Let's Start With a Simple Approach of Balanced Scorecard for Your Organization's Health

June 12, 2018 / by Farhan hanif

Overall health of your organization can be affected badly if you keep yourself hyper-focused on one area of your job.

This is why a 'Balanced Score Card' approach is implemented by prudent business leaders. What is Balanced Score Card and how it can be a beneficial tool to assess the performance of an organization (especially financial performance)?

Balanced Scorecard actually gives a positive outcome in determining the performance of an organization in all aspects rather than just Financial Performance. This gives an opportunity to look into strengths and weaknesses in a better way and solve problems.

One aspect may be able to provide an insight into problems but it might not help solve these problems. Hence, going through all aspects gives a clear picture of company health.

For example: The product manager of a grocery store always looks at company's profit & loss statements and numbers to assess the performance. But he might not know that there could be a different picture of company's performance if other aspects of balanced scorecard were taken into consideration.

• Financial Aspect: Keep it as simple as possible. Simply look into company's profit and loss statements and compare with previous performances. And, compare financial ratios too.

• Customer Aspect: Just after conducting Financial Analysis, you should not assume that it is over. Infact, your actual work has just started when the merging of aspects needs to be done. In Customer Aspect, you need to answer questions like what type of feedback you are receiving from your customers, if there is any complaint regarding your product quality and what your customers are feeling about your staff with regard to customer service.
  
  In retail business, it is easy to identify your customer, but in other businesses, it could be a little tricky. However, everyone has some type of customer (whether internal or external) since everyone is serving someone. And, this exercise becomes easier when it is done department-wise. Taking the example of our product manager from above, we need to find out if he has set the specific benchmarks to determine the level of customer service.
  
  If there is a good score on both customer and financial aspect, then it's a positive sign and we have successfully merged these two aspects and can move ahead to other aspects. If one aspect, such as financials, is great and Customer is poor, then it's a warning sign for something dangerous to come ahead.

• Processes Aspect: These are actually internal activities in your organization to make the product available for your customer. You need to answer questions like if the product manager (our example in this case) has designed the procedures in his department along with everyone's areas of responsibility and if they are aligned with company procedures. The processes need to be department specific for better controlling.
  
  Our product manager (our example) would have processes like Buying, Rotating and moving to sales. He has to set benchmarks like Production Units, at what Quality level and Handling of Waste . These benchmarks help in maximizing profits. Hence, other departments' processes also need to be prepared accordingly. So, once again, there appears the need to merge all these aspects in order to identify and solve any problem. If it was just Financial Aspect covered, it would again be an incomplete picture.

• Organizational Learning and Growth Aspect: A manager has to take the responsibility for his subordinates. A department with high turnover and people in that department not ready to take higher responsibility is a sign of poor manager. People need to be prepared for future to take up difficult tasks ahead to meet the complex business nature as the size grows.
  
  In our example of product manager, he is responsible for high turnover in his department and also for not creating a pipeline for internal promotions. In business environments like a grocery store, people need to be skilled and ready to take up higher challenges. This can be possible if they come up with step by step promotion.
  
  Hence, when combined, all aspects of balanced scorecard give a useful insight into problems and possible areas of improvements.