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What is a balanced scorecard and what are its advantages?
ventajas cuadro de mando wtc barcelona

Efficient and successful business management depends on several requisites: qualified staff, ethics and aesthetics, a culture of innovation, etc. One of the most important is the use of tools that facilitate planning and implementation, so as to act with the diligence needed to come out ahead in today’s highly competitive markets.

In this regard, one of the characteristics of modern businesses is the ability to monitor the status of their activities in real time, along with everything else that is going on. This makes it possible to make the right decisions quickly. This is where Balanced Scorecards play a crucial role.

What is a balanced scorecard?
Balanced scorecards are tools to ascertain the status and general balance of a company activity, or a specific aspect of it that requires analysis. They consist of different indicators and graphs representing specific items of interest that, taken as a whole, provide a full overview of what is happening.

Background
According to two of the main proponents of this business model during its origins (at the outset of the nineties), Robert Kaplan and David Norton: 
”When we created the Balanced Scorecard a few years ago, we started from the premise that using financial indicators as a management system leads businesses to make a lot of mistakes. Financial indicators are late data that indicate results, i.e. the outcomes of past actions. (…) The Balanced Scorecard maintains financial-result indicators --late indicators-- but supplements them by measuring the instigators --the early indicators-- of future financial results”.

The test results of this model in a real case were highly encouraging. The case study involved Mobil North America Marketing & Refining, which managed to cut production costs by 20% and raise productivity to a level 2% higher than the national average, along with other benefits.
The existence of applications, webpages and widgets make it possible to create sophisticated tools for businesses that need them. Examples include Qlik , Cyfe, and Caspio, among others.

Perspectives
Perspectives are the different viewpoints that balanced scorecards take into consideration to provide an overview of what they analyse. In general terms, the perspectives that are usually taken into account are:

Financial Perspective
This refers to costs and the results of income and expenditure balances, among other factors. Prior to the implementation of more fleshed-out models, these were the only factors that were studied and taken into consideration.

Client Perspective
This mainly concerns brand image. It analyses the behaviour and characteristics of potential users to provide them with better service and thus optimise the way a company meets consumer needs.

Perspective of Internal Processes
The focus here is on the main business aims, the objective being to assess how the company’s internal processes are meeting targets. 
Organisation and management models, administrative planning, etc.

Learning and Growth Perspective
A business culture of innovation is a key factor to a company’s success and should be taken into account to establish efficient balanced scorecards.
Here the idea is to take into consideration employees’ motivation to contribute new ideas and keep projects fresh and in constant renewal, to prevent stagnation and promote a healthier working environment, along with a better brand image.
Technological innovation regarding processes and equipment also forms part of this perspective.

Advantages of Implementing a Balanced Scorecard
Balanced scorecards can greatly optimise different aspects of a company in areas such as:
  • Planning: they provide the possibility of drawing up plans based not only on results, but on the causes and bearing of internal and external processes.
  • Logistics: they not only aid planning, but also provide greater control of execution and team organisation.
  • Product quality: studying relations with users as a key factor fosters the development of products that are better adapted to client needs and requirements.
  • Marketing: analysing target customers makes it possible to develop strategies that are better adapted to the latest publicity campaign models.

The following examples show some of the benefits of implementing this management model:
  1. It enables executive management ideas to be turned into specific aims.
  2. The general overview it provides makes it easier to make decisions swiftly and effectively.
  3. It allows a wide range of status indicators to be implemented.
  4. Including innovation and the participation of all team members in its perspectives leads to a deeper knowledge of strategies and better communication.
  5. It facilitates comparative analyses of cause and result indicators.

Depending on how these methods are implemented, hand in hand with a company’s desire to establish its own, successful model, major short, medium and long-term benefits can be secured. 

Similarly, as a business grows and branches out its operations and areas of influence, it needs greater organisation to ensure company executives are up to par on everything that is going on, while also facilitating communication between different areas. The bottom line is that few tools can solve the issues governing leadership of a large business as effectively as Balanced Scorecards.

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