Why is a Balanced Scorecard Important?

By Hannah Knott

Whether you are starting a business or watching your business grow, important questions and goals need to be evaluated. One way to evaluate your business and establish strategic goals is with the Balanced Scorecard. The balanced scorecard approach uses four important aspects to aid a business with establishing goals and forming strategies to achieve them.

Why is a Balanced Scorecard Important?

A Balanced Scorecard is helpful to businesses of all sizes and can be utilized by for-profit businesses, nonprofit organizations, and governmental agencies. As a strategic planning tool, it provides a performance metric to identify and improve various internal business functions and the resulting external outcomes. The idea was first introduced in 1992 and was adapted to include financial and non-financial information. Thus, the balanced scorecard is isolated into four areas: Learning and Growth, Business Processes, Finance, and Customers. See below for an expansion of items to consider with each area:

To complete these items, businesses can form a strategy by assigning tasks and projects in an area, and evaluate those strategies periodically to ensure they are contributing positively to the company’s bottom line. Following evaluation, changes can be made to the strategies to better accomplish the task, or seize the opportunity to change direction. Consistent periodic evaluation is necessary to receive the full benefits of a balanced scorecard. Below are only a few benefits for implementing a balanced scorecard approach:
  • It pulls data from these four areas into a single report saving management time, money, and resources when they review procedures. 
  • It also allows businesses to track their performance with more than solely financial data. 
  • An ability to recognize and reduce inefficiencies.
By implementing the balanced scorecard, you can implement strategies to add value to your business, identify items that hinder current operations, and establish future strategic goals. It’s a tool that can be utilized by any size business or organization and provides a process to deeply evaluate four key areas of their business while saving time and resources. Your business is full of opportunity, and using the balanced scorecard will allow you to create strategies to achieve your goals and grow your business.

We are here to help

Please contact Hannah Knott or any member of the Baker Holtz team at 616-458-1835 if you have any questions regarding the Balanced Scorecard.