Balanced scorecards are a Lean tool used to connect day-to-day operations with the big picture goals of an organization. It is a system that helps prioritize projects and products while measuring a maintaining the progress to meet strategic targets. Each task and every action an operator or assembly line worker completes should, in some way, contribute to the organization’s main targets and a balanced scorecard will help managers visualize that connection and plan accordingly.
There is no specific outline for creating a balanced scorecard and facilities will need to choose what works for them, but there are some generalities all strategies share. Because a balanced scorecard links main overarching goals with daily work, it is best to start with defining the strategy (the core goal). Four high-level aspects to consider include things like the company’s mission statement, the company’s vision, core values, and strategic focus areas.
There are four perspectives to consider when putting together a balanced scorecard:
- Learning and Growth, and
- Internal business processes.
These four business pillars are identified, measured, and managed with the balanced scorecard and works to provide a complete picture of success. A goal and objective for each perspective is set and leaders will then outline strategic objectives for each perspective which will be the measure of progress needed to reach the goal. These more abstract concepts are then broken down into actionable steps that will be carried out by the employees; the further you move from that top and towards the action plan, the more relevant your plan becomes to frontline workers.
So, what does this look like in practice? Let’s say we have a company that is creating a balanced scorecard and their main number one goal is to reach process manufacturing excellence. The company has identified meeting world class quality standards as an objective for the customer perspective (that focuses on what is important to customers and stakeholders). They then decided to evaluate their efforts by measuring the rate of defect per unit, setting the strategic objective at 50 defects per week; this is how the company will evaluate their performance.
- What is a balanced scorecard?
- What is the Lean methodology?
- What is TQM?
- What does KPI stand for?
- What are Lean terms?
- What is Parkinson’s law?
- What is value stream mapping?
- How is Lean different from Six Sigma?