How can Organisations Succeed with Balanced Scorecard (BSC) Software?November 10, 2021
In the early 1990s, Robert S Kaplan and David P Norton developed a Balanced Scorecard model to help organisations measure and analyse business performance using financial and non-financial data. Balanced Scorecard (BSC) is a tried and tested framework for organisational success. Various business, government, and non-profit organisations use the balanced scorecard to align day-to-day activities with enterprise vision, mission, and values. Today, more than half of the Fortune 1,000 companies in North America use the BSC, which has become the trademark of a well-run organisation. Kaplan and Norton articulated the five fundamental principles needed for building Strategy-Focused Organisations:
Translate the strategy to operational terms
Align the organisation to the strategy
Make the strategy everyone's everyday job
Make strategy a continual process
Mobilise change through robust and effective leadership.
The goal of a balanced scorecard is "to align business activities to the vision and strategy of the business, improve internal and external communications, and monitor business performance against strategic goals." In our blog Strategic Planning and Management with Balanced Scorecards, we discussed the relevance of balanced scorecards, their four perspectives, and the benefits. There are four perspectives of balanced scorecards; they are Finance, Customer, Process and People. These perspectives are a combination of both financial and non-financial indicators which help the business grow. Organisations assign different key performance indicators (KPIs) to these perspectives and monitor them using BSC. The organisational benefits of using a framework such as a balanced scorecard are:
1. Better Strategic Planning
2. Improved Strategy Communication & Execution
3. KPIs Analysis
4. Better Organisational Alignment
5. Better Process Alignment
Read More Why Balanced Scorecard?
How can Organisations gain Success using BSC?
Before moving on to the 'how' perspective of BSC, let us understand specific terms often heard along with BSC. In BSC, the term Strategy is the big-picture goals of an organisation/business. The goals can be short term or long term. Strategic objectives are the actions that the company will take or implement to achieve the set strategy or strategic goals. Strategic planning and management as a whole is the process of formulating and implementing strategic objectives into action. Once the plans are successfully deployed, they will be continuously analysed and modified.
How can organisations gain success using BSC? Using a balanced scorecard, an organisation can constantly investigate and improve its operations. Every organisation has their own plan A and plan B or even plan C. The strategic management process in a balanced scorecard is all about getting from Point A to Point B or Point C more effectively and efficiently. According to Kaplan and Nortan (2000), "The BSC is an adequate tool to select a balanced set of indicators and objectives, that reflect the strategic vision of the organisation, helping organisations to meet their stakeholders' expectations, to articulate and communicate strategic objectives and to evaluate their implementation, i.e., it transforms the mission and strategic objectives into actions, allows members to communicate with each other and perceive their contribution in the scope of the organisational mission, enables improvements in the quality of the services provided and continuous feedback and learning. Thus, it represents a balance between external measures related to shareholders and customers and internal measures related to critical processes, such as innovation, learning and growth".
All four perspectives: Finance, Customer, Process, and People, forms a loop in which they are interrelated. They co-exist to produce an outcome that aligns with the goal and plans of an organisation. When an organisation invest more in employee learning and growth, employees will be encouraged to perform their duties or tasks more effectively. An efficient internal process results in increased customer satisfaction. Customers are likely to repeat purchase which results in greater financial result.
In short, the BSC can be considered as the "cornerstone" of an organisation's management system. Various research revealed that organisations use the BSC to manage both the long-term and short-term strategy successfully. From top to bottom, the entire organisation should constantly contribute to achieve the preset strategic objectives. Using a balanced scorecard, an organisation can analyse the KPIs associated with each strategic goals and measure their performance. By measuring performance, the organisation will realise where they are now and what needs to be done to achieve the long or short term goals. According to Atkinson and Epstein (2000, pp. 24), the BSC "has changed the way managers think about organisational management. They began to develop and articulate the strategy more carefully, to think of the organisation as an integrated and coordinated set of activities, linking the strategy to performance measures and connecting the strategy and measures to compensation".
