How To Implement The Balanced Scorecard Framework (With Examples)

Despite being one of the most effective strategy tools, the Balanced Scorecard (BSC) often remains underutilized or misunderstood. 

Consequently, many strategy leaders struggle to impact the organization’s performance or quickly adjust business strategies to changing conditions.

In this article, we’ll provide a detailed guide to the Balanced Scorecard Framework, covering: 

• Key benefits of the Balanced Scorecard
• Debunking a common misconception for better results
• How to implement a Balanced Scorecard
• How to use Balanced Scorecard for strategy tracking and execution 
• How to apply Balanced Scorecard approach with Cascade

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But what exactly is a Balanced Scorecard? Let's dive in. 👇

What Is A Balanced Scorecard?

The Balanced Scorecard, a famous strategy framework by Robert Kaplan and David P. Norton, debuted in Harvard Business Review in the 1990s. Since then, it has been used by thousands of organizations, and is a staple in business and strategic management courses.

The Balanced Scorecard serves as a management system, guiding organizations in aligning strategic initiatives with operational objectives and improving business performance. This framework emphasizes the development of Key Performance Indicators (KPIs) across four critical areas for faster and better decision-making.

What Are The 4 Perspectives Of A Balanced Scorecard?

The Balanced Scorecard (BSC) divides its strategic approach into four key perspectives: financial, customer, internal business process, and learning & growth. Each plays a pivotal role in ensuring a holistic view of organizational success.

Financial perspective

In this perspective, financial performance measures indicate whether an organization's strategy and execution are improving its financial goals. Typical scorecard financial metrics include:

• Cash flow
• Revenue growth rate
• Operating income
• Return on equity
• Return on investment

Customer perspective

This perspective should focus on measures that deliver value to the customer. These scorecard metrics can include:

• % of sales from new products
• Customer lifetime value (CLV)
• Customer complaint resolution time
• Customer churn rate
• Net promoter score (NPS)

Internal business process perspective

In this perspective, prioritize internal metrics that impact customer satisfaction most. Optimizing these metrics ensures operational improvements that boost performance in a customer and financial perspective. This would include measuring things such as:

• Unit costs
• Productivity per employee
• Cycle times 
• Quality control defect rate
• Innovation rate

Learning and growth perspective

This area of the balanced scorecard focuses on KPIs that encourage continuous improvement, innovation, and learning. Examples of metrics include:

• Employee satisfaction score
• Number of training hours per employee
• Employee turnover rate
• Alignment with organizational culture
• % percentage of leadership positions filled internally

📚Recommended reading: Strategy Officer KPIs: 3 Ways CSOs Can Prove Their Value

Benefits Of Balanced Scorecard Implementation

The four perspectives of the Balanced Scorecard serve several purposes.

• They ensure a focus on the main drivers of success, such as customer satisfaction and operational efficiency. 
• They compel organizations to assign tangible metrics to each perspective, boosting accountability.
• They serve as a management framework for communicating the organization’s strategy to stakeholders. For example, 'We are doing x because it helps us succeed in the Customer perspective of our scorecard. '
• They help identify competitive advantages and areas for improvement.

In 1997, one study by the Insitute of Management Accountants found that 64% of U.S. companies use the Balanced Scorecard. This trend continues to this day, according to Bain & Company’s 2023 survey of 1,000 executives and managers.

Interestingly, many of our strategy execution platform users unknowingly align with its principles, reflecting its intuitive appeal. We often talk with them about the Balanced Scorecard and discover they're unaware they've implemented it.

However, they have arrived at their conclusions naturally that their efforts and measures should focus on roughly the same four perspectives that the Balanced Scorecard suggests.

The ultimate gain lies in sharpening focus across leading and lagging KPI indicators, ensuring a balanced approach to short-term and future objectives.

Problems With Balanced Scorecard Implementation

As with any popular strategic framework, the Balanced Scorecard has picked up its fair share of critics. The main criticisms of the Balanced Scorecard highlight its:

• Time-consuming setup.
• Complexity leading to misunderstanding. 
• Rigidity amidst changes in the business environment. 
• Overemphasis on financial measures. 
• Neglect of external market dynamics.

Despite criticisms, mastering the Balanced Scorecard's strategic depth—beyond mere reporting—unlocks significant organizational advantages.

People think of the Balanced Scorecard as four perspectives you simply 'slot' your strategic goals into. When they visualize the Balanced Scorecard, they think of it like this diagram:

This diagram shows how four simple perspectives link together to form a Balanced Scorecard. In each perspective, there are Strategic Objectives, Projects, and KPIs, which you then work toward achieving.

The goal is to balance each perspective and improve organizational performance.

This traditional method assumes that each perspective is independent of the others. Nevertheless, this approach to implementing the Balanced Scorecard is fundamentally flawed. 

Through years of trial and error, it turns out that how we order them matters. The modern balanced scorecard demonstrates how each perspective builds on the previous one.

The truth is that proper implementation, respecting the order of perspectives, transforms BSC into an unparalleled tool for strategic alignment and performance enhancement.

The Right Way To Implement The Balanced Scorecard

Proper implementation of the Balanced Scorecard begins with approaching the diagram from the bottom up, ensuring a solid foundation for each subsequent layer.

