The Essence of Proper Balanced Scorecard Development

We all know how important the concept of the balanced scorecard is, especially if you are aiming for the success of your business or enterprise. And what businessman would not want for his or her business to be successful in every endeavor? Thus, there is certainly a need to know how to incorporate and implement proper balanced scorecard development.

But before we go into that, let us look at the primary reason behind the development of the balanced scorecard, which is also referred to the BSC at times. Just why is there a need to develop the BSC? When you were just starting out, you probably had a number of goals and objectives that you wanted your business to achieve. These goals and objectives – both short-term and long-term – become inevitably easy to forget when you are concentrating on the present status of your business. When this happens, you no longer have a clear gauge of where your business is presently at, especially when pitted against corporate goals and objectives – the very ones you once implemented during the formative years of your business. This is where the importance of the BSC enters the picture. The BSC is that tool that serves as a constant reminder of your business’s present state and progress. This way, you have quantifiable aspects to look at when determining just where you are at in terms of achieving long-term and short-term goals and objectives.

With that said, let us now move on to the development of the BSC itself. There are actually four perspectives to consider when you are developing your BSC. These perspectives are Customers, Financial, Internal Processes, and Learning and Growth. These four serve as “buckets”, wherein objectives of the same nature would fall into that particular bucket. For instance, the goal of customer satisfaction would inevitably fall into the bucket of Customers. Conducting a SWOT Analysis could greatly help in the process of filling these buckets.

The next thing to do is to identify the quantifiable measures to use in determining the present state of the company. These quantifiable measures are known as KPIs or Key Performance Indicators. Using KPIs makes the process of measuring the present state of the company easier, since you will have a quantifiable means of doing so already.

For instance, you want to measure the performance of your company when it comes to Customer Retention – this being one of your goals. The following KPIs can be checked to measure customer retention: Customer Satisfaction, Number of Customer Complaints, and Product Return Rate. When you have these figures at hand, you will find it much easier to determine how far along your business is towards achieving customer retention.

Pretty easy, right? Yes, but the process of balanced scorecard development does not end there at all. After determining the present state, you should then identify initiatives to use when you move to address the areas in which the company is underperforming. This way, you can formulate the right courses of action to deal with the underperformance accordingly.