Martyn Jones

A balanced scorecard is a strategy performance management tool – a well-structured report used to keep track of the execution of activities by staff and to monitor the consequences arising from these actions.
The term ‘balanced scorecard’ primarily refers to a performance management report used by a management team, and typically focused on managing the implementation of a strategy or operational activities. In a 2020 survey 88% of respondents reported using the balanced scorecard for strategy implementation management, and 63% for operational management. Although less common, the balanced scorecard is also used by individuals to track personal performance; only 17% of respondents in the survey reported using balanced scorecards in this way. However it is clear from the same survey that a larger proportion (about 30%) use corporate balanced scorecard elements to inform personal goal setting and incentive calculations.

The critical characteristics that define a balanced scorecard are:
– its focus on the strategic agenda of the organisation/coalition concerned;
– a focused set of measurements to monitor performance against objectives;
– a mix of financial and non-financial data items (originally divided into four “perspectives” – Financial, Customer, Internal Process, and Learning & Growth);

– and, a portfolio of initiatives designed to impact performance of the measures/objectives.
https://en.wikipedia.org/wiki/Balanced_scorecard
Consider this: The Balanced Scorecard (BSC) is a strategic management tool that helps organisations translate their strategy into a set of performance measures. It provides a comprehensive framework for monitoring and improving organisational performance by balancing financial and non-financial metrics across four key perspectives. The BSC was introduced by Robert Kaplan and David Norton in the early 1990s as a way to address the limitations of traditional performance management systems, which often focus solely on financial results.
Key Perspectives of the Balanced Scorecard:
Financial Perspective: Measures financial performance and reflects the results of past decisions. Ensures that the organisation is meeting its financial goals and creating value for shareholders. Examples of metrics: revenue growth, profit margins, return on investment (ROI), cost reduction, shareholder value, and customer perspective.
Customer perspective: Measures customer satisfaction, loyalty, and market share. Assesses how well the organisation is meeting the needs and expectations of its customers. Examples of metrics: customer satisfaction surveys, customer retention rates, Net Promoter Score (NPS), market share, and customer acquisition costs.
Internal process perspective: Focuses on the internal processes that drive the business, such as production, service delivery, and innovation. This helps identify the critical processes that are essential to delivering customer satisfaction and financial performance. Examples of metrics: Process efficiency and productivity, quality control (e.g., defect rates, rework), cycle time (e.g., order fulfilment time), innovation and new product development rates, internal cost-efficiency metrics
Learning and Growth Perspective: Measures the organisation’s capacity for learning, innovation, and employee development. Ensures that the organisation has the human capital, infrastructure, and culture necessary to support long-term growth and success. Metrics include employee training and development hours, employee satisfaction and engagement, knowledge management and innovation initiatives, technology and infrastructure improvements, and employee turnover and retention.
When to use: When you want a holistic view of performance. When you want a better alignment of strategy and action. When you want improved decision-making. When you want improved communication. When you want continuous, measurable and visible improvement.
When not to use: Here are some of the key indicators:
Small organisations or simple business models with limited complexity.
Organisations without a clear strategy or with frequent changes in strategy.
Where companies are resistant to change or lack a data-driven culture.
Organisations with limited resources without time or capacity for implementation.
Organisations focused on the short term that need quick, tactical solutions.
Organisations lacking reliable data or a data management system.
Companies focused on a single metric or simplicity in performance management.
Companies in highly uncertain or volatile environments that require flexibility.
In situations where the Balanced Scorecard might not be suitable, alternative performance management approaches – such as simplified scorecards, KPIs or more adaptable systems – might be more appropriate.
Strengths: In short, the balanced scorecard offers a comprehensive strategic framework that aligns all aspects of performance with organisational goals, fosters long-term success, and improves decision-making. It is especially beneficial for organisations seeking to balance financial results with other critical factors, such as customer satisfaction, internal efficiency, and employee development.
Weaknesses: Although the balanced scorecard is a powerful tool for improving performance management, its complexity, resource requirements and potential for information overload can be disadvantageous for some organisations. In addition, the difficulty of establishing appropriate key performance indicators, the risk of short-term focus and potential resistance to change can hamper its effectiveness. Organisations should carefully assess whether the BSC is the most appropriate for their size, resources, strategic clarity and ability to meet their demands.
Passing comments: “Numerous studies of highly effective people point to a strong correlation between believing in the mission, enjoying the job, and performing at a high level.” – Robert S. Kaplan