A brilliant tool employed by mindful and successful company builders.

The Balanced Scorecard (BSC) system was developed by Robert S. Kaplan and David P. Norton at Harvard University in the early 1990s. It was a milestone in the field of strategic management because it provides a critical tool for businesses to effectively set, track, and evaluate strategic goals. With the Balanced Scorecard, companies can identify problems in time, look for alternative solutions, and efficiently handle challenges, significantly improving the organization's problem-identification and solving capabilities.

The Balanced Scorecard includes four main perspectives that help businesses get a balanced and comprehensive view of their performance. These perspectives are as follows:

  • Financial Perspective: How do the owners see the company, and what financial performance is necessary for success?
  • Customer Perspective: How do customers view the company, and what customer expectations need to be met for success?
  • Internal Processes Perspective: In which internal processes must the company excel to satisfy its owners and customers' expectations?
  • Learning and Development Perspective (sometimes also known as the "Growth and Innovation" perspective): How can the company maintain and improve its capabilities necessary for change and growth?

This framework is not only aimed at improving the performance of the company as a whole but also at enhancing the motivation of groups and individuals by allowing them to see and evaluate the extent to which they contribute to achieving business goals.

The effectiveness and efficiency of the Balanced Scorecard system greatly depend on the way it is implemented. Introducing and operating the system is a complex task that requires commitment and continuous attention from management. For successful application, it is crucial to select relevant indicators, clearly define strategic goals, and continuously monitor activities related to these goals.

8+2 areas where the Balanced Scorecard brings significant improvement

1. High-Quality Job Descriptions

Medium-sized businesses often face challenges in this area. The lack of or superficial job descriptions makes it impossible to measure work performance, which is fundamental for the success of the BSC system. A common mistake is that medium-sized businesses do not pay enough attention to accurately and comprehensively developing job descriptions, or if they do, the descriptions often contain just a general list of tasks, frequently ending with a clause like "and other duties as assigned by the manager." This approach poses significant problems for performance measurement and evaluation of work, as such job descriptions do not provide specific, measurable criteria.

Job descriptions should include the purpose of the position, key tasks, responsibilities, and specific indicators needed to measure success. This allows employees to clearly understand expectations and contribute to achieving company goals. It also facilitates the work of managers by providing a clear basis for performance evaluation and determining directions for development.

A well-formulated job description is not just a guide for employees' daily activities but also a cornerstone of organizational success. Instead of the "doing something different every day" approach, precisely defined tasks and goals ensure continuity, efficiency, and measurable results, which fundamentally contribute to corporate success.

2. Stable Organizational Structure

The foundation of effective operation and performance measurement is a well-structured organization. A stable organizational structure is a fundamental prerequisite for corporate success, creating a balance between efficiency, transparency, and flexibility. Traditional, less transparent, and complex organizational structures may not necessarily meet the needs of today's dynamic business environment.

A common challenge is that such structures are not regularly updated and often too complex, complicating their use in daily decision-making processes. In contrast, a well-organized, transparent, and dynamically adaptable organizational structure promotes effective communication, supports decision-making processes, and enables continuous performance measurement and evaluation using the Balanced Scorecard (BSC) system.

When applying the BSC, it is particularly important for the organizational structure to support the achievement of strategic goals, enabling the company to respond to market changes, recognize internal development opportunities, and achieve sustainable growth in the long term. Therefore, the organizational structure should not only support current operational activities but also be capable of adaptation and innovation, ensuring that the company can implement its long-term strategic plan.

In summary, a stable, well-thought-out organizational structure that defines clear responsibilities and transparent communication channels is essential for measuring corporate performance and ensuring long-term success.

3. Clear Processes

A company operates efficiently when its workflows are interconnected and consistent. Isolated execution of work processes, where different activities are not organically linked to each other, significantly reduces corporate efficiency and hinders continuous development. This type of operation not only fails to leverage synergies but also complicates the objective assessment of performance.

The situation is even more concerning when organizations have interdependent workflows that change from day to day. This practice is not only confusing and ineffective but also undermines employees' trust and reduces the predictability of work. Constant changes in processes obstruct efficient working, increase the risk of errors, hinder continuous improvement, and damage work morale.

For efficiency and competitiveness, it is essential that the company develops and follows well-defined, interconnected workflows that remain consistent over time. This allows for the optimization of work processes, reduction of redundancies, and more efficient use of resources.

4. A Good Team

A good team can advance goals even under imperfect conditions. From the perspective of corporate success, it can compensate for potential shortcomings in the organizational structure and workflows. The dynamics of a strong, cohesive team can significantly facilitate the achievement of corporate goals, even if certain fundamental elements—such as detailed job descriptions, stable organizational structures, or well-defined workflows—are missing. The flexibility, coordinated operation, and commitment to a common goal of these teams can bridge organizational gaps and advance their projects.

