Metrics, Scorecard, KPIs

Business owners and top managers started feeling the necessity to evaluate business performance and develop strategic goals when it became understood that greater production output and high quality products do not guarantee survival in the markets.  Customers became very picky as they almost always have multiple choices.  This resulted in a very tough competition.  That’s why it became necessary to plan everything ahead.  Strategic vision of the company and its strategic goals attempt to foresee possible problems and obstacles the company may face in future.  If the problem is solved even before it has appeared then this problem represents no jeopardy for the company.

The four BSC perspectives

But it is not reasonable to evaluate performance of a company apart from its strategic goals.  In other words the company may do certain things that have nothing to do with its strategic vision.  So, why evaluate such performance?  There is no sense in it.  But with appearance of Balanced Scorecard System this problem has been solved.  BSC is not only an extremely effective tool to evaluate current, past and future performance of the company, but also an excellent way to communicate strategic and operational management.

It has been estimated that about 80% of managers do not directly participate in strategic planning.  Moreover, some of them do not understand the concept of the strategy on may have own interpretation of strategic vision which may not coincide with a genuine strategy of the company.  This is where Balanced Scorecard helps.  It visualizes the strategy and makes it clear even to the lowest level of company management.

What the choice of wrong goals results in

Balanced Scorecard consists of four categories of indicators called perspectives: financial, customer, internal processes, of learning and growth.  These perspectives consist of indicators that represent most important key success factors for the company.  Moreover, every indicator has a direct impact on the company total performance evaluation.  Thus, by looking at the scorecard a top manager can see what prevents the company from implementation of strategic goals.  Balanced Scorecard is a great tool to find weak points.

However, very often companies failed to implement Balanced Scorecard, and one of the most common reasons for that is lack of comprehensive strategy.  It’s impossible to drive to the right destination if the wrong goals were set.  Also, it is unacceptable to confuse Balanced Scorecard and the strategy, since BSC does not substitute the strategy.  That means that strategy development must be still performed by people.

Measuring and controlling of any business is possible with Balanced Scorecard concept, but it is just concept without guides, step-by-step manuals, trainings you will not even understand how to link the concept to your business.

There are two options:

• Take expensive or inexpensive Balanced Scorecard training;
• Invest some time in self-education;

We think that you should choose both! As for self-education there is a great library of Balanced Scorecard articles that is now available online.

So, what can you find there and what is the best way to start your self-education about Balanced Scorecard:

1. Need some inspiration to get started? Check Balanced Scorecard success stories and BSC examples.
2. Need guide? Check guides section.
3. You need to create the best KPIs? Check BSC and KPI section.
4. Need some real-life examples – learn about BSC for Sales and BSC for Finance.
5. If you already have some questions about Balanced Scorecard then start with FAQ section.
6. Setting up company goals? Consider using SWOT analysis, also learn more about strategy maps – you will need them!
7. You have one scorecard and now want implement it company wide? Learn more about cascading and testing scorecard!
8. Have everything on paper and now you are looking for some automation means? Check articles about Balanced Scorecard software or BSC in Excel.
9. Ready to present your Balanced Scorecard ideas? Check these articles for ideas for templates, and BSC presentation.
10. Building your Balanced Scorecard dashboard? Check related articles.

One of the greatest disadvantages of performance management was that this system paid attention to financial indicators only.  Obsession with financial figure’s distracted business managers from such issues as relation to customers, optimization of internal processes in the company, analysis of employee performance, employee satisfaction, organization climate and many other important issues.  It is very difficult to make correct plans and predictions as to the future situation in the market and development of the company.  Financial indicators are the focus and the goal of the other factors that directly influence performance of a company.

Emergence of balanced scorecard system revived performance management by the inclusion of three other perspectives.  Thus, the traditional set of categories consists of financial, customer, internal processes, learning and growth perspectives.  These four perspectives aim to cover all processes is and things happening inside and outside the company and influencing co performance in the direct or indirect way.

The four BSC perspectives

Why is it important to measure business?  In the modern business world stagnation means death.  In the business stop developing it will be sown wiped out by competitors.  But in order to develop one should know the plans.  Operating a business without strategic plan is like running at night with your eyes closed. But it is especially important to link a strategy to the operational management. This is what Balanced Scorecard is especially good at.

So, what are the most important stages of BSC implementation?  First and foremost, it is very important to find out whether or not the company is ready to implement balanced scorecard.  It should be noted that BSC implementation is a lengthy process which requires considerable monetary and human resource investments.  So, if a company does not have the personnel which will implement and work with balanced scorecard it is useless to start the entire process.

Implementation stages of BSC

When the decision to implement BSC is made the company should select key performance indicators to be evaluated.  This will help measure progress and efficiency of strategic goals implementation.  There should be a certain number of key performance indicators that each management of operational level.  Balanced scorecard organizes these measures into a strategic map or strategy tree which visualizes company strategic goals and makes them easy to understand.

It is imperative to decide in what way the information will be collected, submit it, analyzed and in what way response actions will be taken.  Only in such a way balanced scorecard will optimize performance of a company and approach it to strategic goals.

The popularity of balanced scorecard is increasing with every coming day.  Indeed there is no other tool that can combine in so many perspectives in development of a company.  Balanced scorecard aims at designing a strategy maps and evaluation of KPIs in order to reach the company strategic goals.

The system seems simple at a first glance.  But this is the most common misconception.  Balanced scorecard is a complex system that requires systemic approach, clear management structure, comprehensive compensation and bomber system for employees and commitment from the entire personnel.  It is also very important to get a proper education and general knowledge on balanced scorecard.  The statistics shows that only 1/3 of managers are satisfied with the work of balanced scorecard when the system is implemented without professional assistance.

