1. Method Name

Balanced Scorecard (BSC)

2. Alternative Names

Balanced Scorecard System

3. Brief Description

The Balanced Scorecard is a strategic management tool that supplements traditional financial indicators with metrics from three additional key perspectives: customer, internal processes, and learning and growth. It thus provides a more balanced and comprehensive view of an organization’s performance.

4. Purpose / When to Use

It is used to translate strategy into specific, measurable goals and to monitor their achievement. It helps ensure that the company does not focus solely on short-term financial results, but also invests in long-term success factors such as customer satisfaction, process quality, and employee development.

5. Procedure / How to Apply It

1. Define the vision and strategy: The starting point is a clear corporate strategy.
2. Define objectives for the four perspectives: For each of the four perspectives, define key strategic objectives:
- Financial: “How do shareholders perceive us?” (goals: increase in revenue, profitability, return on investment)
- Customer: “How do customers perceive us?” (goals: customer satisfaction, loyalty, market share)
- Internal processes: "In which processes must we excel?" (objectives: quality, cycle time, innovation, efficiency)
- Learning and Growth: "How will we maintain our ability to change and improve?" (goals: employee skills, corporate culture, information systems)
3. Create a strategy map: Visually link the goals in each perspective into cause-and-effect relationships (e.g., “better employee skills” lead to “better process quality,” which leads to “higher customer satisfaction,” which leads to “higher revenue”).
4. Define metrics (KPIs), targets, and initiatives: For each strategic objective, establish a specific metric (KPI), a target value, and a strategic initiative (project) to achieve it.

6. A Real-World Example

The airport has set a strategy to become the most popular airport in the region. In the BSC, they defined the following
: - Financial: Increase revenue from non-aviation services (parking, shops).
- Customer: Increase passenger satisfaction scores (metric: NPS).
- Processes: Reduce the average wait time at security checkpoints
.- Learning and Growth: Improve staff language and communication skills.
The strategy map showed that improved staff skills would lead to faster security screening, which would increase satisfaction, and that in turn would lead to people spending more money in the shops.

7. Benefits

- A balanced perspective: Prevents an overly narrow focus on finances.
- Linking strategy to operations: Translates an abstract vision into concrete and measurable actions.
- Improves strategy communication: A strategy map is a powerful tool for communicating priorities throughout the company.
- Promotes long-term thinking.

8. Risks / Limits

- Excessive complexity: If a company defines too many objectives and metrics, the system becomes confusing and bureaucratic.
- Lack of management support: Without the active involvement of top management, the BSC becomes nothing more than an “exercise for HR.”- Poor
metrics: Choosing the wrong KPIs or ones that are difficult to measure can lead to wasted effort.
- Perceived as a control tool: If the BSC is used for punishment rather than for learning and improvement, it will fail.

9. Practical Tips

- Less is more: Focus on 10–15 key strategic objectives for the entire company.
- The strategy map is key: Don’t forget to visually link the objectives. This is the heart of the BSC
.- Cascade the BSC: Objectives from the corporate BSC should be cascaded down to the department level and even to individual employees.