Performance analysis is essential to a company’s expansion. But it’s not a straightforward procedure, and financial data shouldn’t be the only consideration. Evaluation techniques like a balanced scorecard (BSC) must be used in practice.

The technique can be applied to optimize a company’s long-term outcomes and gain a clearer understanding of its reality. Additionally, the approach provides a wide viewpoint that facilitates efficient management in line with the strategic goals of the company.

What does balanced scorecard mean?

The balanced scorecard, or BSC, is a technique for evaluating business performance that offers a thorough picture of the company, taking into account more than just financial factors.

It was developed as a substitute for conventional approaches and is predicated on long-term plans, goals, indicators, and objectives.

With it, it’s possible to measure the growth of a company’s sectors, evaluating performance in a comprehensive and integrated manner. After all, all aspects of a business must be considered when evaluating its success.

What are the pillars of the BSC?

The balanced scorecard has four fundamental pillars, also known as perspectives, to conduct a more general performance assessment. Each of them monitors and promotes appropriate management for the areas, ensuring the achievement of the established objectives.

Look!

Financial

Although the balanced scorecard doesn’t focus solely on the financial aspect of its analysis, it remains a key factor in assessing a company’s performance. These results are relevant for evaluating various aspects.

Among the main numbers to know are:

return on investment (ROI);
profit;
revenues;
average ticket;
cash flow;
cash conversion cycle.

This perspective allows managers to have a broad view of the efficiency of the company’s operations. Monitoring this pillar is also helpful in identifying wasted resources and adapting financial strategies.

Clients

As the final point of production, customers are essential to the prosperity and longevity of a business. Therefore, the metrics used must be specific to measure the entire customer experience throughout the purchasing journey—including post-purchase.

In this sense, the customer experience doesn’t just consider the purchase itself, but also customer loyalty, built through quality products and services. Indicators used for this analysis can include satisfaction and lifetime value (LTV).

The goal of understanding the customer’s perspective is to understand how the company’s actions are perceived by its audience. In general, ensuring customer satisfaction and loyalty is a key competitive advantage for a company.

Internal processes

Internal processes are as important as the actual sales process. They are the foundation of how the entire business chain is organized and maintained efficiently, ensuring that products and services are delivered with quality and within the agreed deadlines.

This logic of excellence involves monitoring the entire cycle, following internal processes and seeking to optimize operations. Furthermore, with a thorough analysis of the internal organization, it’s possible to operate leaner and more efficiently.

Therefore, internal processes must rely on technology and innovation as allies in this improvement. Furthermore, it’s necessary to pay close attention to after-sales service and strive to establish effective communication to ensure customer satisfaction and build a good reputation.

Learning and growth

Internal satisfaction should be another of the company’s objectives. Therefore, the balanced scorecard considers not only the customer experience, but also that of employees. It is crucial to measure employee appreciation, engagement, and grievances.

The human resources department will be responsible for identifying sensitive issues and suggesting improvements to them—but leaders in each area need to follow suit. The company must constantly monitor its staff to reduce turnover and increase productivity .

What is the purpose of the balanced scorecard?

As you’ve learned, the balanced scorecard is a comprehensive tool that advocates for a grouped analysis of various factors to achieve effective results. It works with objectives, goals, metrics, and strategic initiatives.

Objectives refer to what the company wants to achieve, representing the purpose of each department involved in the organization. Goals, on the other hand, are an element of these overall objectives, serving as guiding points for monitoring progress.

In this scenario, metrics act as an evaluation factor. To achieve this, managers in each sector must define key performance indicators (KPIs). The chosen aspects must be monitored frequently.

Finally, when it comes to putting more process efficiency into practice, strategic initiatives are allies. To accomplish the organization’s set goals and objectives, they try to compute and recalculate routes.

How should the organization go about implementing the balanced scorecard?

Implementing a balanced scorecard involves several steps to ensure the organization analyzes its strategies and achieves the expected results.

Here are the main steps for implementation in your company!

Define your goals

Before you begin implementing the BSC effectively, you need to define objectives. At this stage, you’ll analyze what you want to achieve and the timeframe required to achieve it. For example, your focus might be increasing revenue, improving customer and employee satisfaction, or optimizing internal efficiency.

Choose the performance indicators used

Once you’ve defined your objectives, you should determine the indicators that will measure performance. These could include financial statements, percentage of complaints and returns, implementation of innovations in internal processes, error reduction, and more.

Determine the initiatives

It’s time to decide what needs to be done to reach your goals after you’ve established your performance metrics and targets. For instance, you could wish to spend money on marketing initiatives if your objective is to raise income.

Offering training to the sales and service staff may be the answer when the objective is to enhance the client experience. As a result, identifying the focus is essential to determining which projects will be carried out.

An alternative to attaining more efficient management in line with strategic goals is to implement a balanced scorecard in your organization. Using this approach helps you make strategic decisions by analyzing the company as a whole.