However, retaining and motivating excellent teams poses significant challenges for leaders, especially in the long term. One of the biggest risks is overwork and the resulting burnout, which can lead to the disintegration of the team over time. Overwork can also lead to decreased job satisfaction and high turnover. To ensure sustainable performance and the long-term success of teams, proactive steps are needed from management. This includes more precise definition of job tasks, refining the organizational structure and workflows, and developing systems for recognizing and rewarding employees.

5. Clear Goals and Strategy

While every company has some form of goal system, these are often superficial or tailored to personal interests. For example, a leader's primary goal might be to cover up their own incompetence, while a frequent job hopper's objective might be to endure a certain period, ignoring team dynamics and the achievement of collective results. However, these short-term, subjective goals are harmful in the long run as they do not serve the company's interests and development.

Without a long-term strategy, companies cannot systematically break down goals into specific, measurable management tasks, which is essential for successful performance measurement and continuous improvement. The "just survive until tomorrow" mentality does not lead to sustainable growth or competitive advantage. Instead, when formulating goals and developing a strategy, organizations should adopt a proactive and strategic approach, considering industry trends, market changes, and internal resources. This enables them to set realistic yet challenging goals that motivate teams, facilitate organizational learning, and ensure long-term success.

6. Business Ethics and Responsibility

Considering ethical standards and sustainability goals helps companies move beyond short-term profit focus towards sustainable and ethical business practices in the long term. Ethical companies tend to attract talented workforce and customer loyalty, as people are inclined to support businesses that act in alignment with their values and beliefs. Moreover, ethical business practices can contribute to the long-term growth of a company's reputation and brand value. Companies that place a strong emphasis on ethics and social responsibility remain successful and viable in the long run.

7. Good Communication

While dominant or deceptive communication might seem effective in the short term, this efficacy is usually based on a false perception and does not build genuine trust and openness. In such cases, real organizational development will likely falter in the long run, thereby seriously jeopardizing competitiveness. Therefore, good communication is a key factor in successful and sustainable corporate operation, facilitating effective collaboration and long-term efficiency. Effective communication is fundamental for organizational learning and development and enables the harnessing of collective intelligence and creativity. Misleading or dominant communication styles do not serve the organization's long-term interests.

Open communication ensures that everyone is clear about goals and expectations. Honesty promotes a culture of constructive feedback and effective problem-solving, while supportive communication allows employees to feel safe sharing their ideas, thus fostering the emergence of creative and innovative solutions. These communication styles not only improve the internal work environment but also strengthen the company's external perception and market position, contributing to the creation of a lasting competitive advantage.

8. Effective Meetings

Meetings become productive when they have a precise purpose, especially in the area of performance measurement. As a business leader, based on my own experience, I recognize that I have previously neglected this crucial aspect, which had a significantly negative impact on my company's performance. It is now clear to me that well-structured, goal-oriented meetings, along with effective communication, are essential for achieving success. The structure of weekly meetings focused on performance measurement can be developed as follows:

  • Challenges, problems, and mistakes of the previous week.
  • Announcements, praises, reports.
  • Review of individual performances.
  • Setting goals and quotas for the coming week.
  • Presentation of proposed action plans.

9. Correct Interpretation of KPIs

Interpreting statistics and accurately reading charts are crucial for operating the Balanced Scorecard (BSC) system. Indicators and statistics serve not only to understand and enhance the transparency of corporate operations but are fundamentally important for drawing the right conclusions and determining the strategic goals for the next period. The primary purpose of indicators and statistics is to timely detect trends and more efficiently optimize corporate operations. This includes effective decision-making, performance evaluation, market analysis, risk management, resource planning, product and service development, as well as quality control.

10. Technological Adaptation and Integration

In the era of information technology, fundamental data dynamically change and are continuously updated through IT systems. Accordingly, not only the accessibility of data is important, but also our ability to efficiently incorporate and apply these data in the process of strategic planning and performance evaluation. Drawing on my more than twenty years of experience in information technology, I would emphasize that even an apparently insignificant error can result in serious costs and jeopardize the company's operational stability. Therefore, selecting the appropriate IT infrastructure and the smooth management of technological processes must be a priority. Only in this way can a company remain competitive in the long term against market challenges and maintain its operational stability.

"Everything we measure improves." – Pearson's Law.
"Don't measure everything that counts; only what helps you achieve your goals." - Anonymous.
"What gets measured gets managed." - Peter Drucker.
"Measurement alone is not enough. We must also know what to do with the data." - W. Edwards Deming.
"The performance indicators are like a map in treasure hunting: they show where to dig." - Anonymous.
"Using performance indicators is not just about finding out where we stand, but also about inspiring ourselves and our team towards continuous improvement." – Anonymous.
"Without performance indicators, the strategy is just a wish list." - Anonymous.
"Success is not accidental. Success is the result of measurable decisions and actions." - Anonymous.

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