Picture the accounting manager of a mid-sized textile factory. Every month-end, he prints the profit and loss statement and reviews the balance sheet. The numbers look fine. But customer complaints are climbing, production waste is rising, and the sales team’s morale is low. The financial report says ‘all good’; the reality inside the company says something different. This gap is exactly what the Balanced Scorecard approach is designed to close. In this article, we explain how to put that approach to work using BI (Business Intelligence) software.
The Balanced Scorecard is built on a simple idea: you cannot run a company by watching only one set of numbers. It proposes four perspectives to look at simultaneously — financial (profit, revenue, costs), customer (satisfaction, loyalty, complaint rates), internal processes (production speed, defect rates, delivery times), and learning and growth (employee training, staff turnover). Think of driving a car while only watching the fuel gauge and ignoring the temperature, oil pressure, and speed indicators. BI software is the tool that brings all four perspectives together on a single screen.
BI software collects data from different parts of a business, processes it, and presents it to managers in readable tables and charts. Sales figures from the accounting program, waste data from the production tracking system, headcount information from personnel files — all of it comes together inside the BI platform. A manager opens the computer in the morning and sees everything on one screen. This screen is called a ‘dashboard’, much like the instrument panel in a vehicle. The idea is not complicated; the discipline required to feed it clean data is where the real work lies.
Where do you start building this system? The first step is drawing a strategy map. A strategy map is a simple diagram showing what your company wants to achieve and how those goals connect to each other. For example: ‘If we train our workers well, production quality improves. If quality improves, customers are more satisfied. If customers are satisfied, sales grow.’ Once you put this chain on paper, you find a measurable number for each link. This is called an ‘indicator tree’ — each goal has one or two concrete figures sitting beneath it that tell you whether you are on track or not.
When building the indicator tree, the key rule is this: every indicator must be measurable on a regular basis and someone must actually enter the data into the system. If you want to track customer satisfaction, feedback forms need to be collected after each sale and the results need to be recorded. If you want to monitor defect rates, production staff must log daily figures. If data entry is irregular, the BI software will show you a distorted picture. The quality of what comes out depends entirely on the quality of what goes in. It is like cooking with stale ingredients — the dish will not turn out right no matter how good the recipe is.
The most common obstacle when setting up this kind of system is resistance inside the company. The sales manager asks why his numbers should appear on a shared screen. The production chief insists that everyone already knows what is going on. On top of that, different departments often keep their data in different programs — accounting uses one software package, the warehouse uses another. Getting these programs to transfer data into the BI platform requires a technical connection, sometimes called a ‘data bridge’ or ‘integration layer’. Setting this up usually takes a specialist and can stretch over several weeks. After the initial setup, you also need to check regularly that data is flowing correctly between systems.
As a small or medium business owner deciding whether to take this step, ask yourself one honest question: can I tell, from my monthly reports, exactly which parts of my business are working well and which are struggling? If the answer is ‘not really’, a BI system built around the Balanced Scorecard logic can give you a genuine view of the whole picture. Before you start, however, clarify two things: which indicators actually matter for your specific business, and who will be responsible for entering the data consistently. Keep the number of indicators small — two or three measures per perspective is enough to start. Build the system simply, then expand it over time. Starting with too much complexity leads to the same place as not starting at all.
This article was originally written in Turkish by Gökhan MERCANOĞLU on March 1, 2004 and has been automatically translated into English and other languages using machine translation.