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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. And while the BSC has been studied, evaluated, and proven for companies of all sizes, using the Balanced
The Balanced Scorecard (BSC) is a successful management framework that has been around more than 25 years. And while the BSC has been studied, evaluated, and proven for companies of all sizes, using the Balanced Scorecard in a small, 20-person nonprofit organization is entirely different than 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 critical benefits that highlight the importance of the Balanced Scorecard (BSC) in 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 it is to look out five or 10 years in advance—but large organizations know that it’s critical to do scenario planning for well into the future. For instance, companies may determine how they would react if the economy were to shrink by 5% or grow by 3%—and how every scenario would impact their strategy. They also may run environmental scans to look at what would happen in the event of major changes in their business environment. For example, what if two of their competitors merged?
These techniques allow large firms to implement long-term strategic views—and using the Balanced Scorecard as a management framework allows such organizations to interact with long-term “what if” scenarios alongside their shorter-term strategic plans. Your strategic plan in your Balanced Scorecard would take into consideration some of these long term views.
2. The Balanced Scorecard is a “framework of frameworks.”
The Balanced Scorecard is unique in that it’s a management framework that is flexible enough to manage multiple other 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 Black Belt or Total Quality Management).
The beauty of the BSC is that it can act as the organization system for all other management frameworks and help employees throughout the company see the connection between their departmental approaches and put them into context.
3. The Balanced Scorecard can help manage diverse company units.
Big organizations tend to have very diverse units, divisions, and departments—and these groups are all ideally working toward the same strategy. For example, a large municipality could have hundreds to thousands of individuals working in transportation, public safety, or parks and recreation—this combination of employees could be so diverse that, outside of the highest levels of leadership, they may not interact with each other at all.
The Balanced Scorecard allows you to ensure that every department sees and understands clear linkages between its own strategy and the strategy of the organization as a whole. This gives employees a clean line of sight into how their role is translatable across the organization and where the commonalities between departments lie.
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.
One of the major challenges in large organizations is managing the hundreds of sources for data. Since the BSC relies on strategic measures across the organization, bringing them all into one common place can be a huge challenge. In fact, we’ve seen large companies with strategy teams of 3-5 people working full time on gathering data in order to create their scorecard or most recent report—and, of course, this kind of overhead can quickly kill a strategy.
When using a robust Balanced Scorecard software, you can automatically upload data from a variety of sources or accept as many individuals as you’d like to input data sources. 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 is a critical way for a large organization to 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.