Using Balanced Scorecard to Build Better Businesses
There is no doubt that our present economy is still under significant pressure. While a recovery may not be in the immediate future, companies are starting to feel less panicked and are focusing more on their futures once again. One of the most exciting changes has been the reduction in conversations about cost-slashing among corporate leaders and the renewed interest in replacing those savings with more effective performance management tools.
During the early months of the economic crisis, companies were literally striking out any expense they could to batten down the hatches and shore up profitability. By now, most companies have reduced nearly all of the non-essential spending they became accustomed to during the boom years. This means that incremental improvements from the bottom line aren’t likely to come from across the board cuts, in expenses or headcount. Instead, companies have been looking for ways to optimize their overall health. Anytime an organization goes through expense and staff reduction they can reach a point of diminishing return where further reduction simply reduces their chances for success in the future. At those times it is vital to rebuild your company through effective performance management rather than headcount or expense reduction.
One performance management strategy that seems to be gaining steam is the concept of Balanced Scorecard. Balanced Scorecard is a management process that maintains the standard of financial results as a measure of performance. It also looks at behaviors that lead up to and contribute to financial performance itself. For example, in today’s economy it could be difficult to judge certain businesses or employees on financial results alone. How much they were responsible for, their performance, and how much the present market economics were contributing could be difficult to say depending on the sector. In this case, looking at controllable factors such as learning and growth, internal business processes and customer satisfaction/behavior in addition to the traditional financial assessment could be incredibly insightful.
Proponents of balanced scorecard management simply believe that to truly judge the long term health of an organization or employee, you must adequately assess the big picture when it comes to performance. Particularly in unpredictable times, this balanced approach to management and assessment can help keep employees and organizations on the right track even when the numbers might tell a confusing story.
An additional benefit to using a balanced scorecard approach when it comes to employee assessment is that you create significantly more actionable feedback for the person being reviewed. With a traditional financial performance review, the employee may know whether they are doing “good” or “bad,” but may leave their assessment with no information about how to become better. When discussing balanced scorecard assessments, each employee automatically learns areas where they could contribute to the bottom line because everything from customers to process to results is discussed.
If you haven’t considered a balanced scorecard approach, it’s something you should take the time to learn more about. In difficult times we all need more high quality feedback and more accurate assessment in our organizations. Looking into balanced scorecard management may provide you with just the robust dialogue you’re searching for.
