A balanced scorecard (BSC) is an analytical approach to optimizing a business. Today, more than ever, it is important to economically grow as a company in order to survive on the market in the long run. This article will dive into what exactly a BSC is, how it can help improve the functionality of a corporation as a whole and some visual examples of scorecards.
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Definition
A balanced scorecard (BSC) is an important tool to visually analyze a company in order to optimize it. It is divided into 4 different domains: finance, customers, internal processes and learning & growth. Each of these domains is analyzed separately first, before the data is merged together into strategic objectives.
Use of a balanced scorecard
A balanced scorecard contains 4 major domains that form key points in every company:
| Finances | Customers | Inner processes | Learning & growth |
| Sale numbers, expenditures, budget | Demand, values, satisfaction | Efficiency, quality, key business processes | Human resources, technology, infrastructure |
The financial sector provides the framework of possibilities in optimization. It analyzes the sales numbers, directly related to customer demand, but also necessary expenditures and the remaining budget. This is important to have an overview of how much funding can be invested in potential alternations.
The sector of customer analysis serves to determine the direction of optimization. Identifying the right target group based on the sold products or services, their values and feedback through surveys for example helps to get an overview of where the company still lacks efficiency.
In the field of internal processes it is, as the name suggests, the processes, which are analyzed. This includes production of products or carrying out services, as well as human resource management, marketing and any other kind of key business processes.
The last but probably most important sector is learning and growth. This part is most crucial because it determines whether the optimization is possible or not. Factors like human resources, the availability of new technologies and necessary infrastructure can be the tip on the scales when it comes to modifications within a company.
All this information is in the end combined into the graphic scorecard, which contains all the relevant goals or strategic objectives as well as the measures that are to be taken.
Examples – mind map vs. chart
Balanced scorecards can be set up in mostly two forms, as a mind map-like structure or a chart.
In a mind map, each sector is shown equally in the center while the relevant data is written around it. This way, there is a lot of space to draw lines and correlations between the different sectors as to visualize how every part of the company works hand in hand with the others.
The chart form on the other hand visualizes how each part is built on the other. At the very bottom is learning and growth as the base of all optimizations. No project can be realized if there are lacks in personnel, technology or infrastructure. Subsequently follow the internal processes as those will carry out and determine the product that is then passed on to the customers, who need to be satisfied. Lastly there are the finances, which are the last hurdle to take in order to pull the optimization through.
In this chart there is, apart from the goals and measures to take, a column for targets. These originate from the achieved goals and show the path of continuous, long term growth and goals.
| Goals | Measures | Targets | |
| Finances | |||
| Customers | |||
| Inner processes | |||
| Learning & growth |
FAQs
A strategic objective can be for example a certain percentage rate in customer satisfaction surveys, a sales number or an increased production rate.
The most important aspect on a balanced scorecard is to focus on the company as an individual. Each sector of the scorecard must be thoroughly analyzed before any strategic objectives can be set. Therefore, every part of the balanced scorecard has the same value.
One major deficiency is that sustainability is not included in the scorecard. The best possible outcome for the company and its finances is not always also the best outcome for the environment and the employees. For example, it can be more lucrative to cut costs on packaging, which however may lead to more environmental damage in the long run.