Balanced Scorecard

Balanced Scorecard by Alec McPhedran

The value and use of the Balanced Scorecard
 
The Balance Scorecard helps set goals that give appropriate weight to financial and non-financial measures. It does this by starting with a business’s vision and strategy. From this, it identifies the drivers of success for that vision, and then develops targets that measure progress towards that success. Alec McPhedran, cxreative arts coach and mentor explains the principles of the Balanced Scorecard.

The Balanced Scorecard (BSC) is a strategic management tool designed to provide organisations with a comprehensive view of their performance, beyond just financial measures. The concept was originally developed by Robert Kaplan and David Norton in the early 1990s. It integrates four perspectives to offer a more holistic approach to performance evaluation and strategy execution. These perspectives are:
 
Financial Perspective

• Focuses on financial performance and profitability. Common metrics include:
• Revenue growth
• Profit margins
• Return on investment (ROI)
• Earnings per share (EPS)

This perspective addresses the question: "How do we look to our shareholders?"
 
Customer Perspective

• Measures how well the organization is serving its customers and meeting their needs. Key metrics might include:
• Customer satisfaction
• Customer retention rates
• Market share
• Customer lifetime value (CLV)

The guiding question here is: "How do customers see us?"
 
Internal Business Processes Perspective

• Evaluates the efficiency and effectiveness of internal processes that deliver value to customers and stakeholders. Metrics include:
• Cycle time (e.g., time to deliver products)
• Quality of products/services
• Process improvement and innovation

The question to address is: "What must we excel at?"
 
Learning and Growth Perspective

• Focuses on organisational improvement, innovation, and employee development. Metrics often include:
• Employee satisfaction
• Employee training and skill development
• Innovation rates
• Knowledge sharing

It asks: "How can we continue to improve and create value?"
 
 
How does the Balanced Scorecard work?
 
The BSC links these perspectives to the organisation’s vision and strategy, ensuring that short-term actions align with long-term goals. It also:

Aligns Objectives
Ensures all levels of the organization work towards the same strategic objectives.

Tracks Performance
Provides a structured framework for measuring performance across different areas, not just financial outcomes.

Facilitates Strategic Feedback
Offers feedback on how well the strategy is working, allowing organisations to make adjustments.
 
By balancing financial metrics with non-financial ones, the Balanced Scorecard helps organisations manage intangible assets like employee skills, innovation, and customer loyalty, which are crucial in modern business environments.
 
Alec McPhedran is an international creative arts coach and mentor and specialises in nurturing next generation talent as well as supporting creative business leaders. For more information, visit www.mcphedran.co.uk.

Copyright © Alec McPhedran 2024

Balanced Scorecard Example by Alec McPhedran 2024