Understand what is Balanced Scorecard (BSC) and how to apply this framework in your company’s marketing – WAU
Balanced Scorecard – BSC is a strategic management methodology that allows measuring the progress of a company in relation to its long-term goals. Understand more!
To improve something, you need to measure your variables. This basic management principle applies to almost any situation in a company, and it is in this context that the Balanced Scorecard (BSC) Act.
This strategic concept allows companies to understand how they should go, set objectives and define strategic initiatives. So, in addition to understanding what the BSC is, you need to know what its benefits are for organizations and how it applies from different perspectives.
Continue reading this article and understand what are the main components to be analyzed and in which situations the BSC is usually more applied. Oh, and of course, learn how to implement the methodology in practice, interpreting and analyzing the data correctly.
What is the Balanced Scorecard (BSC)?
Balanced Scorecard – BSC is a strategic management methodology that allows you to measure a company’s progress against its long-term goals. This is done based on a strategy that is translated into objectives, goals, indicators and strategic initiatives.
The concept was created by David Norton and Robert Kaplan, two renowned professors at Harvard University. Their objective was to present a strategic management model that would allow defining objectives and measuring results, however, avoiding the traditional use of financial, market or billing indicators. In 1992, after the publication of the article “The Balanced Scorecard: measures that boost performance”, Norton and Kaplan gained recognition in both academia and business.
Since then, the BSC is one of the most respected methodologies when it comes to performance measurement, strategy definition and planning in organizations. It is applied in the most diverse contexts, from craft breweries to large multinational corporations, through e-commerces and less conventional businesses.
What are the main benefits of using the BSC?
Through the BSC, the administrator can clearly understand what the objectives of his strategy are and, thus, define the strategic initiatives that must be executed. Know the main benefits observed!
From the use of the BSC, the organization has clarity of your macro objectives. It may seem basic, but many companies operate without knowing exactly where they want to go. By achieving this clear and specific vision, it becomes much easier to take practical actions consistent with the desired results. Makes sense, doesn’t it?
As we mentioned, after having strategic clarity, the organization has a much easier time defining which initiatives to take. In practice, the objectives unfold into operational actions. Instead of “shooting all over the place”, the company focuses on what will really bring results.
Measure progress it is the first step for the company to know if it is really moving towards the desired goals. As Peter Drucker, the father of Management, said, “what is not measured cannot be improved.” The measurement allowed by the Balanced Scorecard increases results.
Other advantages of using the BSC include:
- better visualization of the future;
- execution of action plans;
- continuous quality improvement;
- facilitation of communication and feedback between the team;
- alignment of key indicators with macro-objectives;
- possibility to adjust and correct action plans;
- stimulating the learning culture.
So, did you like to know the benefits of the Balanced Scorecard? To implement it in your organization, the ideal is to understand its bases.
How does the Balanced Scorecard work?
The BSC is based on 4 strategic components (objectives, goals, indicators, initiatives) and 4 perspectives (financial, from customers, internal processes, learning and growth). Understand what they represent.
The 4 strategic components of the BSC
For BSC perspectives to be correctly applied, it is essential to know how to define strategies based on the components. Are they:
- goals: define what the organization wants to achieve in each strategic perspective, for example, in Marketing;
- indicators: show performance according to each chosen goal;
- goals: represent the desired performance level in each indicator;
- strategic initiatives or projects: they are the actions and interventions that must be carried out for the company to reach the defined performance goals.
As you can see, the Balanced Scorecard seeks to detail each strategy until it reaches the operational level. Thus, the company gains clarity on what must be done to achieve the desired objectives.
If you have a goal to increase market share, for example, it can be broken down into sales indicators and targets, lead generation, traffic, etc. Initiatives can involve everything from content production and Digital Marketing campaigns, to sales team training and CRM implementation.
