Effective Balance Scorecards link the short-term with long-term value creation. They measure more than money. A number of the key measures incorporated Balanced Scorecards are directly related to Marketing and Strategy. A Renaissance survey found that companies often fail to turn strategy into action. Fortune Magazine estimates that only 10% of strategies effectively formulated are effectively executed. Balanced Scorecards are a tool organizations can use to translate strategy into measures that communicate a company’s vision.

A study by Cranfield University showed that more than 50 percent of large enterprises use some type of a balanced scorecard. Balanced scorecards provide a framework for integrating measures derived from strategy. Strategy is the foundation for deploying the organization’s resources to create a competitive advantage. Marketing serves a pivotal role in the development of your organization’s strategy. As result, how you measure Marketing and Strategy should be reflected on your Balance Scorecard.

Balanced Scorecards Link the Short-Term with Long-Term Value Creation

The idea behind the Balanced Scorecard is that strategies can be aligned with key performance objectives to optimize performance and opportunities. Balance scorecards serve as an important tool on a number of fronts. Organizations use it to

• clarify and gain consensus about strategy
• communicate the strategy throughout the organization
• align business unit goals to the strategy
• link objectives to long-term targets and annual budgets
• identify and align strategic initiatives and
• provide a strategy review process.

Therefore, you want to identify and integrate a set of measures within your balanced scorecard that links short-term achievements to long-term value creation. 

Building Your Balanced Scorecard

Four areas comprise the Balanced Scorecard: Financial Measure, Customer Perspective, Innovative Perspective and Operation Perspective. To create the scorecard you will need to execute five steps:

1. Strategy is Your Starting Point: Before you decide and select on the measures of performance you will be monitoring you will need to define your strategy. A clear definition of your strategy should be able to be illustrated on a one-page strategy map that defines the path your organization will take to maximize strategy success. The strategy map will highlight what should be measured to manage and maximize  performance. It  should include both the desired outcomes of your  strategy and the key drivers of those outcomes linked in a cause-and-effect fashion.
2. Select Your Measures:  Your next step is to identify and select the measures that best determine performance for each strategic performance outcome and driver. Using the Balanced Scorecard as a model, the total number of strategic measures should fall between 15 and 25 (about five per success factor) to be both manageable and sufficient.
3. Employ Your Scorecard Daily: Create a scorecard that you and your team can use to guide day-to-day decision-making and action by managers, coaches, and employees. For Marketing, this will require that you systematically link the strategic  measures in your Balanced Scorecard to each aspect of the Marketing organization.
4. Report on Performance: Establish a reporting system to continuously inform everyone about the performance of each  measure, and where improvement is needed. 
5. Integrate Your Scorecard With Core Systems: To maximize success, integrate your Balanced  Scorecard with core management systems, including HR systems, management systems, and finance systems (e.g., Marketing Technology budgeting).

Balance Scorecards Measure More than the Money

As noted, the scorecard process begins by translating business strategies into specific strategic objectives. While the Balanced Scorecard retains traditional financial measures, it also includes the drivers of future performance. Remember, in addition to financial measures, a balanced scorecard also captures customer, operational and innovation measurements.

Examples of common customer measures include market share, brand image and awareness, customer acquisition, service perceptions and expectations, customer satisfaction, cross sales, defections, retention, and intention to switch. These measures are very relevant to Marketing.

Operational measures can include percentage of sales from new products, manufacturing costs, manufacturing cycle time, inventory management, transaction time, throughput time, quality indices, etc.

Innovation measures include new products, return on innovation, time to market, and customer interface time. Again, measures very relevant to Marketing.

A Marketing Example

Here is an example of how measures related to Marketing could be integrated into the Balanced Scorecard (remember to do step 1, Strategy, before you select your metrics).

1. Strategic Customer Perspective
   • Net New Customers Acquired
   • Retention Rate
   • Penetration Ratio
   • Win Back Percent
2. Financial Measures
   • Cost to Acquire
   • Customer Lifetime value
   • Retention Percent (%)
   • Win Back Value
   • Revenue per Conversion per Sales Channel
   • Cost per Service Encounter
3. Operation Perspective
   • Conversion Rate per Sales Channel (%)
   • Service Level per Channel (%)
   • Cost per Service Encounter ($)
4. Innovation and Learning Perspective

Putting the Balanced Scored to Work

With a Balanced Scorecard, the corporation, down to each organizational unit and even to the individual level, can:

• Understand the key performance indicators that they have control and responsibility for and understand the relationship to the overall success of their organization.
• Have visibility into operations and issues of all business units and enables the management team to easily monitor and understand how organizations are progressing against plan.
• Enable organizations to implement and track key initiatives for addressing problem areas or pursuing business opportunities.
• Utilize a strategic feedback and enterprise communication platform.

Balanced Scorecards and Marketing Dashboards need to work together. Learn more about Creating Marketing Dashboards.

Comments are closed.