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    8 Replies Latest reply on Feb 11, 2008 9:46 AM by puzzleman

    balanced scorecard

    GENEJMARKS Wayfarer
      Hi,

      The Balanced Scorecard is a very popular approach for large companies to measure tangible and intangible performance factors. Has anyone had experience with this approach and would it be something that I should consider for my small (under 50 person) company?

      Thanks,
        • Re: balanced scorecard
          LUCKIEST Guide
          Great Question We would need to know more about tour company.
          Have you developed a Business or Marketing Plan?? How about operational goals??
          More info on the balanced scorecard.

          The balanced scorecard, a concept for measuring whether the
          activities of a company are meeting its objectives in terms of vision
          and strategy, was developed and first used at Analog Devices
          in 1987. By focusing not only on financial outcomes but also on the
          human issues, the balanced scorecard helps to provide a more
          comprehensive view of a business which in turn helps organizations to
          act in their best long-term interests. The strategic management
          system helps managers focus on performance metrics while balancing
          financial objectives with customer, process and employee perspectives.
          Measures are often indicators of future performance.

           


          Implementing the scorecard typically includes four processes:

          1. Translating the vision into operational goals;
          2. Communicate the vision and link it to individual performance;
          3. Business planning;
          4. Feedback and learning and adjusting the strategy accordingly.
          Let me know if you need more info, LUCKIEST
          • Re: balanced scorecard
            Generation4 Adventurer
            Hi GENEJMARKS - can you share what is meant by a balanced scorecard? What is it and how did it help you? Thanks for providing more information.
            • Re: balanced scorecard
              Lighthouse24 Ranger
              Gene, I'd agree that most small businesses don't use Balanced Scorecard. The reason, I think, is that most small businesses use a different planning philosophy than larger organizations.

              Large organizations typically define a vision, identify strategic objectives related to that vision, and then plan downward (or outward, depending on how the model is depicted) to realize the vision through the achievement of various tactical and operational goals. As I see it, Balanced Scorecard is a way to integrate and measure progress toward the specific set of Financial, Marketing, Process Management, and HRD goals, targets, and initiatives that make up the vision. The management team for a larger organization can often envision where they want to company, agency, or non-profit to be in two, five, or maybe even twenty years from now -- so they have time (and resources) to establish the related metrics, and to institute the feedback loops (measure, analyze, adjust) that would allow Balanced Scorecard to work well for them.

              In contrast, small businesses tend to plan from the bottom up (or outside in). They often begin with a single element -- for instance, a financial opportunity that others have overlooked, a market need that isn't being met, a unique process that provides a radical competitive advantage, or a specialized skill that no one else has. They figure out how to operationally apply that element, then determine how to tactically add on the other elements that are needed to support the operation, and finally figure out how to strategically deliver it in a profitable business context. In one sense, "balance" is built-in to that evolution. Further, once a small business is delivering that initial element, the owner invariably sees other elements and opportunities (I have no data to back this up, but I think most small businesses are actually engaged in a slightly "different" business than their owners initially imagined).

              The analogy I use is an oil tanker versus a small sailboat crossing the ocean. A tanker plows through the waves en route to its destination using the most direct course possible, and very little affects it. Because the cargo is valuable and capable of doing enormous damage, certain things must be monitored and measured -- most of which are "internal" to the ship and its well-being (and for which the ship has dedicated equipment and personnel). On the other hand, a sailboat gets pitched and rolled by the waves, and has to constantly respond to changes in the wind and weather. While the destination is (or should be) a measureable objective, a sailboat can't go straight there. So (like a small business), it sometimes has to maneuver to take advantage of opportunities and thrive, and sometimes has to maneuver just to protect itself and survive. A small business "captain" goes it alone, without the sophistication a tanker might have. He/she constantly monitors the "weather" and is always prepared to change a financial, marketing, process, or developmental objective if necessary.

              Bottom line, managing a small business presents different challenges than managing a large organization, and therefore relies on some different management approaches. The rewards are also different. Big organizations offer big rewards, but mostly at the end of the voyage. A small business offers small rewards all along the way. If the sailboat passes near that one particular harbor on a day when the weather is fine and there are no commitments to keep, the small business captain can drop anchor and be like one of those folks in a Corona commercial for awhile. (The big tanker just plows on by, while we lay on the beach and wave.)
                • Re: balanced scorecard
                  GENEJMARKS Wayfarer
                  Thanks everyone for your replies.

                  I wanted to consider deploying the Balanced Scorecard approach at my company, and also to write about it too. But, like Lighthouse observed, it doesn't seem very applicable to smaller companies. It's kind of a shame, because it's so popular among big businesses. Maybe it's just reality. I'm going to do more research.
                    • Re: balanced scorecard
                      puzzleman Tracker
                      Gene, After reading this thread, I think you should try Balanced Scorecard as a trial basis. You soul like you are definitely interested in the concept and would like to try it. What do you have to lose if you try it? Explaining it to your employees and what you are trying to do, will get their involvement in the plan.

                      Also by my understanding of what Luckiest wrote, I kind of do this process with my people. Each year, I set goals and get their input on how to get there. I think larger companies have to have a formal system because of their culture and the sheer size of the company. I have a feeling that you already do much of the Balanced Sheet but not done formally.

                      Jim