Definition of a Balanced Scorecard
A Balanced Scorecard (BSC) is a framework that tracks company performance and aligns goals by measuring results across four perspectives: Financial, Customer, Internal Processes, and Learning & Growth. The Balanced Scorecard is not just a measurement tool, but a strategy management system. It helps organizations translate vision and mission into actionable objectives, align teams around common goals, and track progress across both financial and non-financial dimensions.
What Are Balanced Scorecard Perspectives?
Financial metrics alone don’t show the full picture of an organization’s health. Tracking all four perspectives helps identify growth opportunities, improve long-term performance, and ensure the business is sustainable and competitive—not just profitable in the short term.
1. Financial Perspective
This perspective focuses on the financial health of the organization. It looks at profitability, return on investment (ROI), and cost management. Key performance indicators (KPIs) here include net profit margin and return on capital. Essentially, it helps ensure that the organization is generating sufficient revenue and managing expenses effectively.
2. Customer Perspective
The customer perspective emphasizes understanding and meeting customer needs. It measures satisfaction, retention, and market share. KPIs such as customer satisfaction scores and churn rates provide insights into how well the organization is connecting with its customers. Happy customers are more likely to stay loyal and recommend the business to others.
3. Internal Process Perspective
This perspective looks at the internal processes that drive the organization’s efficiency and quality. It focuses on optimizing workflows and ensuring that products or services meet quality standards. KPIs like process cycle time and defect rates help organizations identify areas for improvement and streamline operations.
4. Learning & Growth Perspective
The learning and growth perspective is all about building the organization’s capabilities. It focuses on training, innovation, and employee engagement. KPIs such as training hours per employee and idea-to-launch rates measure how well the organization is fostering a culture of continuous improvement and innovation, which is crucial for long-term success.
How is the Balanced Scorecard Used in Strategic Management
The Balanced Scorecard is powerful because it links abstract strategy to concrete, everyday actions. It does this by translating vision into clear objectives, measurable KPIs, and initiatives that align teams and processes toward common strategic goals.
Translating Strategy into Strategic Objectives
Each perspective is broken down into clear, measurable objectives that make strategy actionable. For instance, a financial objective might aim to increase recurring revenue, while a customer objective could focus on improving satisfaction scores. Defining these objectives ensures that the overall mission is expressed through specific, achievable outcomes that guide everyday decisions.
Visualizing Strategy with Strategy Maps
Strategic objectives are linked in a cause-and-effect chain and displayed in a strategy map. This visual tool shows how success in one area drives results in another—for example, employee training (Learning & Growth) improves process efficiency, leading to higher customer satisfaction, which in turn increases financial performance. Strategy maps create a shared understanding of how value flows through the organization.
Measuring Progress with Key Performance Indicators (KPIs)
Each objective is tracked using KPIs, which provide quantifiable evidence of progress and accountability. For example, an objective to reduce customer churn may use the KPI “Monthly churn rate (%)” to monitor outcomes. Regular performance reviews based on these indicators help leaders determine whether strategies are effective or need adjustment.
Executing Strategy Through Strategic Initiatives
While objectives define what needs to be achieved and KPIs measure progress, strategic initiatives outline how to achieve them. Initiatives are targeted projects or programs designed to close performance gaps. For instance:
- Launching a new CRM system to improve customer tracking (short-term initiative).
- Redesigning the supply chain for faster delivery (long-term initiative).
These initiatives ensure that strategic intent is translated into concrete action.
Aligning the Organization Through Cascading
A critical part of using the Balanced Scorecard in strategic management is cascading. This is done for distributing strategic goals throughout all organizational levels. The corporate scorecard (Tier 1) sets overall direction, business unit scorecards (Tier 2) adapt objectives to specific functions, and team or individual scorecards (Tier 3) link personal accountability to strategic priorities. Cascading ensures:
- Alignment between individual work and organizational strategy.
- Clear ownership of objectives and results.
- Consistent performance tracking across all levels.
Who Uses the BSC?
From multinational corporations to government agencies and grassroots nonprofits, the balanced scorecard finds application in organizations of all sizes.
- Executives: Align board-level initiatives with tactical projects.
- Strategy Managers: Design and maintain scorecard frameworks.
- Project Leads: Track KPI progress and report outcomes.
- Consultants: Guide clients through BSC adoption.
- Technology Teams: Integrate data sources for automation.
- HR Leaders: Align training with growth metrics.
How to Make a Balanced Scorecard in Creately
Step 1: Define Vision, Mission, and Success Criteria
Establish a clear vision that outlines the long-term aspirations of the organization, ensuring alignment among all stakeholders. The mission should articulate the organization’s purpose, guiding day-to-day operations and strategic decisions.
Step 2: Identify BSC Perspectives and Objectives
Categorize your company objectives into four key perspectives: Financial, Customer, Internal Process, and Learning & Growth. This mapping helps ensure a holistic approach to strategic planning and performance measurement.
