The Balanced Scorecard is a strategic planning technique that can be applied in business analysis to ensure that an organization can transform its mission and vision into specific and actionable goals. It also allows monitoring how the business is doing in terms of achieving these goals.
This kind of analysis typically involves:
- Examining and monitoring KPIs to see if they are performing as expected.
- Understanding why KPIs are not performing as they should. Root cause analysis can help in shedding light on the key causes of problems.
- Placing emphasis on the key areas of the business like Finance, Customer Relations, Learning & Growth and the effectiveness of Internal Business Processes.
The key strength of Balanced Scorecard lies in the fact that it combines traditional financial metrics with the non-financial metrics that are important in moving the business forward.
In summary, the Balanced Scorecard technique involves tracking the progress of the organization against these metrics from the following perspectives:
▪ Learning and Growth
▪ Business Process
The Balanced Scorecard technique offers a structure for translating the strategic objectives of a company into well-defined performance measures. Developed by two management strategists, Kaplan and Norton, the balanced scorecard technique helps to define four distinct areas of the business that need to be monitored:
Finances: The interests of stakeholders are considered from a financial standpoint (i.e. What are the financial prospects of shareholders in the organisation and how should success be measured?)
Customer: There is need for organisations to create customer value to succeed financially (i.e. What are the things customers value and what are the areas that should be improved based on these findings? Also, how can progress be measured based on this metric?)
Internal Business Processes: Efficient and effective internal processes can enhance customer value (i.e. Can customer service be improved by enhancing the use of information technology, and can the level of professionalism be measured?)
Learning and Growth: This refers to the on-going support given to value-creating strategies directed at enhancing customer service (i.e. How can customer services be improved by integrating superior IT initiatives through innovation, learning and growth?)
The business analyst should analyse the aforementioned areas before starting to build a balanced scorecard. The relationship between these processes can best be described by the diagram below, which connects the substance and the structure of the balanced scorecard:
So, how is this technique useful to BAs?
According to Kaplan and Norton, the balanced scorecard can be used in developing metrics around the effective learning and education of employees. BAs can assist here by helping to define the knowledge gaps in the business and how knowledge management/mentoring can be improved across the business. Such insight can help the business understand where best to channel training initiatives.
Secondly, the BA can assist the business in developing metrics that will guide stakeholders in assessing the effectiveness of internal business processes, to measure if their performance suits the needs of the business.
Thirdly, metrics should be developed from customers’ perspectives to ensure customer satisfaction. Customer satisfaction is certainly key to the overall success of the business.
Lastly, the business analyst should assist in defining the financial metrics for the organisation.
When formulating business strategies in an organisation, the business analyst can use the balanced scorecard technique to highlight short-term performance metrics with long-term strategic impact. As a result, the organisation’s short-term and long-term objectives would be adequately defined.
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