Recent research indicates that companies which use the Balanced Scorecard approach usually outperform those without a formal approach when it comes to performance management.

Here is a look at the benefits using a Balanced Scorecard will offer:

Better Strategic Planning

The Balanced Scorecard provides a robust framework for communicating and building strategy. Business models are visualized in Strategy Maps, forcing managers to consider cause and effect relationships. The process of coming up with a Strategy Map ensures that a consensus is reached when it comes to interrelated strategic objectives. That means that both future performance key enablers like intangibles and performance outcomes are identified to create a holistic view of the strategy. If you are wondering about this approach, here is a good post on how to use a balanced scorecard.

Improved Strategy Communication

Since strategies with all their interrelated objectives are mapped on a single piece of paper, it becomes easier for companies to communicate their strategy both externally and internally. This makes understanding the strategy easier and helps engage both external stakeholders and staff in the review and delivery process of the strategy.

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Better Management Information

A Balanced Scorecard approach pushes organizations to think about and design key performance indicators that suit their strategic objectives. This way, companies measure the things that matter. Research shows that is true as companies using the Balanced Scorecard approach usually report much higher quality when it comes to how they manage their information and increasing benefits dictate how this data is used to guide strategic decision making and management insights.

Improved Performance Reporting

Companies that use a Balanced Scorecard often report and communicate performance better than those that don’t have a structured approach when it comes to performance management. Increasing transparency needs and requirements can be met if organizations create more meaningful management dashboard and reports to communicate their performance both externally and internally. This approach helps organizations identify what they should report, and a Strategy Map template is one effective way of visualizing performance, particularly if the various measures and objectives are communicated in traffic light format and color-coded management dashboards.

These are some of the compelling benefits the Balanced Scorecard has to offer; however, they cannot be realized if a Balanced Scorecard isn’t properly implemented or if one takes too many shortcuts when implementing it.

Posted by Steven

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