The Balanced Scorecard is a business tool recognized world-wide by companies’ executives. The secret of the successful BSC project is that all key employees, business owners, and top managers are involved. Research show that the biggest challenge during the implementation of the BSC is a motivational problem. Before starting a Balanced Scorecard project it is necessary to explain this business approach to all stakeholders so that they would buy into the design of the Balanced Scorecard and in the future became active users of this business tool. For sure, you will face some technical problems as well, but you will easily solve them if you have all stakeholders on your side.
The Balanced Scorecard is already used widely
Let’s start with some basic facts. Statistic shows that the Balanced Scorecard framework is already used widely in companies world-wide:
According to study by Cranfield University:
- More than 50 percent of large enterprises use some type of a balanced scorecard
According to 2GC Balanced Scorecard usage survey:
- 31% of companies reported Balanced Scorecard as extremely helpful, 42% as a very helpful
- 34% of interviewed companies use BSC for strategic management, 35% for reporting, 17% for operational management
According to Bain & Co
- About 70 percent of organizations had at least partially implemented a Balanced Scorecard by 2006.
- 50 percent of Fortune 1,000 companies are using the Balanced Scorecard
- Balanced Scorecard was one of the 5 most used business tools in 2013
You will find all the mentioned statistics in the Balanced Scorecard Fact Sheet and Statistics section at bscdesigner.com
Why companies use the Balanced Scorecard?
By now we see that the Balanced Scorecard is used widely, but why is it used? Here is some more data that reveals problems that all companies face and that Balanced Scorecard addresses:
According to Balanced Scorecard Collaborative
- 95% of typical workforce does not understand its organizations’ strategy
- 90% of organizations fail to execute their strategies successfully
- 70% of organizations do not link middle management incentives to strategy
Balanced Scorecard allows one to see the big picture
That’s where the Balanced Scorecard helps. It allows to see the big picture of what’s happening in the business and shares this picture with employees. As a result line-level employees start seeing the connection between what they are doing now and the strategy of the company. Executives enjoy the top view of what’s happening in the company, why it’s happening and what is the response of the business on this.
Analyze your last failure
Every business fails with some project or another. In most cases it is not the question of a wrong strategy, but the question of poor execution. Have a look at your last business failure:
- If you would have executed it better if you would see a big picture of what’s going on?
- If your employees would achieve better results if they would have known what strategic plan stands behind their job?
- If your project would be more predictable if you would use clearly defined measures and KPIs?
If you have answered ‘Yes’ to at least one of the questions, then the Balanced Scorecard could help you in this case. Top management would be more focused on main challenges of the project and employees could deliver better results faster. BSC is not a magic pill, it won’t insure you from any business problems. But it allows your team to stay focused and minimizes the strategy execution risks.
We already have KPIs!
Most business managers argue that they already have KPIs and with that tool they manage their business. Unfortunately, KPIs are for measurement, not for management. They can give some insights, but they lack the connection with strategy, business objectives and action plans. It was discussed in details in the article “Why most KPIs don’t work and what to do about this.” To work effectively, KPIs need to be placed in a business context.
How exactly can the Balanced Scorecard help?
By now we know that to execute a business strategy effectively top managers, department managers and line-level employees need to see the big picture of what’s happening in the business and why. Management initiatives should be aligned with strategy and we need KPIs to know that we are on the right track. The question is: “How can the Balanced Scorecard help?”
- It obligates top managers to formalize their strategic ideas into a form of a strategy map. The strategy map should have business objectives and what is more important is that these business objectives should be linked with each other by a cause-and-effect connections.
- KPIs will be aligned to business objectives so that we know if we are on the right track towards achieving the business goal.
- In the BSC for each business objective we will have an action plan that will tell employees what they should do to achieve the specific business goal.
- The Balanced Scorecard project will be cascaded. The Balanced Scorecard with its KPIs and action plans should not be used by top managers only, but it should be delegated to department levels.
You still need your task/project management tools
The Balanced Scorecard is not a replacement for classical project management tools. The BSC addresses the strategy execution problems, not a task management challenges. The Balanced Scorecard gives a business context for operational tasks. Instead of just doing their job, employees will be able to understand why they are doing it and why it is important. It allows changing the perception of the job. As a result, companies that have implemented the Balanced Scorecard have reported significant increases in ultimate business performance.
According to 2GC Balanced Scorecard usage survey:
- The most significant impacts of Balanced Scorecard implementation were found in business actions (83%).
