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Balanced Scorecard definition

Balanced scorecard mind map (© Dizain /

Balanced scorecard mind map (© Dizain /

In order to effective manage a project, a multi-faceted approach must be taken. Doing so will help you better gauge the baseline performance of your project, as well as track your improvements. If you’re managing any project, you are going to want to make sure that you are using this vital tool. To find out more about balanced scorecards and how they impact project management, please continue reading.

A balanced scorecard is essentially a tool that has been specifically designed to aid with the management of a project. It measures a variety of critical components that affect the success of a project, including both financial and non-financial metrics. Once bother metrics are analyzed, formulating and re-designing plans for better operation becomes a lot easier for all stakeholders involved.

To be more precise, a balanced scorecard refers to a highly strategic planning and management system that are used by companies for a variety of purposes. Balanced scorecards allow companies to:

  • Improve their communication regarding what they are trying to and what they expect to be accomplished
  • Better align the daily work that everyone is completing in regard to the strategy
  • Prioritize products, projects and services
  • Monitor and measure progress toward a strategic target

In other words, a balanced scorecard system helps to connect the dots between the elements that make up the big picture, such as the mission (the purpose), the vision (the aspiration), the core values (what the company believes in), and the s trategic areas of focus (the themes, the results and/or the goals). It also includes the operation elements of a project, including the objectives (the continuous activities for improvement), the measures (the key performance indicators that are used to track performance), the targets (the intended level of performance), and the initiatives (whatever projects that are used to help reach a target).

Who Are Balanced Scorecards Used By?

Balanced scorecards are used by a variety of businesses in a multitude of industries. They are also used by nonprofit and government organizations. In fact, it is estimate that more than 50 percent of the largest firms in the United States are using a balanced scorecard. Moreover, it is estimated that more than half of the largest companies in the United States, Europe and Asia area making use of balanced scorecards. Furthermore, the use of balanced scorecards is growing in Africa, as well as the Middle East. Balanced scorecards are one of the most widely used management tools around the globe and they are said to be one of the most influential business ideas that have occurred in nearly a century.

Important Terminology Associated with a Balanced Scorecard Approach

A balanced scorecard suggests that organizations should be viewed from four specific perspectives. Furthermore, they should be used to develop objectives and measures, as well as targets and actions that are related to each of the following perspectives:

  • Financial. This perspective looks at an organizations financial performance, as well as how an organization uses its financial resources
  • Stakeholders and Customers. From this perspective, organizational performance is viewed from the point of view of the customer or the key stakeholders that the organization intends to serve.
  • Internal process. This perspective looks at performance via the lens of quality and efficiency that are related to products, services or other key processes that are involved in business.
  • Organizational capacity. This perspective was originally referred to as learning and growth. It looks at organizational performance through the eye of human capital, technology, infrastructure, culture and other elements that are important to a breakthrough performance.

Balance Scorecard and Strategic Mapping

One of the most important elements that are used in a balanced scorecard methodology is the utilization of strategic mapping. This helps companies visualize and communicate how their value is created. A strategy map is, in its simplest terms, a basic graph that illustrates a logical, cause and effect relationship between strategic objectives. By improving performance in the objectives that are found in the organizational capacity perspective, organizations are better able to improve their performance. This, in turn, makes it possible for an organization to develop the results that they desire in both the customer and financial perspectives.

Cascading and the Balanced Scorecard

The term cascading is often used when referring to a balanced scorecard. Essentially, this term means balancing the corporate wide scorecard. The end result of the cascading effects should focus across all levels of the organization, and they should be consistent. They should also be used to improve the accountability of those who are involved in a project by ensuring parties take ownership of their behaviors. Moreover, the behaviors of employees should be incentivized with rewards and recognition.

Optimization of a Balanced Scorecard System

In terms of the profitability of a company and the quality of the products and/or services it delivers a company, effective internal processes are a necessity. When systems are optimized, better outcomes are possible, for both internal and external stakeholders. This makes it possible to better illustrate the process of efficiency via metrics. Identifying and analyzing various types of product defect rates, waste and the cost of quality when creating projects is important, as these things have a direct impact on the bottom line. Modifying and adjusting project teams and changing workflows is a lot easier when a balanced scorecard illustrates key problem areas.

The Importance of Educational Programs

It’s exceptionally important to have a very well-educated and exceptionally skilled project team. In fact, this is crucial for success. Encouraging change and constant improvement isn’t an easy process for most businesses, but it is important. It takes a lot of training in order to get all people on the same page. Moreover, employees throughout a company may be resistant to new processes or systems for various reasons. For example, some people might become comfortable with the way they do things and don’t want to change, and others might have a fear of downsizing. Therefore, it is very important to educate and inform employees throughout the implementation of project management. If key stakeholders aren’t kept in the loop, there is a very real chance that the project will fail.

The History of the Balance Scorecard

The balance scorecard was developed by Dr Roper Kaplan of Harvard University and Dr David Norton. It was intended to be a framework for measuring a company’s organizations performance by using a more balanced set of performance measures. Traditionally, companies only used short-term financial performance as a way to measure their success. The balance scorecard brought to light additional measurements that were not related to financial elements. The goal was to allow companies to better focus on their long term success.

Since its implementation, the balanced scorecard approach has evolved. It is now considered a fully integrated strategic management system, and one of the most effective tools that a company can use.

The phrase ‘balanced scorecard’ was coined in the early part of the 1990s, but the foundation of this type of management approach are a lot deeper. They include the efforts of performance assessment that were made by General Electric back in the 1950s, as well as the work of French process engineers in the early portion of the 20th century. Though it has been around for a while, the balanced scorecard approach to management is still considered relatively new. The founders of this strategic management approach recognized that there were weakness associated with pervious tactics that were used to manage projects. As such, the balanced scorecard approach offers a more clear prescription regarding what companies should be measuring in order to balance out their financial perspective.

Balanced Scorecard: Reach and Engagement

Reach and engagement refers to the tangible process metrics that demonstrate an organization’s reach and engagement with its audience via multiple channels. It also evaluates the efficiency of internal and external communications. The data for reach and engagement usually comes from paid, earned, shared and owned media tools, as well as internal tracking systems.

Relevance and Alignment

This is another intangible process metrics. It demonstrates the internal alignment of an organization, as well as its external relevance. It reflects on qualitative factors, which include the understanding of an audience, the relevance of the market, the reflecting qualitative factors, such as the understanding of the audience and the employee alignment. The data for relevance and alignment usually is collected from paid, shared, earned and owned media tools, as well as internal tracking systems.

Reputation and Brand

Yet another intangible outcome metric, reputation and brand reflects the longer term relationships with stakeholders, as well as their perceptions and the reputation and advocacy of a brand. Essentially, it involves anything that could potentially impact a brand’s future revenue. The data for this usually comes from survey research, internal tracking systems and third party reports.

Financials and Revenue

This last tangible outcome metric reflects the financial elements of a project, including the impact of its sales. It includes lead value, profitability and revenue.

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