Step 3: Open a BSC Template
Start by selecting a suitable template from Creately’s list of balanced scorecard templates. Utilize this standard framework to add objectives under each perspective using sticky notes, or custom labels.
Step 4: Select KPIs and Set Targets
Identify key performance indicators (KPIs) that are quantifiable and directly related to the organization’s objectives. Establishing realistic targets for these KPIs provides a benchmark for success and motivates teams to achieve their goals. In Creately, these KPIs, data sources, and target values can be added as cards and linked with connectors to their objectives for context.
Step 5: Map Strategy and Link Initiatives
Visualize how initiatives drive strategic objectives using cause-and-effect diagrams to clarify priorities and resource alignment. Use Creately to build strategy maps with connectors to show these relationships.
Step 6: Choose Owners and Set Timelines
Assign specific individuals or teams as owners for each objective, fostering accountability and ownership of results. Additionally, define clear timelines for deliverables to ensure progress is tracked and maintained throughout the implementation process. You can assign these directly in the Creately canvas using task cards and tagging your team members to them.
Step 7: Share Scorecard and Communicate
Roll out the scorecard organization-wide with clear communication to drive adoption and alignment. Share your BSC workspace with view/edit permissions, embed diagrams into team wikis or dashboards, and use commenting tools for real-time collaboration and feedback.
Step 8: Review, Learn, and Iterate Regularly
Review performance quarterly, make improvements, and adapt strategy to stay aligned with evolving goals. Use Creately’s version history to track changes, update visuals in real time, and run review sessions with discussion threads.
Step 9: Use the AI Balanced Scorecard Template
You can skip the data gathering and organizing steps by using Creately’s AI balanced scorecard template. Simply enter your strategic goals as a prompt, and let the AI auto-generate objectives, KPIs, and initiatives across all four perspectives with a single click.
Balanced Scorecard Advantages and Disadvantages
Advantages | Disadvantages |
Provides a Holistic View of Performance – The BSC goes beyond financial metrics by including perspectives like customers, internal processes, and learning and growth. This helps organizations monitor both short-term results and long-term strategic goals. | Can Be Time-Consuming to Implement – Developing a meaningful Balanced Scorecard requires detailed analysis, stakeholder input, and data collection, which can take considerable time and effort. |
Aligns Daily Work with Strategic Objectives – By linking departmental and individual KPIs to the overall strategy, it ensures that everyone’s efforts contribute toward common organizational goals. | Difficult to Maintain and Update – The BSC must be regularly reviewed and updated to stay aligned with changing strategies. Without this, metrics can become outdated or irrelevant. |
Improves Communication and Understanding – The structured framework helps communicate strategy clearly across teams, making complex objectives easier to understand and execute. | May Lead to Information Overload – Including too many metrics can make the Scorecard complicated and harder to interpret, reducing its usefulness. |
Encourages Strategic Thinking and Continuous Improvement – It promotes cross-functional collaboration and helps managers see how changes in one area impact others, fostering a culture of reflection and improvement. | Requires Cultural and Management Buy-In – Successful adoption depends on leadership commitment and employee engagement. Without this support, the BSC risks becoming a static reporting tool. |
Facilitates Better Decision-Making – By combining financial and non-financial measures, leaders can make more balanced, data-driven decisions and identify underperforming areas early. | Subjectivity in Selecting Metrics – Choosing the right KPIs can be subjective and vary across departments, leading to inconsistencies or conflicting priorities. |
Free Balanced Scorecard Templates by Creately
History of the Balanced Scorecard
The Balanced Scorecard, introduced by Kaplan and Norton in 1992, evolved from a performance measurement tool into a strategic management system linking metrics to long-term goals. Initially adopted by Fortune 500 firms, it expanded to public and nonprofit sectors. Key milestones include the introduction of Strategy Maps in 2004, scorecard automation through software in the 2000s, and real-time dashboards in the 2010s which enhanced its use. BSC adoption peaked in the early 2000s, with over 50% of large organizations using the tool.
Helpful Resources for Making Balanced Scorecards
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FAQs about Balanced Scorecards
Why is it called a “Balanced” Scorecard?
How many KPIs should each perspective include?
How is the Balanced Scorecard different from traditional KPIs?
Can small organizations use a Balanced Scorecard?
How often should a Balanced Scorecard be reviewed?
Resources
Kaplan, Robert S. “Conceptual Foundations of the Balanced Scorecard.” Handbook of Management Accounting Research, vol. 3, no. 3, 2009, pp. 1253–1269, https://doi.org/10.1016/s1751-3243(07)03003-9.
Perkins, Mike, et al. “What Do We Really Mean by “Balanced Scorecard”?” International Journal of Productivity and Performance Management, vol. 63, no. 2, 13 Jan. 2014, pp. 148–169, https://doi.org/10.1108/ijppm-11-2012-0127.
