What is BSC? 4 BSC metrics and how to apply BSC to businesses

The BSC model is no longer strange to businesses today. So what is BSC? What role does this model play in business, how to apply it in practice, and what notes are there? In the article below, 1C Vietnam has compiled complete information about BSC for businesses to refer to.

1. What is the concept of BSC (balanced scorecard)?

BSC stands for "Balanced scorecard", which in Vietnamese means "balanced scorecard". This model helps businesses manage strategy at a basic level. From there, the administrator will establish, deploy as well as monitor and measure the results of the strategy. Besides financial factors, the BSC model focuses on three other issues: internal operating processes, customers, learning and development.

The meaning of the BSC system lies in the fact that the model shows the balance between short-term and long-term goals, input and output targets of results, goals of financial and non-financial factors, activities directed towards society and activities within the enterprise.

2. Important benefits of the BSC balanced scorecard for businesses

Through explaining what BSC is above, businesses have partly grasped the benefits that this method brings. One of the most important factors is to help save resources in terms of time and money for the company. At the same time, this model also helps clearly express the goals and vision of the proposed strategy. Specifically:

2.1 Plan a better pricing strategy

The BSC method helps businesses build and deploy better pricing strategies. Managers can rely on this measure to determine the cause and effect relationship between different strategic goals in the business. That is, the results of this activity may also become a driving or motivating factor for future performance.

2.2 Good alignment with organizational projects and initiatives

The BSC model helps businesses link initiatives and projects together to increase the effectiveness of a common strategy. Therefore, each initiative plays an important role in helping develop the common goal.

2.3 Improve reporting quality

One of the benefits BSC brings to businesses is improving reporting quality. This helps businesses focus on important problems and propose more effective solutions.

2.4 Target control

BSC is very effective in supporting businesses in controlling their goals. At the same time, the model also points out the most important goals that need to be focused and invested in resources to achieve.

3. 4 BSC model metrics applied in businesses

Currently there are 4 popular BSC models according to business processes; according to customers; according to financial indicators, according to learning and development measures. Businesses can refer to the specific information below to choose the appropriate model.

3.1 Internal business processes

Based on the perspective of internal business processes, managers can ask the right questions to find which processes truly add value to the organization and need to be repeated. Added value is expressed primarily through customer-oriented performance.

3.2 Learning and development metrics

An organization's ability to learn, innovate and develop demonstrates that the business cares about work management, human resource quality and continuous improvement to create a working environment. better job. The working environment is always changing with new regulations and laws, thereby helping businesses answer the question: "How do we maintain the ability to achieve our set goals?".

3.3 Customer experience measurement

Each organization will have a different target customer group, targeting specific markets. These customer groups will have different service and product requirements, as well as determine acceptable prices, quality, profits and services.

For example, if a business's customers are a group of famous people with high income and status in society, the price the company sets for the product may be high, but that means quality must be guaranteed and dedicated service. When a business has many customer groups for the same product, BSC will help the company meet customer expectations to the maximum.

3.4 Measure of financial indicators

Financial perspective is always the top focus of a business because this is the indicator that determines the success and development of that company. This is also an indispensable factor when analyzing the BSC model. This measure helps managers see whether the business is making money, whether past decisions were effective, whether shareholders are satisfied, etc.

4. How is BSC (Balanced scorecard) applied in businesses?

More than 75% of the group of administrators, executives or senior managers use BSC in implementing strategy (according to survey results of 2GC Active Management in 2016, based on BSC model user behavior). . The remaining 25% of people use BSC for reporting. In fact, the BSC model brings many benefits to businesses in management and strategy if applied properly.

5. Note when applying balanced scorecard to businesses

Besides understanding what BSC is, businesses need to firmly grasp the notes when putting it into practice to ensure maximum effectiveness of the model. Below are the 3 most important issues compiled by 1C Vietnam.

5.1 Accurate control of necessary data

Nowadays, most businesses face the problem of data overload and complexity. Therefore, to successfully apply BSC, businesses need to clearly identify data sources or put them on a centralized platform. From there, administrators can determine a set of metrics for relevant people and know what their work actually is like. You can learn more about the control process below:

• Limit the number of BSC methods for easier management. The idea of using as many BSC methods at the same time as possible is wrong. Administrators can use 10 - 15 strategies to focus on each strategy in the best way. At the same time, this approach also helps businesses save more resources.
• You should prepare necessary questions before the meeting to find the most effective strategy. For example, if reach decreases, what is the cause and what is the solution? From there, determine the most accurate and appropriate data source.
• Send documents 1-2 days in advance so everyone can grasp the problem before coming to the class. From there, the opinions will be of better quality and it will be easier to synthesize data.
• Make necessary decisions to evaluate meeting strategy. Information needs to be recorded in detail and everyone required to comply with the decision that has been made.

5.2 Measure and evaluate target factors

To accurately evaluate and measure goals, businesses can use different color symbols. For example:

• Red for goals that need more resources and support to bring things back on track.
• Yellow (or amber) indicates goals that are about to stay on track and can make self-corrections.
• Green for goals that are on track.

After putting the strategy into practice, businesses need to regularly follow the set goals. These items all need to be evaluated objectively to avoid affecting the final result.

5.3 Based on KPI, periodically evaluate target factors

KPI (Key Performance Indicator) is one of the effective tools to manage each individual's work performance and is a criterion to evaluate whether they have implemented that strategy. You should combine BSC tools and software that uses KPI evaluation criteria. Depending on each goal, businesses can set different KPIs, from which they can control and set appropriate criteria.

When using BSC to measure strategies, attaching goals will bring greater efficiency. Therefore, businesses should include KPIs for employees when assigning tasks. Finally, the manager will connect the goals together with arrows to produce the most accurate results.

Thus, the article on 1C Vietnam has introduced to users what the BSC method is, how to apply it in practice as well as measures that can be applied in businesses. The BSC model is an effective method for a company to develop comprehensively, sustainably and compete in the current environment.