Managing an organization long-term isn’t easy. Most founders and C-suite executives discover this the hard way when their business fails. The reason for this downfall? A failure to plan.
Since most business executives know strategic planning is vital, how does this situation occur?
What Are the Benchmarking and Balanced Scorecard Methodologies?
- Benchmarking Method: This is the process of capturing your company’s performance, products/services and processes and comparing it against industry standards and competitors.
- Balanced Scorecard Method: This method ensures your strategic actions align with the business objectives. It involves tracking financial and non-financial measures to determine an organization’s effectiveness and when to take corrective action.
Failure to implement strategic plans effectively is a primary reason for this statistic, but benchmarking and a balanced scorecard can provide comprehensive tools for achieving your goals.
How Strategic Planning Can Set Your Future Up for Success
Strategic planning is a way to envision the future of your organization. It involves developing and implementing the company's primary goals and initiatives based on its resources and the internal and external environments in which it competes.
The process begins with defining the vision, which should be a clear, inspiring and forward-looking statement that encapsulates its long-term aspirations and desired impact on the world. For example, LinkedIn’s vision is “to create economic opportunity for every member of the global workforce.”
Next, analyze your company’s strengths and weaknesses, opportunities and threats and identify goals to achieve in a specific timeframe.
After this, you’ll need to devise ways to implement your goals through diversification, product development, market penetration, mergers and acquisitions and other methods.
Bringing a Strategy to Life with Effective Implementation
It’s one thing to develop an exciting corporate vision and another to bring it to life. Strategies are implemented through detailed plans involving resource allocation, timeline, and responsibilities. While several well-proven roadmaps exist for implementing strategic planning, benchmarking and the balanced scorecard method are two options that can help you.
1. Benchmarking
Benchmarking is the process of capturing a company’s performance, products/services and processes and comparing them against industry standards to identify areas of growth. By performing this exercise, companies identify strengths and weaknesses which facilitates prioritization and focus. Organizations that engage in benchmarking are 69 percent more likely to achieve their strategic plans than their counterparts. The result: a clear perspective on where the company stands and where improvements are required.
Here are some ways to begin benchmarking in your organization:
- Identify the data sources for benchmarking.
- Ensure your internal data collection methods are consistent and collecting the correct data
- Conduct a gap analysis (in product, pricing, audience, etc.) of your competitors.
Benchmarking is not without challenges, however. Companies often struggle to access reliable data or interpret it correctly. Solutions include producing accurate data through advanced analytics, fostering a culture of continuous improvement and balancing external insights with internal strengths.
2. Balanced Scorecard Methodology
The balanced scorecard (BSC) method, on the other hand, provides a valuable framework for tracking performance indicators, ensuring that your strategic actions align with overarching business objectives. The scorecard tracks financial and non-financial measures to determine an organization’s effectiveness and when to take corrective action.
This methodology, developed in the early 1990s, delivers a holistic view of your organization’s status beyond measuring business performance, which typically focuses solely on financial outcomes.
The BSC approach is divided into four key perspectives:
- Financial measures reflect the traditional economic consequences of actions already taken.
- Customer perspectives focus on customer satisfaction and retention.
- Internal business processes examine the efficiency and effectiveness of business operations.
- Learning and growth evaluate the organization's ability to innovate and improve.
Organizations rate their score in each of these categories based on specific, measurable objectives and key performance indicators (KPIs). The rating is typically based on performance relative to set goals for each category, aligning daily activities with long-term strategic objectives.
The purpose of the scorecard method is to quickly summarize current business performance and future growth potential through actionable goals and measurable outcomes. A BSC’s core strength is its ability to align business activities with the organization's vision and strategy. This alignment improves both internal and external communications and monitors performance against strategic goals.
The framework's flexibility allows organizations to customize their scorecards and add or modify perspectives and measures to fit their strategic focus. This evolves the BSC from a simple performance measurement tool to a strategic management system.
Focus on Efficiency and Competitiveness
Benchmarking and balanced scorecards are indispensable to companies aiming at excellence. They provide a dual focus on internal efficiency and external competitiveness. Their integration into strategic planning enables organizations to measure and enhance performance comprehensively, ensuring alignment with broader goals and objectives. By continually applying these strategic planning and implementation tools, businesses can stay ahead, driving performance and achieving strategic objectives with precision and insight.
