Using a Balanced Scorecard to Focus Your Business on What Matters

balanced scorecard

Forget what you know about the Balanced Scorecard approach. Most guides don’t really get to the point, as all they talk about are the “four perspectives” that you need to have, business objectives, and KPIs. All that is important, but what is more important is a coherent approach to using these business tools.

Goals and Objectives

Goals are what you wish to achieve, and objectives are the more specific and action oriented formalization of your goals. I have written about the difference before, and what is important right now is that you need to have objectives that should tell you how to realize your goals.

Strategy Map

Do you have a to-do list? The one that I have on my table now is not actually a list. It has some items listed, but all of the items are linked. That’s exactly what the Balanced Scorecard approach suggests you should do. Don’t think about business objectives as separate items in your company’s to-do list: think about it as a map.

Let’s call it a strategy map. Why strategy? Because strategy shows “how” we are going to achieve our goals. One needs to achieve certain objectives and all the objectives have different roles. Some are financial ones, other support financial objectives, others represent your plans about improving your business systems, and others are bottom-level objectives that catch what your business needs to learn in order to succeed.

KPIs

Key Performance Indicators or KPIs are your compass. What is your current progress towards a specific objective? What is the current performance of the process that you are constantly monitoring? KPIs don’t just deliver you numbers: they generate business insights that one can use to correct an action plan.

Before you do anything else you need to do, like perform SEO to attract more visitors, orpromote your business in the local newspaper, or send your team to a workshop, ask yourself: “How will I know that it was successful?”

For some objectives, it is not that simple. Sometimes it costs a lot to come up with a good Key Performance Indicator, but it is worth investing time in this. Good KPIs will save you from many business mistakes. Here is my receipt for winning KPIs.

Balanced Scorecard

These ideas are inspired by the Balanced Scorecard method. Build your strategy map, align it with KPIs and an action plan, and there you have it. The most important thing is that it will help you to focus on what matters. It might sound confusing from the beginning, but when you try it, you’ll love it. Check out BSC Designer for an automated scorecard. While Excel is great for a prototype, when your project gets bigger, you’ll need a professional BSC tool.

Main Takeaways

  • Learn the difference between a goal and an objective. Have goals, but support them with objectives.
  • Don’t have a list of to-do items, have a map where items are linked with goals and objectives.
  • Think about measuring your progress and performance, and come up with result-oriented KPIs.

Aleksey Savkin is a founder of AKS-Labs, vendor of BSC Designer balanced scorecard software. His areas of expertise are remote team management, Balanced Scorecard, KPIs, business performance management, general info-business development and marketing. Aleksey is the author of a number of articles and books on Balanced Scorecard. He runs Balanced Scorecard seminars in the Moscow Business School (MBS).

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