As a CFO or FP&A professional, it’s important to implement a strategy mapping tool to see where value is added within your organization, and to help develop strategic initiatives and strategic objectives.
This can be done by assigning tasks and projects to different areas of the company to boost financial and operational efficiencies, thus improving the company's top and bottom line.
One of the best tools to do that is with Balanced Scorecards (BSC).
What are Balanced Scorecards?
Balanced Scorecards (BSC) are a strategic management performance metric that helps organizations translate strategy into operational objectives that drive both behaviour and performance to deliver superior external outcomes.
Also, it measures past performance data and provides organizations with feedback on how to make better decisions in the future.
There are many benefits of using a balanced scorecard. For instance, the BSC allows businesses to pool together information and data into a single report rather than having to deal with multiple tools.
This allows management to save time, money, and resources when they need to execute reviews to improve procedures and operations.
Sabrinthia Donnelly
The Balanced Scorecards: 4 perspectives
In a Balanced Scorecards (BSC) model, the information is collected and analysed from four aspects of a business:
1. Financial perspective
To satisfy our stakeholders, what financial objectives must be accomplished?
Examples:
- Increase revenue through finding new sources of revenue.
- Improve profitability from existing customers
- Improve cost efficiencies
- Increase assets utilization
- Improve EBITDA
- Reduce DSO
2. Customer perspective
To achieve our financial objectives, how the entity provides value to its customers determines the level of customer satisfaction with the company’s products or services.
Customer satisfaction is an indicator of the company’s success. How well a company treats its customers can obviously affect its profitability.
Examples:
- Customer satisfaction scores
- Customer retention rate
- NPS (Net Promoter Score)
- Increase number of new customers
3. Internal business processes perspective
To satisfy our customers, and shareholders, which internal business processes must we excel? The scorecard helps evaluate the company’s products or services and determine whether they conform to the standards that customers desire or not.
Examples:
- Reduce machine downtime
- Improve forecast accuracy
- Reduce month end closing time
- Reduce customer returns
4. Organizational capacity / Learning & growth perspective
To achieve our objectives, how must our organization learn and innovate? People are required to demonstrate high performance in terms of leadership, the entity’s culture, application of knowledge, and skill sets.
Proper infrastructure is also required for the organization to deliver according to the expectations of management.
Examples:
- Number of key hires
- Keep smart (learning)
- Employee engagement survey
- Number of new hire failures in 90 days
- Continuing education and training
- Number of quality meetings per week (sales leading indicator)
- Glassdoor recommendations
- The use of the latest technology to automate activities and ensure a smooth flow of activities, etc.
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