Balanced Scorecard and Strategy Map
The Balanced Scorecard is a performance management tool developed by Robert Kaplan and David Norton. It's considered an innovative way to measure the performance of an organisation in a structured way through Key Performance Indicators (KPIs). Instead of focusing on financial KPIs only, the Balanced Scorecard takes both financial and non-financial measures into account. (Kaplan R. S. & Norton D. P., 1993 & 1996)
As an extension to the Balanced Scorecard, Robert and David created the Strategy Map. The Strategy Map is a diagram to visualise cause-effect relationships between multiple key performance indicators (KPIs) identified in a Balanced Scorecard. It enables end-users to understand how each of the Balanced Scorecard KPIs are linked to each other and their effect on the vision and mission of an organisation. (Kaplan R. S. & Norton D. P., 2000)
Balanced Scorecard & Strategy Maps in Power BI (Case study)
We created a custom version of the Balanced Scorecard for a fictitious scenario of a US online retailer to visualise and analyse data with a dashboard. The retailer has a sales and supply chain strategy in place to accomplish its mission & vision to increase the market share of their products to 6%. The organisation is measuring the following KPIs:
The effectiveness of the sales strategy through sales visits, net promoter score and total revenue KPIs.
The effectiveness of the supply chain strategy through on time deliveries, delivery quality, order fill rate and operational expenses KPIs.
The market share and the gross margin of its products as high-level KPIs to measure the overall performance.
We used the Power KPI Matrix (version 3.0.0) custom visualisation from Microsoft to create our own custom version of the Balanced Scorecard for our online retailer (interactive dashboard below):
With this KPI matrix, management can easily measure its performance on a monthly basis. Based on the target values set by the organisation, it is easy to identify whether a certain KPI goal is reached. The visualisation uses conditional formatting to highlight with colours whether a value is below or above target value. Moreover, a spark-line shows the trend of the KPI actual value over the last months.
To understand how each of the KPIs are linked together and how they support the vision of the retailer, we created a custom version of the strategy map (interactive dashboard below):
This diagram enables the end user to understand how different KPIs are linked together and how they affect each other. For example, in case the retailer increases its Net Promoter Score, the organisation is expected to have a higher leads to sales conversion rate (more sales for each lead as clients are happier with your product). Which in turn will have a positive impact on total revenue and finally, the total revenue will have a positive impact on the gross margin.
Performance management visualisations offer easy, clean and clear overviews of how organisations perform and achieve their goals on a periodic basis. In some case, these type of dashboards can even be used as a mean of communication to get the whole organisation involved. Tools like Power BI ensure that these strategic frameworks are not limited to large organisations only and give you an opportunity to have a go with it.
Kaplan R.S., & Norton, D.P. (1993). Putting the Balanced Scorecard to work, Harvard Business Review.
Kaplan R.S., & Norton D.P. (1996). Using the Balanced Scorecard as a strategic management system, Harvard Business Review.
Kaplan, R.S., & Norton, D.P. (2000). Having Trouble with Your Strategy? Then Map It, Harvard Business Review.