7 Balanced Scorecard Examples and their Application in Business
Before presenting Balanced Scorecard examples, it is important to understand the context and the concepts behind the management and monitoring tool created by professors Robert S. Kaplan and David Norton in their famous article in the Harvard Business Review 1992 entitled "The Balanced Scorecard: Measures that drive performance. "
At that time there was a perception that the benchmarking methods of organizations were becoming obsolete and inadequate. At the end of the professors' study, rather than create a more appropriate method of enterprise performance measurement, they eventually developed an efficient support system for decision making, to aid strategic management.
One of the key points of the Balanced Scorecard was to expand the performance evaluation of prospects that have always been very focused purely on financial aspects.
Therefore, an example of Balanced Scorecard description can be defined as follows:
A tool for monitoring the strategic decisions taken by the company based on indicators previously established and that should permeate through at least four aspects - financial, customer, internal processes and learning & growth.
So the company has its measurement capabilities and expanded monitoring, allowing all relevant points of the supply chain to be measured. Also, It brings about significant improvements in the whole company's understanding of their strategy defined by top management, which is assessed so that each employee is involved in the process. It's done through the development of strategic maps.
Furthermore, in our balanced scorecard examples, there are some strategic maps, which become clearer as we summarize every organization's method of performance measurement and the effect they have on the achievement of business objectives.
In the words of the professors themselves Robert Kaplan and David Norton:
"Balanced Scorecard communication happens through a logical structure, based on the management of established goals; enabling managers to reallocate physical, financial and human resources in order to achieve strategic objectives. More than a performance measurement tool, the Balanced Scorecard is a translator of strategy and a performance communicator. "
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Balanced Scorecard Examples: Defining the 4 Perspectives
The best way to define the objectives and their metrics for each of the perspectives are by answering a few questions.
Note that there is an interconnected hierarchy ranging from financial goals (usually what the company wants to attain), through to internal customers, processes and then learning and growth which is the way to perpetuate long-term achievements.
Here's an example of how to answer these questions.
Financial Outlook:
To succeed financially, how should shareholders view us?
An example answer could be: increase revenue and increase profitability. How to measure it? Through the financial statements.
Customer Perspective:
To achieve our vision, how should our customers see us?
Sample answer: we need to show the market that our products have superior quality compared to the competition.
How to measure it? Through customer satisfaction surveys.
Internal Process Perspective:
To satisfy our customers, what business processes do we need to achieve excellence in?
Sample answer: we must achieve excellence in quality control and innovation.
How to measure it? By the statistical analysis of consumer care service reports, social networks and review sites like "Yelp".
Learning and Growth perspective:
To achieve our vision, how will we sustain our ability to change and improve?
Sample answer: we must sustain our ability to change and improve through the intensification of training and qualification of employees.
How to measure it? By verifying the number of hours spent in training and the number of certificates achieved by employees in outsourced courses.
7 Balanced Scorecard Examples
The development process of the Balanced Scorecard in a company involves several steps, which we have summarized here:
- Establish a clear vision of the future
- Define the strategic objectives
- Determine the critical success factors
- Choose indicators to measure and monitor performance
- Set goals, action plans, and initiatives
All 5 steps for each of the 4 perspectives. So, below are examples of Balanced Scorecard objectives, goals, indicators, and initiatives for different industries. These examples illustrate how the BSC framework can be tailored to meet the specific needs of various sectors.
