The Balanced Scorecard in Project Management

For a project manager, ensuring projects align with strategic goals while maintaining operational efficiency can be an uphill task. In the past, performance only focused on financial metrics. However, this failed to capture the multi-dimensional nature of organizational performance.

Enter the Balanced Scorecard (BSC). Developed by Dr. David Norton and Dr. Robert Kaplan in the early 1990s, the BS offers a comprehensive framework for managing and evaluating performance through a balanced approach that includes non-financial perspectives.

This article delves into the core components of the BSC, the benefits it brings to project management, and the common challenges organizations face during its implementation. By exploring these aspects, we aim to provide project managers with a clear understanding of utilizing the Balanced Scorecard to drive project success.

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Definition of a balanced scorecard

The Balanced Scorecard (BSC) is a strategic planning and management system used by organizations to align business activities with the company’s vision. The BSC helps monitor an organization’s performance against strategic goals and improve business results.

Initially developed by Dr. Robert Kaplan and Dr. David Norton in the early 1990s, the BSC incorporates both financial and non-financial performance measures to provide a more ‘balanced’ view of organizational performance.

Historical background and development

Kaplan and Norton introduced the BSC to address the limitations of traditional financial metrics in evaluating overall organizational performance.

They argued that exclusive reliance on financial indicators could give a skewed view of a company’s health. Instead, they proposed a more comprehensive framework that includes additional perspectives: customer, internal business processes, and learning and growth.

The four perspectives of the balanced scorecard

A balanced scorecard comprises four building blocks that allow a project manager to evaluate their team from different viewpoints. In doing so, you can have an unbiased understanding of your entire project, business, or organization.

Back in the day, finances formed the only metric against which to measure performance. But times have changed. The balanced scorecard comes to even the field for a comprehensive outlook. Here are the four perspectives of a balanced scorecard:

1. Financial perspective

If you‘re making money, realizing a tidy profit or return on your investment is a top priority. As such, the financial perspective is typically a measure of the financial performance of an organization and how well it is achieving its financial objectives.

Some of the metrics used in analyzing financial performance include:

Revenue growth
Earnings per share (EPS)
Return on investment (ROI)
Operating cash flow

2. Customer perspective

The customer is always right. This is one of the most popular phrases used by business owners worldwide. So then, what does the customer say about the business? What value does the customer see in your product or project?

In many instances, the customer (the originator of the problem) defines the solutions and gaps the business or project can close. In that case, it‘s important to keep your ear to the ground using the following metrics:

Customer satisfaction indices
Net Promoter Score (NPS)
Market share
Customer retention rates
Customer complaint rates

3. Internal business processes perspective

Your project or business is only as successful as your systems. How efficient are they? Can you go for a week with full confidence that the business will run without any hiccups? This is what internal business processes are about.

However, over and above, you also want to ensure the services or products offered meet the set standards for your customers. With that in mind, you will need to set internal objectives and operational goals. Key objectives often include improving operational efficiency, quality control, innovation, and supply chain management.

4. Learning and growth perspective

When looking at this aspect, think about the intangible drivers of performance. However, these drivers can be quite broad but can be split into the following:

Human capacity such as talent, knowledge, experience, and skills
Information systems comprise databases, technological infrastructure, and networks
Organizational culture includes teamwork, employee alignment, leadership, teamwork, and knowledge management.

Benefits of Using a Balanced Scorecard in Project Management

Here, we delve deeper into these benefits and introduce additional ones to provide a comprehensive understanding of why the BSC is a valuable tool.

Improved Strategic Alignment. The BSC aligns all projects with the organization’s main goals, ensuring resources are used effectively.

Enhanced Performance Measurement. Using both financial and non-financial metrics, the BSC provides a comprehensive view of performance, identifying areas for improvement.

Better Communication. The BSC clarifies roles and goals, improving teamwork and collaboration.

Increased Accountability. Clear objectives and metrics foster accountability and motivation among team members.

Continuous Improvement. The BSC enables ongoing refinement of strategies and operations.

Enhanced Agility. Linking strategic goals with daily operations, the BSC allows quick adjustments to changes.

Holistic View. Balancing financial and non-financial metrics, the BSC provides a complete picture of performance.

The Balanced Scorecard (BSC) offers numerous advantages in project management, ranging from enhanced performance measurement to better strategic alignment and improved communication.

Implementation of a Balanced Scorecard in Project Management

Even with pointers on what a BSC comprises, you still need a blueprint to implement to ensure alignment with strategic objectives, effective measurement, and improved performance.

Selecting Appropriate Metrics for Each Perspective

As explained earlier, the BSC has four perspectives that provide a holistic overview for a project manager. However, choosing the right metrics is crucial for the effectiveness of a BSC.

Setting Targets and Aligning with Project Objectives

Direction is more important than speed. That means you must have targets you aim to achieve as a team. But these targets must be realistic and achievable, otherwise, team members will end up burnt out and lacking the motivation to keep going.

But in addition to setting goals, you also need to communicate them to the team. It is also important to energize the team around these common goals and choose the right tools to implement these goals.

To implement and manage a balanced scorecard, you will need project management software to help you achieve this.

Project Management Software for Managing a Balanced Scorecard

To boost your company’s productivity with project management software and a balanced scorecard, it’s crucial to find the right tool to track both financial and non-financial metrics. While there are many project management tools available, few are suited for this purpose.

Birdview PSA is a powerful project management tool that helps you plan and manage your projects, resources, and budgets effectively.

Use Birdview PSA to plan your projects with powerful Gantt charts, execute them on Kanban boards, and easily track progress in the Activity Center.

Balance resources effectively with the smart Resource Center

Monitor and manage project costs using Business Intelligence Reports,
where you can view key performance indicators such as time, cost, and more.

In the fullness of time, the Balanced scorecard proves to be more than just a performance measurement tool. It‘s a strategic management system, which when implemented, can drive significant improvements in project outcomes and organizational success. Birdview PSA is one of the best project management tools in the professional services industry to help you implement a BSC. You can book a demo to try Birdview PSA.

The Balanced Scorecard in project management: benefits and use cases