Scorecard Strategies to Help You Manage Your Business

Did you know that a poorly managed business can result in low company morale, low productivity, and a decrease in profits? It’s important for a manager to understand the company’s needs for it to thrive.

Business management tools are a great way for leaders to manage their companies in the right way. Scorecard strategies are a great example! Continue reading to learn the benefits of scorecards and how you can start today.

What Is a Balanced Scorecard?

A balanced scorecard is a business framework used for tracking and managing an organization. This strategy is adaptable and incorporates every facet of a business.

Management can use this as an actionable outline of goals and strategies to help them increase and maintain performance. Bottom line numbers aren’t the only important piece to running a successful company. This is why this scorecard is used to create overall success.

There are four different components, or topics, to a balanced scorecard. These components include customer, internal processes, financial, and learning & growth.

Customer

The opinion and trust of customers are more important to a business than ever before. Your customers’ perception of how your company is performing is the key to keeping it alive. Using this strategy can help you determine which customer-related factors are the most important.

These priorities could include increasing customer retention and increasing customer satisfaction. It could also include, high-quality customer service, customer acquisition cost, and much more.

Depending on your business goals, you could have some or all of these under your customer line on a balanced scorecard. If you’re unsure of where to start, try breaking it down into categories such as timeliness, quality, performance, service, and cost.

Internal Processes

Some other important facets of business that can’t be overlooked are internal processes. If a car engine isn’t running, no one will buy the car. The same goes for a company. As a manager, you need to be sure that your business is running as efficiently as possible or it could break down.

This could include operational improvements and improvements on products or services. It could also include increasing employee knowledge, adding resources, and more.

Do your employees have access to the right performance management tools and software to do their job correctly? Do you have proper expense procedures in place? These process procedures can make or break your business. It’s important to understand all internal processes as your company grows.

Financial

For many companies, money is the bottom line and the most important piece of the business. Finances can often be the one thing managers focus most of their attention on. However, it’s easy to get caught up in the numbers and forget the big picture.

Revenue and profit are obvious objectives. Most organizations will list these under their financial perspective on a balanced scorecard. However, simply putting “revenue and profit” won’t cut it. This list works best when specific financial goals are identified.

Figure out which financial goals you can accomplish within a realistic timeframe. This could relate to cost savings and efficiency, revenue sources, and profit margins.

For example, one goal could be to find other sources of revenue outside of your normal product and/or service. Is there an event your company can invest in that will guarantee more leads or sales? Or, if you’re looking to save on costs, what exact percentage are you looking to save by next quarter or year? Be specific in this particular piece of the scorecard.

Learning and Growth

The last, but not least, of the four components of the balanced scorecard is learning and growth. The other three topics of the scorecard relate to more tangible items. This particular piece, however, considers the more intangible drivers of performance.

Researchers say taking care of your employee’s health leads to business benefits. Making your employees a priority makes the work environment more effective and efficient.

Taking responsibility for your employee’s health can feel overwhelming. You need to be sure they are continuously learning and staying productive. But you also need to be sure they are feeling fulfilled at work.

Some goals to list include, increasing professional development opportunities and increasing employee retention. You can also include, improving work/life balance and creating more opportunities for professional growth.

An employee’s productivity at work can be directly related to their opportunities. Work processes and employee treatment also have an effect. If your employee turnover rate is high, what can you do to lower it?

Consider having a conversation with your employees about what they need. If you give them the opportunity to speak about needed improvements, it could help your bottom line. It could be as easy as building productivity projects. Or, it could be more complicated such as being more flexible with work hours.

What Are the Benefits of Scorecards?

One important benefit of a balanced scorecard is that it helps to prioritize a company’s business initiatives. With so many goals, opportunities, and issues in the workplace, it’s easy to get overwhelmed. A scorecard helps bring perspective.

Which facet of the business needs the most attention at this moment? Which facet needs the most financial support at this moment? Creating a scorecard can help answer these questions.

A balanced scorecard can also help balance and clarify a manager’s responsibilities. Which teams need more bandwidth? Which department is spending the most money? Which employee needs more motivation?

Scorecards can also force leaders to determine and reach specific goals. Managers can wish to increase sales by 30%. To reach the 30% increase in sales, certain actions need to occur. Defining those actions and measuring them on the scorecard is key. Without measuring those actions, wishing for an increase in sales is just that, a miserably disappointing fantasy. Creating a scorecard can also help managers better communicate their companies’ goals and needs to important investors and stakeholders.

Scorecard strategies create a layout to capture the short and long-term objectives of your business. With the objectives in place, it’s much easier to figure out the tactics you need to be successful. This dynamic framework shows actionable goals and strategies to help increase and maintain your company’s performance.

What Are the Cons of a Scorecard?

With all of these pros, there have to be some cons, right? Wrong! The best thing about a balanced scorecard is that it works as well as you work it.

There are reports that a balanced scorecard takes too long to implement. The small amount of time it takes to create this strategy will help you save time, effort, and money in the long run!

Others also feel it might be too structured to work across all industries. This strategy is very adaptable and flexible. It’s also important to build your framework the right way!

Creating a Scorecard

The best way to begin creating a business strategy is to first get together with the leadership team. Take it back to the basics and ask yourself questions.

Why did you start this company to begin with? What problems are you solving for the consumer? What does success look like?

The answers to these questions may seem very high-level, but that is why they’re important to start with. Most of these answers will relate in some way to all of the four components of the scorecard.

One mistake many companies make when creating their scorecard is thinking it will magically fix their company. The balanced scorecard won’t perfectly balance each facet of your business. The scorecard will instead showcase how each piece of your business works together and how you can improve various parts.

After answering the big questions, you can then break down your scorecard by financial, learning & growth, customer, and internal processes and include your goals for each. Once you have your goals set, it’s time to map them out!

Notice which goals connect to one another across the scorecard, regardless of topic. Try drawing arrows to see and how every strategic goal within your organization relates to one another. When you can see your company from this perspective, you’ll be able to make more strategic decisions and move your company forward more efficiently.