Balanced Scorecard

A Balanced Scorecard is a Strategy Tool that helps to track the performance of a Company by analyzing a set of Factors.

 

It is a very useful method since it allows you to analyze how a Business is doing at a Glance.

• That is why it is widely used in Management.

 

Of course, the different Factors to study, vary from one Business to another.

• The indicators you need to analyze an Ice creams company are not the same than those you need for a Museum, for example.

 

However, they are usually grouped into 4 different Perspectives.

1. Financial: How the Business is doing.

• Is it having Profits?
• Is it reaching the planned Financial Goals?

 

2. Customer: How is the relationship with the Client.

• Are they engaged with the Company?
• Are they Satisfied?

 

3. Process: Everything related to the Company’s internal Processes.

• Is the company capable of achieving its Targets?
• What should the Company improve?

 

4. Innovation: Is the Company Innovating Successfully?

• Are its Innovations good enough?
• Are it Innovations Profitable?

 

The Factors studied in each of these 4 Perspectives are generally compared with pre-established Objectives.

Balanced Scorecard template.

 

Although you can choose the Factors you want, we suggest, at least, the ones we used in the template shown:

• According to our professional experience.

 

Financial Factors:

• Short term Profit.
• Long term Profit.
• Sales cannibalization.

Customer Factors:

• Needs covered.
• Customer Satisfaction.
• Coherence.

Process Factors:

• Internal Capabilities.
• Synergies.
• What should be improved.

Innovation Factors:

• Success.
• Profitability.
• Imitability.

 

* You will find an open Excel file with this Template and all the examples that we’ll explain below in our “Strategy Template section“.

KPIs

 

These “Factors to be Studied” are commonly known as KPIs.

• Key Performance Indicators.

 

We have decided not to use this terminology as we think that it may confuse people.

But… How does this Tool Works?

What do these Factors mean?

 

Let’s see a first example so you understand it better:

 

Let’s imagine you own a Restaurant.

• And your results have not been very good.

 

Since you are fully committed to having a Successful Restaurant, you decide to develop a Balanced Scorecard.

• You update it both Quarterly and Yearly.

 

It looks like this:

Balanced Scorecard example – Restaurant Business.

 

As you can see in the image above, you decided to focus on:

 

Financial Perspective:

• Cost Reduction.
• Increase your High-Margin products.

 

Customer Perspective:

• Differentiate your Restaurant from other establishments.
• Use rewarded surveys to check your Customer Satisfaction.
  • You can reward them with a free desert, for example.

 

Process Perspective:

• Reduce your Preparation time.
• Use your current “idle” time to start offering delivery service.
  • You start with UBER Eats.

 

Innovation Perspective:

• Develop New Profitable dishes (linking with the financial perspective).
• Rely on Special sauces or ingredients.
  • So your dishes are not easy to copy.

 

* If you don’t see the text of the image correctly, you can download the Excel Template in our “Strategy Templates section“.

We are aware that, at first glance, this Tool seems a little “difficult” or tedious to use.

 

Then… Why should you develop a Balanced Scorecard?

A Balanced Scorecard is a very helpful Tool that you can use whenever you have a Project to Develop or a Goal to achieve.

 

However, there are 3 main scenarios in which a Balanced Scorecard can be especially useful:

 

1. To Evaluate and choose different Strategies.

• Analyzing whether a product would fit into the company’s global strategy.
• Defining recruitment policies.
• etc.

 

2. To evaluate the Operation of a Company.

• Is it achieving its goals successfully?
  • Therefore: is it well managed?

 

3. To Start a New Businesses Efficiently.

• It allows you to set and track the Goals to achieve.
• Helps keep you on track.

One of the main reasons why professionals don’t use a Balanced Scorecard more frequently is because it is a very “open” tool.

• Each Business needs different Factors, Targets….

 

Therefore, there is no Easy and ready-to-use common Template for everybody.

• That is why we suggested you those “Factors to be Studied”.
  • In order to make things easier for you.

 

But, as we always say: don’t be afraid to use this tool.

• It is better to use it “your way” than not to use it at all.

 

Now, we’ll give you some Tips on how to develop and use a Balanced Scorecard easily and effectively.

1. First of all: Define your Objectives.

• In the 4 Perspectives mentioned.
• These Objectives don’t necessarily have to be quantifiable.
  • Although it is highly recommended.

 

2. Identify the Factors that best define those Objectives.

• These Factors should be as defined and measurable as possible.

 

3. Establish What Actions have been taken or should been taken.

• If you are updating your already developed Balanced Scorecard, it will evaluate the Actions Taken.
• If it is the first time you develop a Balanced Scorecard, or you have set new Objectives, you’ll define the Actions to be Taken.

 

4. Track your Results.

• Or Potential Results, if you are evaluating a Strategy.

 

We know: it seems tedious… But we encourage you try it.

• We have a huge Balanced Scorecard about this Site (Consuunt) with our Goals, Actions taken and Actions to be taken…

 

Just take some time, think about what you want to achieve… and be Creative.

• You don’t have to stick to a “boring” model; it is up to you.

 

Now, we’ll give you some helpful examples of How you can use a Balanced Scorecard.

We have chosen 3 examples of Balanced Scorecards used in the 3 scenarios we suggested before:

1. To Evaluate a Business Strategy.
2. To Evaluate the Operation of a Company.
3. To Start a New Business.

 

* As you can imagine, when we talk about “Telsa” or “Zoom”, we have had to invent some of their data and Objectives.

• Since they are publicly traded companies, there is a lot of data on the Internet (which we have used) but not as much as we would like.

 

Let’s begin:

 

Let’s imagine, for a moment, that you are Elon Musk.