Example of Balanced Scorecard in an Outsourcing Company
| Perspective | Objective | Goals | Indicator | Initiative |
|---|---|---|---|---|
| Financial Perspective | Increase Revenue | Achieve 15% revenue growth annually | Annual revenue growth rate | Expand service offerings and enter new markets |
| Customer Perspective | Enhance Customer Satisfaction | Achieve a customer satisfaction score of 90% | Customer satisfaction surveys | Implement a customer feedback system |
| Internal Process Perspective | Improve Process Efficiency | Reduce process cycle time by 20% | Process cycle time | Start a business process redesign project. |
| Learning and Growth Perspective | Enhance Employee Skills | Provide 40 hours of training per employee annually | Training hours per employee | Develop a comprehensive training program |
Example of Balanced Scorecard in a Mining Company
| Perspective | Objective | Goals | Indicator | Initiative |
|---|---|---|---|---|
| Financial Perspective | Reduce Operational Costs | Decrease costs by 10% annually | Cost reduction percentage | Implement cost-saving technologies |
| Customer Perspective | Improve Product Quality | Achieve a product quality rating of 95% | Product quality rating | Enhance quality control processes |
| Internal Process Perspective | Optimize Extraction Processes | Increase extraction efficiency by 15% | Extraction efficiency rate | Adopt advanced mining technologies |
| Learning and Growth Perspective | Foster Innovation | Generate 5 new innovative ideas annually | Number of innovative ideas | Establish an innovation lab |
Example of Balanced Scorecard in a Financial Services Company
| Perspective | Objective | Goals | Indicator | Initiative |
|---|---|---|---|---|
| Financial Perspective | Increase Profit Margins | Achieve a profit margin of 20% | Profit margin percentage | Optimize investment strategies |
| Customer Perspective | Enhance Client Relationships | Achieve a client retention rate of 95% | Client retention rate | Implement a client relationship management system |
| Internal Process Perspective | Streamline Financial Processes | Reduce transaction processing time by 30% | Transaction processing time | Start a business process optimization project. |
| Learning and Growth Perspective | Develop Financial Expertise | Provide 50 hours of financial training per employee annually | Training hours per employee | Launch a financial training program |
Example of Balanced Scorecard in a Healthcare Company
| Perspective | Objective | Goals | Indicator | Initiative |
|---|---|---|---|---|
| Financial Perspective | Improve Financial Health | Achieve a 10% increase in net income | Net income growth rate | Optimize billing and coding processes |
| Customer Perspective | Enhance Patient Satisfaction | Achieve a patient satisfaction score of 95% | Patient satisfaction surveys | Implement patient feedback systems |
| Internal Process Perspective | Improve Clinical Outcomes | Reduce hospital readmission rates by 15% | Readmission rates | Adopt evidence-based clinical practices |
| Learning and Growth Perspective | Enhance Staff Competency | Provide 50 hours of training per staff member annually | Training hours per staff member | Develop a comprehensive training program |
Example of Balanced Scorecard in a Manufacturing
| Perspective | Objective | Goals | Indicator | Initiative |
|---|---|---|---|---|
| Financial Perspective | Increase Profitability | Achieve a profit margin of 15% | Profit margin percentage | Optimize production processes |
| Customer Perspective | Improve Customer Loyalty | Achieve a customer loyalty score of 90% | Customer loyalty score | Implement a customer loyalty program |
| Internal Process Perspective | Enhance Production Efficiency | Reduce production cycle time by 25% | Production cycle time | Adopt lean manufacturing techniques |
| Learning and Growth Perspective | Develop Workforce Skills | Provide 40 hours of training per employee annually | Training hours per employee | Establish a skills development program |
Example of Balanced Scorecard in a Tech Company
| Perspective | Objective | Goals | Indicator | Initiative |
|---|---|---|---|---|
| Financial Perspective | Boost Revenue from New Products | Generate 30% of revenue from new products | Revenue from new products | Invest in R&D for new product development |
| Customer Perspective | Increase Market Share | Achieve a market share of 25% | Market share percentage | Expand marketing and sales efforts |
| Internal Process Perspective | Enhance Product Development Cycle | Reduce product development time by 20% | Product development cycle time | Implement agile development methodologies |
| Learning and Growth Perspective | Promote Continuous Learning | Provide 60 hours of professional development per employee annually | Professional development hours per employee | Establish a continuous learning program |
Example of Balanced Scorecard in Retail Company
| Perspective | Objective | Goals | Indicator | Initiative |
|---|---|---|---|---|
| Financial Perspective | Increase Sales Revenue | Achieve a 20% increase in sales revenue | Sales revenue growth rate | Expand product lines and market reach |
| Customer Perspective | Enhance Customer Experience | Achieve a customer satisfaction score of 90% | Customer satisfaction surveys | Implement a customer experience improvement program |
| Internal Process Perspective | Optimize Inventory Management | Reduce inventory holding costs by 15% | Inventory holding cost | Adopt advanced inventory management systems |
| Learning and Growth Perspective | Enhance Employee Engagement | Achieve an employee engagement score of 85% | Employee engagement surveys | Implement employee engagement initiatives |
The examples of Balanced Scorecards presented are entirely hypothetical and rather schematic. Usually, they may contain more initiatives for each objective, as well as more goals. The important thing is to understand the concept and how to use it correctly in your particular business.
