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What's a strategic balanced scorecard and is it relevant to my business?

by , 01 July 2014
Our labour experts receive a lot of questions.

One of the questions they received recently comes from Linda, a business owner who lives in Johannesburg. She says, as a new business owner, she's been hearing a lot about a strategic balanced scorecard. And she wants to know what it is and whether or not it's relevant to her business.

If you're in the same boat as Linda, continue reading to find out the answer.

Here's what you need to know about a strategic balanced scorecard

A balanced scorecard or strategic balanced scorecard is a tool that allows your company to translate its vision and strategy into a strategy map and measurable objectives, say the experts behind the Practical Guide to Human Resources Management.

A balanced scorecard is relevant to your business as it provides answers to the question: 'How is my company performing on what's important?'

Now that you know what a balanced scorecard is, let's take a look at how it works.

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A balanced scorecard works as follows

According to our experts, you'll derive the information for the balanced scorecard from your strategy map.

A strategy map is a visual map defining all the strategic objectives and key initiatives your company must focus on to achieve its vision and mission this year.

The balanced scorecard defines a comprehensive set of performance measures that guides the execution and measurement of the strategic objectives (i.e. the strategy map). It allows you to measure the performance of your business/departments/teams/ employees against specific key aspects.

The comprehensive performance measures must ideally include the following four perspectives:

#1: Financial – What should we measure to succeed financially?

#2: Customer – What should we focus on in terms of customers to achieve our vision and meet our customer's needs?

#3: Internal business processes – What must we do effectively and efficiently to satisfy our shareholders and customers?

#4: Learning and growth perspective – What strategic enablers in terms of people, technologies and product/service development do we need?

We hope this explanation has given you a clear understanding of what a strategic balanced scorecard is and why it's relevant to your business.

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