Developers of BSC designer know this perfectly well.  That’s why they offer a user’s continuous support.  AKS-LABS releases training courses and freed study materials from time to time.  This time, users can download free templates on balanced scorecard.

Download free templates on Balanced Scorecard

What will you find inside templates?  Having unpacked archive you will see several power find and pdf files with templates on balanced scorecard and KPIs.  First of all you will have at template for the company four perspectives.  The only thing you should do is to fill in the scheme with strategic goals of your company.

You’ll find the tables with objectives, measures, targets and initiatives for every of the four perspectives: financial, customer, internal processes, learning and growth.  Besides, there are cracks and tables for a set of KPIs for each perspective.

Free templates will make it possible to visualize company strategy goals and specify measures to be evaluated.  You’ll also find screen-shots from BSC designer and excel reports.

Templates are available for download from this page.

Enjoy free BSC templates from AKS-LABS

Implementation and maintain ends of balanced scorecard system is not as easy process as it might seem at a first glance.  If one fails to properly implement balanced scorecard, find relevant metrics and adequate response actions Balanced Scorecard System will turn out helpless, and thus it will be a waste of time and what is more important money.  Some users and businessmen view balanced scorecard as a magic tool that turns a mediocre company into a prosperous international business.  In fact, balanced scorecard is the tool that helps communicate company strategic goals and strategic vision with methods of implementing such a strategy.

Even creators of balanced scorecard note that only about 27% of managers and business owners are satisfied with implementation results of balanced scorecard without professional assistant and special training.  This is to say that balanced scorecard requires professional approach and commitment.

Learn more about BSC system

To assist business owners and top managers, developers of BSC Designer from AKS-LABS have released an audio course which covers the most controversial and difficult issues about implementation and maintenance of balanced scorecard.  The audio course is presented as a number of mp3 files grouped according to the stages of balanced scorecard implementation.

So, what will you learn from this course?  As set above, these files address issues and problems related to certain stages of balanced scorecard implementation.  Thus, you will learn general information on balanced scorecard, the design process, selection of KPIs, implementation of balanced scorecard, finding relevant response measures and establishment of a well organized management system.

You will learn how to choose the right key performance indicators for particular business.  It is also important to use the right number of KPIs.  How many KPIs is enough?  You can learn that from the course.

This training program also covers the issues of strategic maps and cascading balanced scorecard.  If you are to use balanced scorecard in a big company you’ll certainly come across the issues of cascading balanced scorecard and designing of strategy maps.

Of course, every user of the Balanced Scorecard System was to know how effectively this system was implemented in the organization.  It should be noted that such evaluation is also evaluation of the system itself as well as professional level of managers who participated in this process.

The training course is very easy to follow at the speaker uses very clear language, at the same time trying to explain complex things in simple terms.

Stages of BSC implementation

The Balanced Scorecard is a tool businesses should know how to use. By applying key concepts here, growth in terms of performance and productivity should not be hard to achieve.

There are many theories and such that have emerged in the world of business over the years. And this is far from coming to an end because at this very point in time, there is surely another emerging business theory being put into practice at just about any area of the world today. However, amongst all these theories and concepts, a select few just might be effective as to the results that they bring for their respective companies and organizations. One of these is sure to be the Balanced Scorecard. Yes, you may have heard about the tool in theory, but you just might not know everything there is to know about the tool itself. Here are some facts about Balanced Scorecard that you should be aware of.

Just like any other tool that is being used in the world of business, the Balanced Scorecard has adjustable properties; all of which are made adjustable and modifiable to suit the individual and collective needs of businesses worldwide. In spite of this, though, the Balanced Scorecard operates in the same way in terms of its application. Even if you run just a small business or a fairly huge one, the same concept underlies the application of the tool itself.

Firstly, the Balanced Scorecard begins with the mission statement. This mission statement has to be stated exactly, concretely, and precisely. What’s more, the mission statement should be shared by every single member in the organization. Thus, you have to make sure your mission statement is well-worded because everything else in the process depends on this.

The second thing you should pay attention to is your financial balance or your cash flow. This is one of the first things that the financial stakeholders of your company would look for in your Balanced Scorecard. Thus, the figures here should also be as accurate as possible. Think of this as your company’s financial target, so to speak.

Thirdly, you also have to pay attention to the reputation of your company or organization itself. Just how do you want to appear in the eyes of customers and clients? Or perhaps, in the eyes of your beneficiaries? Image is very important here because you just cannot deny the fact that first impressions do count, even if they do not really last. Thus, prepare a brief but concise description of your organization, in the very image you want to appear in your customers’ eyes.

The fourth thing to look into pertains to methods and processes the company must undertake to keep the stakeholders happy and content. Brainstorming is very important during this stage because you have to take into consideration all processes needed to satisfy your stakeholders here. From the bottom of the chain of command all the way up to management tasks, all of these aspects will have to be taken into thorough consideration.

The fifth aspect involves planning. Planning takes place in the form of figuring out the courses of action to be undertaken to achieve the vision of the company itself. What would it take for all employees from all divisions to work productively together?

Lastly, you need to elaborate as much on the specific KPIs that are used on the Balanced Scorecard. In this way, the system is actually made more open to critical appraisal from all members of the organization. And since this is a continuous process, the application of this final step would indeed help in developing an efficient system. Just focus on these facts about Balanced Scorecard to get there.

Learn more about Balanced Scorecard for HR