 

After months of research, you and your team end up with an exciting idea:

• Tesla needs a SUV.

But, not just an average-style SUV: You need to Stand Out.

 

The result? The Cybertruck:

 

You are all very excited about the preliminar idea.

• However, you must assess whether this Product conforms to Tesla’s overall Strategic plan.

 

You decide to develop a Balanced Scorecard to evaluate if this new product-line would make sense.

The result is this:

Balanced Scorecard example – Tesla’s Strategy.

 

It seems that, this product would fit perfectly into Tesla’s Strategic plan.

• Why?

 

Let’s analyze the main conclusions you obtained from the Balanced Scorecard:

Financial Perspective:

• Since this model would use practically the same existing Tesla’s technology, there is no need to develop new relevant Know-How investments.
• Its Margins are huge.

 

Customer Perspective:

• It is an extremely distinctive model, what is coherent with Tesla’s style.
• Moreover, Tesla can use the good momentum of its Brand.

 

Process Perspective:

• Since it uses pre-existing technology, the main “issue” would be the design, not the batteries.
  • Which are much more difficult to develop.
• The only problem is… will Tesla be able to deliver more vehicles on time?
  • It already has manufacturing-capacity issues.

 

Innovation Perspective:

• Again, the design of high-autonomy batteries was the big problem, and it is already covered.
• Moreover, since this is a large vehicle, the same but bigger batteries would last even more.
  • What customers can see as a great improvement (although it is not).

 

Balanced Scorecard Conclusions

 

According tho this Study, you have no doubt:

• The Cybertruck will be Tesla’s future.

However, your main limiting factor is your manufacturing capacity.

 

* If you don’t see the text of the image correctly, you can download the Excel Template in our “Strategy Templates section“.

 

Now, let’s imagine you work for Zoom.

• The company that is trying to replace Skype as the main Video conferencing application

 

In case you don’t know, Zoom has not stopped growing in recent months, and more, with the coronavirus crisis:

The evolution of Zoom’s share price.

 

You are in the annual Strategic review of the Company, analyzing its Balanced Scorecard.

• How is Zoom doing?
• Is it achieving its Goals?

 

Let’s see it:

Balanced Scorecard Example – Zoom Company.

 

In general terms, the Company is doing great.

• However, there are certain aspects in which it should improve.

 

Main conclusions obtained from the Balanced Scorecard:

Financial Perspective:

• The company’s Revenues grow 78% annually.
• All the activity is self-financed.

 

Customer Perspective:

• Zoom is growing at high rates, and it is highly appreciated by its users.
• However, the average user profile is quite young.
  • Zoom wants to target audiences of all ages.

 

Process Perspective:

• Sometimes, the application is “Crashes”.
  • The Server capacity have not grown as fast as the increase in users.
• The Application still needs to improve its Privacy Protocols even more.

 

Innovation Perspective:

• The Security should be improved.
  • The more users an Application have, the more Hackers will try to “spy”.
• Since Zoom has focused only on Video-conferencing technology, its performance is excellent.
  • All efforts have been successfully focused.

 

Balanced Scorecard Conclusions

 

Zoom is doing very well from a financial and technical point of view.

• Since they are focused on one thing, they are having amazing results.

 

However, they should improve:

The perception of the product.

• Middle-aged people and Businesses should see it as an option to use.
  • Not just young people.

 

Their Security and Privacy.

• Users should have no doubts about How safe using Zoom is.

 

* If you don’t see the text of the image correctly, you can download the Excel Template in our “Strategy Templates section“.

 

Now, let’s imagine that you are planning to start your own Personal Trainer Business.

• You will work with groups.

 

Since you want to have a successful Business, you decide to develop a Balanced Scorecard.

• To Set Goals and track your progress.

 

After careful study, this is your result:

Balanced Scorecard Example – Starting a Personal Trainer Business.

 

As you can see in the template above, you decided to:

Financial Perspective:

• Start on your own so you can earn a salary as soon as possible.
• In the medium and long term, you would like to hire some employees.
  • In this way, you can increase you earnings.

 

Customer Perspective:

• You want to create a friendly environment.
  • Your indicator will be the amount of people who become friends.
• You’ll also focus on having “loyal” customers.

 

Process Perspective:

• You’ll have to learn new training techniques.
  • They are usually attractive and therefore profitable.
• In addition, you’ll have to improve your “running” skills.

 

Innovation Perspective:

• You want to develop your own “training techniques”.
  • So you can instruct future employees and expand your Business.
• You also want to develop your own “training material”.

 

Balanced Scorecard Conclusions

 

Your Success depend on 2 Key things:

• Create a Friendly Environment.
  • So you have loyal and satisfied clients.

 

• Develop your own “training methods”.
  • This way, you can differentiate your Business from other options and instruct future employees and expand your activity.

 

* If you don’t see the text of the image correctly, you can download the Excel Template in our “Strategy Templates section“.

A Balanced Scorecard is a Strategy Tool that helps to track the performance of a Company by analyzing a set of Factors.

 

These Factors are usually grouped into 4 different Perspectives:

• Financial Perspective.
• Customer Perspective.
• Process Perspective.
• Innovation Perspective.

 

Although it can be used in many different situations, we strongly recommend using a Balanced Scorecard in the following 3 Scenarios:

1. To Evaluate and choose different Strategies.
2. To evaluate the Operation of a Company.
3. To Start a New Businesses Efficiently.

 

Steps you should follow to develop a proper Balanced Scorecard:

1. Define your Objectives.
2. Identify the Factors that best define those Objectives.
3. Establish What Actions have been taken or should been taken.
4. Track your Results.