Why I Need A Balanced Scorecard

There are numerous benefits of the balanced scorecard and reasons why you should integrate one with your key performance indicators.

Balanced Scorecard is a concept that was created due to a demand for a wider perspective on reporting the performance of an organisation, than simply sales figures. As we know, when the chips are down or when our backs are against the wall, sales are everything, but these should not come at all costs.

Successful businesses don’t buy sales. They don’t cannibalise their own products and services. They don’t under price just to get the next sale. They don’t discount because they know the customer is getting great value. They are also passionate, often to the point of obsession, about knowing what they are best at, and continuously improving everything that gives them a competitive advantage.

“Just being great and unique at something today, doesn’t mean that you will be alone with these things tomorrow… your competitors will be watching and copying. Continuous improvement, of even your biggest strengths, is essential for business success.”

So with these things in mind, it makes perfect sense to stretch reporting beyond the simple sales volumes and values achieved, and look into the other things within your business that helped you get there.

It’s a case of balancing the objective, the numbers, with the subjective, the softer things that are often equally important.

This is where the concept and name of Balanced Scorecard came from. It’s not rocket science, it’s a scorecard that presents a balance of reporting the most important things that help your business to operate, sell and grow.

Being a simple concept, based on the ever popular 2×2 matrix, it means that it’s flexible and you can title each of the four boxes in any way you see appropriate for your organisation.

A typical Balanced Scorecard will include Customers, Financial Performance, People and Business Processes. You might want to substitute in, other titles that are currently part of your strategic focus. Growth might be one, or Innovation, another. These could also be included at the next level down from the four main titles. In other words, growth might be reported under Financial Performance, or Innovation could be under Business Processes.

The beauty of The Balanced Scorecard is that it is so simple and there is something in it for everyone, from accounts to sales, production to HR.

You will notice in the example above that it is colour-coded, red amber green. This is intentional. Green items would be performing in line with the targets set. Amber would be items that are underperforming against the targets and need to be considered at the next review meeting. Items in Red are show-stoppers and would require urgent attention today.

You can of course add in the actual data and evidence underneath or linked from each of these titles and sub titles. You could also ask members of the team to complete their own Balanced Scorecard using identical titles and then collate each response to give a clear team-wide, collaborative view, rather than just the view from the top of the business.

Review your Balanced Scorecard in monthly meetings or more regularly. It’s a great method of balancing success in all quarters with the challenges facing every business today and as you can see, it’s completely evidence-driven, leading to better results and ultimate success.