The Importance Of The Balanced Scorecard For Large Organizations

The Balanced Scorecard (BSC) is a successful management framework that has been around more than 25 years. The BSC has been studied, evaluated, and proven for companies of all sizes. But using the Balanced Scorecard in a small, 20-person nonprofit organization is entirely different from using it in a large organization with over 10,000 employees.

If you are looking at different management frameworks for your large organization, here are four benefits the Balanced Scorecard (BSC) brings to strategic management.

1. The Balanced Scorecard can tie your long-term strategy into a short-term set of goals.

It’s much easier to look out a year in advance than five or 10 years. Large organizations still need to plan scenarios well into the future. For instance, a company may decide how it would react if the economy were to shrink by 5% or grow by 3%, and how each scenario would affect its strategy. It may also run environmental scans to see what would happen after a major change in its business environment, such as two of its competitors merging.

These techniques give large firms a long-term strategic view. The Balanced Scorecard lets them weigh long-term “what if” scenarios alongside their shorter-term strategic plans. The strategic plan in your Balanced Scorecard takes some of these long-term views into account.

2. The Balanced Scorecard is a “framework of frameworks.”

The Balanced Scorecard is unique in that it’s flexible enough to manage multiple other management frameworks. For example, many large corporations have sophisticated approaches to finances, customer relations, or human resources. To help organize these systems, they may rely on any number of frameworks (for instance, Six Sigma or Total Quality Management).

Pampa Energía, one of the most important integrated energy companies in Argentina, used its scorecard to meet an outside standard as well. Pampa rolled out a strategy map and aligned each power plant’s scorecard to the organizational scorecard. The same plan now serves as its Strategic Power Plants Management Plan (PEGA), a key step in achieving ISO 55001 certification. To build the plan, Pampa considered political, economic, technological, social, legal and environmental context, along with its own strengths and opportunities.

The BSC can act as the organizing system for all other management frameworks. It helps employees across the company see how their departmental approaches connect and puts those approaches in context.

3. The Balanced Scorecard can help manage diverse company units.

Big organizations tend to have diverse units, divisions, and departments, and ideally all of them work toward the same strategy. For example, a large municipality could have hundreds to thousands of people working in transportation, public safety, or parks and recreation. Outside the highest levels of leadership, these employees may not interact with each other at all.

The Balanced Scorecard helps every department see the links between its own strategy and the strategy of the whole organization. Employees get a clear line of sight into how their role fits across the organization and what departments have in common.

Pampa grew by acquiring companies, and its generation sites each had their own technologies and culture. Each power plant had its own indicators, so comparing them was impossible, and data rarely flowed back to the plants. Pampa set one standard: in ClearPoint, each power plant has its own scorecard with the same structure as the corporate scorecard, with objectives, indicators and initiatives linked to it. Now everyone in the organization can answer two questions: Where is the company going and what is the strategy for getting there? How am I expected to contribute to the strategy?

As California-based American Association of Critical-Care Nurses (AACN) grew, the elaborate spreadsheets that housed the information of over 25 different departments quickly became obsolete. Each department had their own scorecards, as cross-scorecard collaboration and information-sharing was critical. After a few months of getting everything set up properly, AACN had been able to generate enterprise-wide reports from ClearPoint that went directly to the Board.

Note: The BSC can also be deployed independently in a single division or department without interfering elsewhere. This isn’t necessarily recommended, but it can be done if the circumstances don’t allow for company-wide strategic alignment.

4. You can use the Balanced Scorecard to manage numerous data sources.

Managing hundreds of data sources is one of the major challenges in large organizations. The BSC relies on strategic measures from across the organization, and bringing them all into one place is hard. We’ve seen large companies with strategy teams of 3-5 people working full time just to gather data for their scorecard or latest report. That kind of overhead can quickly kill a strategy.

With Balanced Scorecard software, you can upload data automatically from a variety of sources or let as many people as you’d like enter data. This makes reporting far easier and helps large companies get a handle on both organizational and departmental strategies.

Take A Look At These BSC Examples

Strategy mapping helps a large organization unify and achieve its objectives. Take a look at this free ebook for details on the importance of the Balanced Scorecard and examples of five BSC strategy maps in financial, manufacturing, software, and insurance companies.