Optimizing a company’s internal planning is an essential part of achieving the best possible results. After all, a company that manages to stay innovative and improve results based on performance indicators is a company that will stand out in its segment. And it was to achieve this stage that the Balanced Scorecard was created.
This management method — which we will present in more depth in this article — helps expand the vision a manager should have of their own company, facilitating decision-making and the control of obtained results.
Keep reading this article to learn what a Balanced Scorecard is and check out the 4 stages necessary to implement it in your company!
How did the Balanced Scorecard originate?
Before the creation of the Balanced Scorecard (BSC), in the early 1990s, the main metric used to understand a company’s operations was its financial results.
In this context, the Balanced Scorecard emerged as a way to optimize control over the company’s operations, allowing managers a broader view of the influence of each area’s results.
What is a Balanced Scorecard?
We can define the Balanced Scorecard as a strategic planning method that looks at a company more deeply, dividing it into 4 perspectives:
- Financial;
- Customers;
- Internal processes;
- Learning and growth.
Each of these perspectives influences the others on a scale of internal dependency. Financial results help fund actions that will improve the learning and growth perspective.
Similarly, successful strategies in these areas will result in better outcomes in internal processes (production, quality, greater internal efficiency). Consequently, an improvement in this perspective will attract more customers, increasing the company’s financial results.
How to apply the Balanced Scorecard?
1. Perform an analysis of the current state
The process of establishing the BSC in your company begins with a deep evaluation of each of the 4 perspectives within the company, in addition to the perception of the challenges faced. Through this resource, it is possible to know how to structure your strategic planning.
A company that sells agribusiness inputs, for example, may realize it has a low customer retention rate, which diminishes its growth capacity. Armed with this knowledge, it can move on to the next step.
2. Establish goals
The second step to implement the BSC in the company is to establish the goals that each business perspective must achieve by the end of the management period. It is essential to take into account the effects that each goal will have on the other perspectives and define, in this step, what the performance indicators for each perspective will be.
Imagine that your company defines two goals for the customer perspective (decrease the number of complaints and increase the average ticket) and another two for the financial perspective (increase revenue and increase net profit).
Meeting the average ticket goal in the customer perspective will influence the achievement of goals in the financial perspective. Thus, we can observe how the different perspectives are interconnected, influencing each other and contributing to business growth.
3. Assign strategies
The next step for implementing the BSC in the company is assigning strategies to fulfill the pre-established goals, as these will guarantee the expected results.
Each perspective must have specific strategies to achieve the goals. These strategies should preferably be formulated by bringing together the different managers and directors of each sector of the company, who can contribute with knowledge, experience, and suggestions.
4. Control the results
One of the advantages of using the BSC is that it allows you to monitor the company’s performance indicators in real time, applying technological solutions to data extraction and contextualization to enable optimized performance analysis.
Thus, the BSC becomes a continuous process of analysis and course correction. If you notice that the strategies assigned in step 3 are not leading to the goals in step 2, you can adjust actions in real time and pursue the best possible result.
And you? Did you understand what a Balanced Scorecard is? Tell us in the comments!
