In business, we are constantly seeking ways to improve. Whether improving function, profitability or brand awareness, we do this to achieve long-term goals and create stability for an unknown future.
No matter the reason for optimising your business performance, the Balanced Scorecard (BSC) is an effective approach to achieving your targets. It is a strategic management tool that helps you align your current activities with long-term goals.
Find out more by watching our full explainer video about the Balanced Scorecard.
Essentially, the BSC takes your business strategy and maps it out into four key perspectives:
As with any good pyramid, the pinnacle rewards rely on the strength of the foundations. In the case of the Balance Scorecard – People and Processes.
They can be measured and managed to optimise a business’s performance from the bottom up. Improving the foundation of the business promotes growth and security.
These two facets are also known as ‘leading’ perspectives as they create momentum for the top tiers to follow. A business can proactively improve these elements while the results reflected in the Customers and Finances will lag behind.
What is the ‘People Perspective’?
The people perspective of the Balanced Scorecard is all about the employees.
The people indicators help business owners measure how well their staff contribute to the company’s success. The three leading people indicators are:
Employee satisfaction
Employee satisfaction is a key leading indicator of organisational performance. Happy team members are more productive, engaged, and committed to the business’s success. Employee satisfaction can be measured through surveys to get insights into employees’ thoughts and feelings about the company.
Employee turnover
High employee turnover rates can indicate poor management, poor working conditions, or low employee morale. Employee turnover can be measured by tracking the number of employees leaving the organisation over a given period and asking why.
Employee skills
The skills of employees have a direct impact on organisational performance. Employees with the skills required to perform their jobs are more productive and work to a higher standard. Measuring employee skills can be done by tracking employees’ education, training, and certifications.
Optimising the People Perspective
Overall, optimising the people perspective means improving team satisfaction and reducing turnover rates. You can only achieve strategic objectives with a strong team. Small business owners can use the following strategies:
Offer training and development opportunities
Investing in staff training and development can improve employee skills and increase satisfaction.
Provide competitive compensation and benefits
Offering competitive compensation and benefits packages can help attract and retain high-quality employees.
Create a positive work environment
Business owners can achieve this by providing a safe and healthy workplace. Promoting work-life balance and rewarding employees for their hard work and achievements are all great ways to achieve this.
What is the Process Perspective?
The process perspective of the Balanced Scorecard is all about the internal business processes. Process indicators help measure how well processes contribute to the business’s goals. The three leading process indicators are:
Process efficiency
Process efficiency measures how well an organisation is running. Efficient processes can improve productivity and reduce costs. Process efficiency can be measured by tracking the time and resources required to complete tasks.
Process quality
Process quality is a measure of how well processes are delivering the desired outcomes. High-quality processes can improve customer satisfaction and reduce rework. Measuring process quality can be done by tracking the number of errors or defects in the output of a process.
Process innovation
Process innovation is a measure of how you are continuously improving. Innovation can improve productivity, reduce costs, and increase customer satisfaction. Process innovation can be measured by the number of new processes implemented or streamlined.
Optimising the Process Perspective
Once the people perspective has been optimised, processes are the next step to improving financial performance. To manage process indicators, business owners can use the following strategies:
Implement process improvements
Identifying and implementing process improvements can improve efficiency and quality. Business owners can achieve this by conducting process audits, analysing process data, and benchmarking against industry standards. Or ask the staff where their pain points are and how to improve them.
Foster a culture of innovation
Fostering a culture of innovation can encourage employees to develop new ideas for improving processes. Business owners can achieve this by promoting collaboration and idea sharing. Providing resources and support for innovation and rewarding innovative thinking also helps. The financial measures will have a great return on investment.
Using the Balanced Scorecard to Optimise Business Performance
The Balanced Scorecard is an effective strategic management tool that helps business owners align their activities with their objectives.
Breaking down the tactical steps into perspectives allows attention to be given to ensure a high quality of optimisation.
The people and process indicators of the Balanced Scorecard are critical. These strategies are fulling in the control of a business and can actively lead to increased profitability and long-term success.
For assistance in breaking the business strategy down into perspectives or formulating a BSC to optimise business performance, contact one of our expert Business Advisors at admin@elementsag.com.au or call us on 07 3878 9181.
We can show you the benefits of implementing a Balanced Scorecard.
