How can you create a balanced scorecard for your practice?

1 Define your vision and mission

The first step is to define your vision and mission statements, which describe your purpose, values, and aspirations as a practice. Your vision statement should answer the question: What do you want to achieve in the long term? Your mission statement should answer the question: How do you serve your customers and stakeholders? These statements should be clear, concise, and inspiring, and they should guide your strategic decisions and actions.

2 Identify your strategic objectives

The second step is to identify your strategic objectives, which are the specific and measurable goals that you want to accomplish in each of the four perspectives of the balanced scorecard. For example, your financial objectives could be to increase revenue, reduce costs, or improve profitability. Your customer objectives could be to enhance satisfaction, loyalty, or retention. Your internal objectives could be to optimize processes, quality, or efficiency. Your learning and growth objectives could be to develop skills, knowledge, or innovation. You should have between three to five objectives per perspective, and they should be aligned with your vision and mission.

3 Choose your key performance indicators

The third step is to choose your key performance indicators (KPIs), which are the metrics that you will use to track and evaluate your progress towards your strategic objectives. For each objective, you should select one or two KPIs that are relevant, reliable, and actionable. For example, your KPIs for the financial perspective could be revenue growth rate, operating margin, or return on investment. Your KPIs for the customer perspective could be customer satisfaction score, net promoter score, or customer lifetime value. Your KPIs for the internal perspective could be cycle time, defect rate, or productivity. Your KPIs for the learning and growth perspective could be employee engagement, training hours, or innovation index. You should also define the targets and benchmarks for each KPI, as well as the data sources and methods for collecting and analyzing them.

4 Map your cause-and-effect relationships

The fourth step is to map your cause-and-effect relationships, which are the links between your objectives and KPIs across the four perspectives of the balanced scorecard. This helps you understand how your actions in one perspective affect your outcomes in another perspective, and how they all contribute to your overall vision and mission. For example, you can map how investing in training and development (learning and growth perspective) leads to improved skills and knowledge (internal perspective), which leads to enhanced service quality and delivery (customer perspective), which leads to increased customer satisfaction and loyalty (financial perspective). You can use a strategy map, a visual diagram that shows your objectives and KPIs in a logical sequence, to illustrate your cause-and-effect relationships.

5 Implement and monitor your balanced scorecard

The fifth step is to implement and monitor your balanced scorecard, which involves communicating and executing your strategy, as well as collecting and reporting your data. You should communicate your balanced scorecard to your team and stakeholders, and ensure that they understand and support your vision, mission, objectives, and KPIs. You should also assign roles and responsibilities, and allocate resources and incentives, to facilitate the implementation of your strategy. You should monitor your balanced scorecard regularly, and use dashboards, reports, or software tools to display and analyze your data. You should compare your actual results with your targets and benchmarks, and identify any gaps, trends, or issues.

6 Review and update your balanced scorecard

The sixth and final step is to review and update your balanced scorecard, which involves evaluating and improving your strategy, as well as adjusting your objectives and KPIs. You should review your balanced scorecard periodically, and use feedback, insights, or best practices to assess your performance and impact. You should also consider any changes in your environment, customer needs, or competitive landscape, and how they affect your strategy. You should update your balanced scorecard accordingly, and make any necessary changes to your objectives, KPIs, targets, or actions. You should also communicate and celebrate your achievements, and recognize and reward your team and stakeholders.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?