Use the Balanced Scorecard to structure your organization’s operations
The Balanced Scorecard (BSC) is an effective planning and performance management tool. This article explores how it can be utilized for objective-based planning and contains the following sections:
What is the Balanced Scorecard?
Use the Balanced Scorecard to set meaningful strategic objectives
Example strategic objectives based on the Balanced Scorecard approach
What is the Balanced Scorecard?
Conceptualized by Art Schneiderman in the late 1980s and later refined and popularized by Robert S Kaplan and David P Norton, the BSC was originally developed as a performance management framework. Its characteristic feature was establishing a set of financial and non-financial measures based on four themes — financial, customer, internal business processes, learning, and growth — through which the health of an organization could be determined. From an early stage, the BSC focused on targets and measures that support the implementation of corporate strategy.
Over time, the BSC evolved, with new themes added to better suit government and non-profit organizations, address new implementation methods, and address other aspects. It has also become a basis for strategy mapping. Importantly — and of relevance to this article — its focus has widened as an objective-setting framework at the corporate level.
Use the Balanced Scorecard to set meaningful strategic objectives
Consider the original four themes – financial, customer, internal business processes, learning and growth. These are a great foundation, but let’s adjust them to ensure a stronger focus on fulfilling organizational purpose and achieving strategy. This means putting customers first. And yes, all impactful organizations have "customers" (i.e., people of groups you serve) – whether government, non-profit, or profit-based – as well as a solution to satisfy them. Putting all this into a storyboard format – we create the following:
To fulfill purpose — you must make your customers happy
To make customers happy — you must excel as an organization (processes, productivity, efficiency, quality)
To excel as an organization — you must have the right capabilities (people, infrastructure, technology, culture)
By fulfilling the above — you maximize financial performance and shareholder value (revenue, profit, RoE)
Example strategic objectives based on the Balanced Scorecard approach
For each theme, we must create one high-level, succinct objective. Consider the example below of a software startup – called "beactiv" – looking to develop a cloud-based SaaS solution for sharing and borrowing sports equipment (tennis racquets, baseball bats, etc.). Specifically, they address the following needs:
Need: Currently, no online solution for sharing and borrowing sports equipment.
The positive impacts they bring: Help create active, healthy, and happy communities.
Implementing strategic objectives
The example objectives above become the "horizontal" (or "strategic") objectives that sit above all departments and are the long-term outcomes they strive towards achieving – to fulfill the organizational purpose and achieve its strategy. They can – and should be – incorporated into an OGSM or OKR format (check out our article for more information). Beneath these horizontal (strategic) objectives – vertical OKRs and OGSMs are set within departments and teams to ensure efforts are coordinated toward achieving the horizontal objectives. This is illustrated in the image below.
Finally – and to fulfil the initial purpose of the BSC – KPIs (measures) are established to support the optimization of strategic and operational performance.
Would you like support in establishing a BSC framework of objectives for your organization? If so, get in touch.