In addition, it is essential to remember the importance of measuring each result. The correct definition of the indicators, together with their measurement, allows to find out if the efforts are being used correctly. That is, the BSC application process itself brings the necessary learnings to adjust the directions taken within the method.
Usually, what you have just learned (objectives, indicators, goals and initiatives) is applied in the 4 perspectives of the Balanced Scorecard.
Here on the blog we have other content on methods, strategy and management, do you want to see?
Forget BANT: discover GPCT, BA and CI and get better sales!
Canvas: what it is, how to assemble it and downloadable template
SWOT Analysis or F.O.F.A Matrix: what it is and how to do it [templates]
Management tools: which ones are the main and how to use them
The 4 perspectives of the Balanced Scorecard
The prospects are nothing more than areas of implementation of the Balanced Scorecard. One of the principles of the BSC is that these different aspects must be worked on in an integrated manner, helping each other.
This perspective analyzes impacts that strategic decisions have on goals. It is necessary for the company to have long-term financial goals, connecting them to an action plan that is linked to financial processes, customers, internal processes, in addition to employees and systems.
Here, financial indicators are important to show whether the company is in the right direction. For this reason, although the BSC goes beyond finance metrics, it is interesting to observe profitability, revenue and the increase in value.
This perspective considers both the company’s market share and the Clients satisfaction. For this, it is important to identify the stakeholders and define the results that will be evaluated, such as loyalty, satisfaction, profitability, acquisition and market share.
This is the area that thinks about product or service characteristics (quality, functionality, price), customer relationship (relationship and shopping experience), image and reputation. Therefore, it is important to understand the vision that customers have of the company.
Perspective of Internal Processes
THE quality of internal processes is the focus of this perspective, both in terms of innovation and in terms of operation and after sales. In practice, this can translate into indicators such as productivity, cost, technology and development time. The ideal is to constantly strive for process excellence, implementing improvements and repairing errors or damages.
Learning and Growth Perspective
This perspective assesses the internal employee satisfaction. Here, it is valid to observe intangible assets, such as engagement, training and satisfaction. In addition, it may be interesting to measure employee turnover and the training implemented. Infrastructure objectives and measures that prove necessary to achieve results with the team also enter this area.
Now that you know the basics of BSC, how about giving some tips on how to apply it in your organization?
How to apply the Balanced Scorecard in a company?
The authors Kaplan and Norton defined four management processes that are important for the implementation of the Balanced Scorecard.
Translate the vision and strategy
This step has the function of translating the business vision into a strategy itself. For example, translating marketing positioning into strategies so that the consumer has the same perception.
The process must be carried out with all company employees, as this makes the process clearer and more focused, being worked on constantly by internal communication. So start by clarifying the vision and building a consensus. Then, turn that vision into strategy.
Communicate and link
The success of the BSC depends on the team’s commitment to the action plan. Therefore, communicating is extremely important. Along this path, it will probably be necessary to educate employees about the methodology and the action plan. Do this and link rewards to performance indicators.
Plan and set goals
To achieve any organizational goal, it is necessary to have certain resources available, right? They can be financial, human or infrastructure.
What do you need to execute the marketing plan, for example? People? Budget? Training? Automation tools?
Budget control will allow you to reserve or acquire these resources so that the objectives are achieved. Therefore, with the objectives set, allocate money, materials or people according to what was planned in the strategic alignment.
Feedback is essential for growth and learning. More than a timely implementation, strategic management is an ongoing process that needs to be constantly improved to function. With that in mind, establish strategic feedback processes for employees, as this will allow for constant progress.
Finally, as we have seen, applying the Balanced Scorecard in your company has numerous benefits. For that, it is necessary to respect the principles and fundamentals of the method, because they will be responsible for sustaining the entire application of the strategies. Besides that, remember the importance of measuring results, which must always be present to generate continuous improvements.
Did you like this article about the Balanced Scorecard? Great! Then also check out our complete content on High Performance Marketing and Sales and learn how to generate results with your business!