A balanced scorecard is a Lean management system commonly used in manufacturing facilities, warehouses, and construction sites, but can be translated across industries. The scorecard works to balance and align day-to-day work with the bigger picture goals of the company, effectively helping organizations better accomplish their goals.
Using a balanced scorecard to link the organization's main strategies with frontline operations is the core of using the balanced scorecard system. It is taking high-level aspects like a company's mission statement or core values and using it to provide instruction to frontline workers. This way, the actions of those on the production line are continuously supporting the organization's goals.
The scorecard is a one-page document usually including charts, graphs, color coding, and other visual cues. Formatting and information included will be specific to the facility, but for the most part the document can be broken down into three sections: strategy map, balanced scorecard, and an action plan. It will usually feature four main concepts: financial, customer, internal business processes, and learning and growth, all of which is one step away from vision and strategy, the big picture. The further you move from that center and to the outer sections and their sub-sections, information should be more and more relevant to the frontline workers.
Balanced Scorecard Example
For example, we will look at the financial component. In the strategy map section, goals are identified and objectives to reach these goals are created. In this case we can identify the organization's goals to improve productivity and grow revenue, and one way to do that (the objective) is by improving the operating cost and efficiency. Moving from the mapping section, you reach the critical step of balancing. First, you will identify how you will measure the data, in this case take cost divided by unit efficiency. Then a more specific objective is set; something along the lines of "improving operating cost and efficiency by 10 percent."
Finally, the action plan is put into place. It usually includes some form of inspection, monitoring, holding meetings, or validating and this task is the responsibility of the frontline workers. Using this example, you can see how to logically create tasks that support the bigger picture of the company. The balanced scorecard is a great tool for managers to improve their progress towards their most important goals while effectively engaging with workers.
Similar Glossary Terms
- Strategic Planning Process
- Hoshin Kanri
- PFEP (Plan for Every Part)
- Key Performance Indicators (KPI)
- Material Flow
- Hoshin Planning