According to Balanced Scorecard Forum
- 80% of organizations using balanced scorecard reported improvements in operating performance
- 66% of these organizations reported an increase in profits
A Balanced Scorecard and a dashboard are not the same
Most businesses have some type of a dashboard. A dashboard and a Balanced Scorecard are not the same business tools. They are designed for different purposes.
- Dashboards help to generate some business insights. Dashboards are great for monitoring of the current business state.
- When it comes to new challenges you will need a scorecard that will track your progress towards specified business objectives.
Learn more in the article “What’s the difference between a Dashboard and a Balanced Scorecard?”
What are the benefits of the BSC for a top manager?
For a top manager the Balanced Scorecard:
- Displays the big picture of what’s going on in the company
- Helps to formulate and execute the strategy
- Visualizes strategic information on the strategy map
The next time when a top manager needs to make some kind of business decision he or she will have not only operational information, but will also have the understanding of the cause-and-effect connections between involved business objectives and suggested business solutions.
What are the benefits of the BSC for a business unit manager?
For a business unit manager the Balanced Scorecard:
- Helps to monitor the current performance
- Helps to tracks the progress towards business objectives
- Visualizes important performance information
With the Balanced Scorecard top level initiatives will be translated more logically to the department level. In this way, managers of business units can focus on what matters, and avoid doing a job that doesn’t help the company to execute its strategy.
What are the benefits of the BSC for line-level employees?
For line-level employees the Balanced Scorecard:
- Shows how the current task is linked to the company’s strategy
- Tracks the current performance transparently
Employees are happy to do a job where a final objective and the progress measures are clearly defined. With the Balanced Scorecard framework managers can translate to line-level employees not only what should be done, but why it should be done. Knowing the ultimate goal helps employees to do their job more effectively.
Balanced Scorecard’s DON’Ts
- Do not run the BSC project by yourself. Top managers like to play their business toys alone. In the case of the Balanced Scorecard this won’t work. Involve your team as soon as possible. In this way you will come up with better KPIs, business objectives, action plans and finally will achieve better results.
- Do not use reward KPIs. Linking rewards to specific KPI will make the life of HR much easier, but it is not recommended to use Reward KPIs on your scorecard, researches and best practices also confirm this point of view. Check out “Compensation and reward KPI best practices” article for details.
- Do not copy KPIs from other businesses. You need to map your business objectives and then come up with KPIs that will measure your progress towards business objectives or monitor your current performance. Business objectives come first, not KPIs. For that reason it doesn’t make sense copying KPIs from others.
Choosing an automation tool
As it was shown the Balanced Scorecard is not about few KPIs and it is not for the top managers only. To help company execute its strategy, the Balanced Scorecard should be a part of the business toolkit of all departments. The question is what software automation tool can a company use for the Balanced Scorecard?
- Excel is a great choice when you are on the stage of a prototype
- When it comes to the strategy map, cascading, sharing your BSC, choose a professional Balanced Scorecard software like BSC Designer.
It is better to share the real story
Facts tell, stories sell. We have to learn many facts about the Balanced Scorecard, but to be really persuasive one need to share stories about the Balanced Scorecard with their stakeholders.
BSC Designer software has helped many companies with automation of the Balanced Scorecard concept. Visit the testimonials section at BSC Designer. There you will find more than 80 testimonials from users from various businesses from all over the world.
Stories for the business world
Business people like to see not just user’s testimonials, but the case studies with even more facts and details. Share with your stakeholder one of the business stories from our case study section.
Here are some latest case studies:
- Software development company 2Realpeople used the Balanced Scorecard framework automated with BSC Designer to model their commercial strategy for 2014. Read more…
- Slovenia-based provider of information security services Astec d.o.o. started the Balanced Scorecard project to implement controlling in their business processes. Read more…
- Top managers of the Concept Italia use BSC Designer software to evaluate the level of achievement of business goals. One of the ultimate goals of using of the BSC Designer in the company is to improve customer satisfaction. Read more…
- BSC Designer software supports a cultural shift from “I’m doing my job” to “I do understand strategy” in Talent Consulting. Read more…
Find more case studies with companies that use the Balanced Scorecard framework automated with BSC Designer.
Still doubt about the Balanced Scorecard?
It is a challenging task to catch all the features and details about the Balanced Scorecard in just one article. You will find more details and insightful articles about the Balanced Scorecard in Articles section at BSC Designer. Also, feel free to send us your questions.