measures, initiatives, and action items as well. This gives you a more detailed overview.

Map your strategy

The next step is to map your strategy onto your business aspects. There are a few different tools that you can use:

  • Microsoft Word offers a ‘Labeled Hierarchy’ SmartArt object. You can easily construct a BSC with this.
  • LibreOffice Draw contains all the graphical features you need to create a BSC. Manual effort required, though.
  • Online tools like Canva and LucidChart offer BSC templates.

Is it balanced?

Your final step is to evaluate your scorecard. Is it balanced? Or are all your strategic choices bunched into one or two aspects of your business? If your scorecard isn’t balanced, revisit your goals.

KPIs and KPOVs

We use key performance indicators (KPIs) and key process output variables as metrics to tell us how we’re going.

Use KPIs and KPOVs with the balanced scorecard concept to create a balanced dashboard or KPI/KPOV scorecard. This provides a running update on progress towards your goals.

What to do with a balanced dashboard

It’s all very well to create a balanced dashboard. But what now?

Once you’ve plotted your progress toward your goals on your dashboard, the next step is to analyze. Are there aspects of your business in which you’re crushing your goals? Are there aspects in which you’re really, really not?

Example Balanced Dashboard

A call center created a balanced scorecard three months ago. The call center was having trouble with:

  • Calls taking too long.
  • Customers waiting too long in the queue.
  • Customers unhappy with the amount of time that they had to spend on the line with customer service.
  • Expenses being too high.

So the company’s balanced scorecard for the next 6 months looked like this:

Now, three months later, the company needs to look at its progress towards these goals.

It needs a balanced dashboard to track its numbers in each quadrant.

The team responsible charts the average call wait times for each week in the current quarter and the preceding quarter.

It charts its monthly expenditure on infrastructure for the current quarter and the preceding quarter.

The team charts the percentage of calls lasting a certain amount of time before being escalated to level 2 support.

Then it charts the number of employees working from home.

Finally, it combines all of these into a balanced dashboard so that all staff can see at a glance their progress toward goals.

Points to keep in mind

Here are some things to remember when you’re creating balanced scorecards and dashboards:

  • If you don’t decide on metrics up front, you won’t be able to measure your progress.
  • If you can’t chart it, it’s probably not a good metric. Metrics are objective and measurable.
  • Don’t make your short term goals so big that your staff won’t be able to meet them. Smashing small goals builds morale.
  • Balancing your goals across your business is good. Creating spurious goals just to achieve ‘balance’ is pointless. If you can’t come up with goals that are important in a particular category, ask yourself: “Is this aspect of the business important? Can I replace it with something else?”
  • Support your goals with action items. It’s not enough to figure out where you want to go; you also need to work out how to get there.

Comments (2)

Hi Jeremy,

Good question. There are a few answers here.

You could be using a Dashboard as part of chartering a project in the Define phase. Alternatively, you could be updating or editing Dashboards as a result of your project when checking results in the Improve phase or even as part of a control plan in the Control Phase.

Best, Ted

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