Visualize the Balanced Scorecard as a strategy map, where each step, starting from Learning & Growth, systematically guides you toward the ultimate goal: increased profitability.

There is also a different way to look at this. 

As with leading and lagging KPIs, the Balanced Scorecard is a series of leading and lagging perspectives. 

Learning and Growth, Internal Processes, and Customer will be your leading perspectives, as these perspectives facilitate the delivery of your primary lagging perspective: Financial performance. It's termed 'lagging' because it results from actions taken in the other three perspectives.

This profit-centric view, however, faces scrutiny. Critics point out its potential misalignment with organizations like nonprofits, government entities, or innovators such as Google and Meta, whose missions extend beyond financial results. 

These entities strive for innovation, user experience, and social or environmental responsibility goals that a narrowly profit-focused framework like the Balanced Scorecard might only partially support.

How to use this approach to implement BSC 

Begin your BSC implementation journey with actionable steps that are designed to drive performance:

• Assess your current business performance using core business metrics. 
• Identify and address roadblocks and risks for each BSC perspective.
• Prioritize business activities in the order they must be tackled to allow the most rapid progression through the stages.
• Build a strategic roadmap to close the current and desired state gap. 
• Map out and understand cause-and-effect relationships between different strategic objectives.

When mapping dependencies, consider how a company's ability to learn and grow directly impacts its ability to manage its internal processes. By refining your internal processes, not only do you enhance customer service and lower costs, but you also set the stage for increased sales. 

This direct impact on your bottom line demonstrates how strategic enhancements lead to achieving broader financial objectives, a testament to the BSC's efficacy.

Balanced Scorecard Example

Your Balanced Scorecard should be integrated into two main phases of the strategy lifecycle: strategic planning and strategy execution. 

We will show you examples using Cascade, our strategy execution platform, but you can also use an Excel spreadsheet.

Thanks to its flexible structure, Cascade supports various strategy frameworks, with the BSC being a popular choice among our customers. See how to set it up here.

📚 Recommended reading: The Only Balanced Scorecard Software You’ll Ever Need (2023)

Balanced Scorecard for strategic planning

One of the most effective places to implement the Balanced Scorecard is in your strategic planning process. 

As the first and most crucial step in implementing a Balanced Scorecard methodology, this will lay the foundation for everything your organization will do in the future.

Here’s how you can implement the Balanced Scorecard from a strategic planning perspective with Cascade in 2 steps:

Step 1: Use Focus Areas as your perspectives

This Balanced Scorecard implementation methodology involves orienting your whole strategic plan around the Balanced Scorecard. You will set each perspective as a strategic Focus Area and then align Objectives, Projects, and KPIs directly underneath it. You’ll end up with a strategic plan that looks something like this:

💡Tip: Shared Focus Areas in Cascade align every plan with your Balanced Scorecard’s four focus areas—finance, customer, internal processes, and learning and growth—ensuring horizontal alignment and seamless collaboration across teams towards common goals. 

Step 2: Add Objectives, Projects, and KPIs for each perspective

The implementation doesn’t stop with the setup of your focus areas. You need to make sure each of your perspectives has a good mix of:

• Strategic objectives (overall outcomes)
• Projects (specific initiatives)
• KPIs (measures of success)

💡Tip: With Cascade's Alignment & Relationships maps, you can easily see how the objectives and initiatives from the different perspectives of your plan work together to achieve your strategic goals.

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👉🏻 Streamline your strategic planning process with our free Balanced Scorecard Strategy Template.

Balanced Scorecard for strategy tracking

Moving from strategic planning to strategy tracking, let's explore using a Balanced Scorecard for performance management and progress monitoring. 

This is a crucial element of every strategy execution. You must integrate your Balanced Scorecard into governance by embedding it in weekly team meetings and board reports for continuous strategic alignment and improvement.  

Here’s how to do it in Cascade: 

Create a Balanced Scorecard Dashboard

Start by creating a Balanced Scorecard Dashboard for your strategic reporting. In the dashboard, you should see your score for each of the four perspectives and a summary of your key objectives, projects, and KPIs. It should look something like this:

💡Tip: Keep your dashboard fairly high level; for complex strategies with multiple layers, opt for dedicated dashboards for each strategic plan.

Create Balanced Scorecard Reports

The dashboard offers a snapshot of progress, but for in-depth analysis, switch to a tabular report featuring detailed updates and commentary for each perspective. Your report should look something like this:

This detailed report format is invaluable for deep dives during your strategy review meetings.

💡Tip: With Cascade, you can manually track and update your metrics or take advantage of automation to make the most of your time—no one likes to spend hours on progress updates. You can integrate Cascade with the tools your teams use, pull data from multiple systems, and add context in real time.

📚Read this article to find out how to use Cascade as your balanced scorecard software. 

Balanced Scorecard + Strategy Execution Software = 🚀

Intrigued by the Balanced Scorecard approach? Enhance your strategic efforts with a strategy execution platform that simplifies planning and execution. 

Cascade excels at bringing your Balanced Scorecard to life. It offers a cohesive approach to strategic management and provides a unified platform that amplifies accountability, fosters alignment, and drives tangible business results.

If you'd like to learn more about how Cascade can help you implement the Balanced Scorecard, book a demo today.