What is a balanced scorecard?
A balanced scorecard is a tool that measures a companies performance, but rather than focus on one metric it covers all the fundamental basis (hence balanced). The concept was introduced in a Harvard Business Review article in 1992.
This scorecard includes a companies financial performance, but also includes client data, internal KPIs and innovation and learning. Combining these areas means you do not focus on one area to the detriment of the others - kind of like paired metrics.
Balancing all these metrics means that you are not focusing exclusively on the data from yesterday to try to predict the performance of tomorrow. Innovation and client feedback make clear how and where you are investing in future activities.
The 4 areas of the scorecard are:
- Financial - standard business financials - profit margin etc
- Client/customer - feedback, NPS, market share etc
- Internal - how well are your teams operating? Quality etc
- Innovation - employee training, new ideas generated etc
By regularly reporting on all activities you will make the company successful today, but also make sure it has invested in tomorrow.