BSC allows organisations to build a high-performance culture and promotes the alignment of key performance indicators to the company's strategic objectives at various organisational level. Once the planned strategic initiatives are put into action, using BSC, the organisation can assess whether the new initiatives align with its strategic goals. Balanced Scorecard can be used to `` It can also be used as a tool to learn about various aspects of a business. Comparing the actual vs target helps the management team reassess and adjust both the strategy and action plans.
Why Balanced Scorecard Software?
So far, we have been discussing the importance and inevitable role of a Balanced scorecard in an organisation. So what is the relevance of BSC software in the present scenario? How does it differ from a scorecard template in excel? When should an organisation think of a shift from excel to a balanced scorecard software?
Usually, organisations begin their strategic planning and management with a paper-based solution or excel spreadsheet. But as an organisation grows, these solutions might limit the scope of a balanced scorecard. Spreadsheets are not appropriate for long term process planning and execution. The collaboration of real-time data and retrieval of reports is not possible; the process is highly time-consuming and limits the entire organisational performance view. Both paper-based or spreadsheet Scorecard lacked features such as:
Real-time data visibility
Advanced search, filter and sort options
Data Analytics and reports
Historical data analysis
Signs your organisation is outgrowing Excel:
The existing Balanced Scorecard is not able to scale with the organisational growth, i.e endless tabs in multiple spreadsheets, and no understanding of how the elements of each scorecard align with your strategy.
Limited ability to assign access levels and lacks online collaboration, it’s hard to tell who made the changes and which is the latest version.
Delayed reporting. Accurate reporting is critical for data-driven decisions. No visualisation of reports until and unless the data is pulled into a word or PowerPoint format
No trace of historical data to compare the level of success in strategy planning and management
The most appropriate way to actually track your scorecard on a regular basis is to use a balanced scorecard software. As the organisation grows and involves more people in the strategic planning process, it will be challenging to manage all data in an excel spreadsheet. When the strategic plan gets more complex, organisations will confront multiple levels of measures and KPIs that roll up into each other. A balanced scorecard software organises these strategy elements hierarchically and helps you understand the relationship between your measures and goal statuses. The combined effort of both top and bottom level management results in effective strategic planning and management. Therefore it is essential to have a solution that binds both and gives a better result. A scorecard software visually presents the organisation's journey, enabling each individual to perform well to achieve the set strategic goals. The effort put forth by each employee is measured and valued. Using scorecard software, the organisation stays up-to-date and tracks relevant information. By replacing a traditional scorecard with a digital scorecard system, organisations can improve efficiency, gain transparency over each process, evaluate and implement actions for improvement and achieve the preset organisational goals. Managing Balanced Scorecard shouldn’t be a job that is tedious and time-consuming; it’s time to move to a Balanced Scorecard software.
Data Point - Computerised BSC for Organisational Success
Lean Transition Solutions (LTS) with our expertise in Lean and Industry 4.0, helped various organisations to implement balanced scorecard solutions. LTS has developed a Balanced Scorecard Software called 'Data Point' that addresses and overcomes all the drawbacks caused by the traditional Balanced Scorecard practices. Data Point allows the organisation to visualise the strategy map, analyse different KPIs and align workforce and other processes with the preset strategic goals. With a digital version of Balanced Scorecard, organisations will be able to:
Get better strategy map visualisation
Access to real-time data
Increase data security
Saves time and increase productivity
Support business framework
Analyse, evaluate and visualise different KPIs in dynamic dashboards
Communicate organisational strategy to all employees
Align Organisational, Departmental and Individual goals
Retrieve reports on different KPIs such as Health and Safety, Sales, Quality, Delivery, Cost, People, Maintenance and Environment
Kaplan, R., & Norton, D. (2000). El Cuadro de Mando Integral (The Balanced Scorecard). Barcelona: Ediciones Gestión 2000.
Olve, N., Roy, J., & Wetter, M. (2002). Implantando y Gestionando el Cuadro de Mando Integral (Performance Drivers). Barcelona: Ediciones Gestión 2000.
Atkinson, A., & Epstein, M. (2000). Measure for Measure: Realising the Power of the Balanced Scorecard. CMA Management, 74(7), 22-28.