The Balanced Business Scorecard explained

A Proven business framework to master your business metrics

This guide breaks down the four perspectives of the Balanced Scorecard and shows you how to choose the right KPIs to drive growth.

Learn the Kaplan and Norton Balanced Scorecard framework, a proven system to master business metrics and strategic growth beyond simple financials.

Introduction: Your Strategic Cockpit

As a SaaS founder or online business owner, you’re likely swimming in data. Website traffic, conversion rates, churn numbers, ad spend, the metrics pour in daily. Yet, despite this flood of information, connecting daily activities to your long-term strategic goals can feel impossible. Are your marketing efforts really driving profitable growth? Is your product team’s work actually improving customer loyalty? Without this connection, teams chase vanity metrics, marketing budgets balloon, and strategy execution stalls. Without a system to connect your metrics to strategy, even the best data leads nowhere, that’s where the Balanced Scorecard earns its place.

This article explains the proven Balanced Scorecard (BBSC) framework, showing you how to build a ‘strategic cockpit’ for your business. We’ll break down the model so you can move beyond drowning in data and finally master the metrics that drive sustainable growth.

Why a Balanced view matters: The data

Focusing only on financial metrics is like trying to fly a plane by only looking at the fuel gauge. A holistic approach leads to superior performance.

• Execution is the Top Challenge: When executives were asked about their greatest challenge, 31% cited “Ensuring that day-to-day decisions are in line with strategy.” This highlights the difficulty in translating high-level strategy into daily actions.
• Lack of Understanding: Only 55% of middle managers can name even one of their company’s top strategic priorities. This indicates a significant communication gap, making effective execution nearly impossible.
• Non-Financial Drivers Predict Success: As Kaplan and Norton noted in Harvard Business Review (1992), non-financial indicators like customer satisfaction and employee engagement are often the best predictors of future financial success.
• SaaS Benchmarks Confirm It: Industry reports from sources like Baremetrics consistently show that top-performing SaaS companies closely monitor a balanced set of metrics, including MRR growth, LTV:CAC ratio, and Net Revenue Churn.

What is the Business Balanced Scorecard? (The classic framework)

Developed by Drs. Robert Kaplan and David Norton in the Harvard Business Review, the Balanced Scorecard was created to give managers a comprehensive view beyond lagging financial indicators. It provides a framework for translating a company’s strategic objectives into a coherent set of performance measures.

The framework requires viewing your business from four distinct but interconnected perspectives:

1. The Financial Perspective

This perspective focuses on the financial health and performance of the business. Are strategic actions contributing to the bottom line? Key areas include:

• Revenue Growth & Mix
• Profitability (Gross & Net Margins)
• Cost Management & Efficiency
• Return on Investment (ROI) & Asset Utilization
• Cash Flow Health
  → Focus: Ensuring financial sustainability and shareholder value.

2. The Customer Perspective

This perspective focuses on how the company is perceived by its target customers. Are we delivering value? Key areas include:

• Customer Satisfaction (e.g., CSAT scores)
• Customer Loyalty & Retention (e.g., Churn Rate)
• Market Share & Customer Acquisition
• Customer Profitability
• Brand Perception & Net Promoter Score (NPS)
  → Focus: Understanding and meeting customer needs to drive revenue.

3. The Internal Business Processes Perspective

This perspective focuses on the internal operations that create value for customers and stakeholders. What processes must we excel at? Key areas include:

• Operational Efficiency (e.g., cycle time, cost per transaction)
• Quality Management (e.g., defect rates, first-time pass yield)
• Innovation Processes (e.g., R&D pipeline, time-to-market)
• Supply Chain Management
• Regulatory Compliance & Risk Management
  → Focus: Optimizing internal operations for efficiency and quality.

4. The Learning and Growth Perspective

This perspective focuses on the organization’s ability to innovate, improve, and learn. Are we building the capabilities for future success? Key areas include:

• Employee Capabilities (e.g., skills, training hours)
• Employee Satisfaction & Retention
• Information Systems & Technology Infrastructure
• Organizational Culture & Climate for Action
• Knowledge Management & Sharing
  → Focus: Investing in people, systems, and culture for long-term growth.

Each perspective contains strategic objectives, measures (KPIs), targets, and initiatives. The power lies in linking these perspectives in a cause-and-effect chain. As Henry Mintzberg noted, strategy can also emerge; the BBSC helps track whether both deliberate and emergent strategies are working. Verne Harnish’s Scaling Up complements this by helping leaders translate those strategic measures into daily rhythms and execution systems.

Let’s explore how this classic scorecard transforms when applied to online-first, high-growth businesses.

Adapting the Scorecard for an online business

The classic BBSC needs adaptation for the digital world. Online business expert Geert-Jan Smits, in his book De Internet Scorecard 2.0, emphasizes tailoring KPIs to the specific dynamics of e-commerce and SaaS models.

1. The Financial Perspective (online)

Focus shifts to unit economics and recurring revenue models.

• Key KPIs:
  • Monthly Recurring Revenue (MRR) Growth
  • LTV:CAC Ratio, Gross Margin %
  • Average Revenue Per User (ARPU)

2. The Customer Perspective (online)

Focus shifts to user experience, engagement, and retention in a digital environment.

• Key KPIs:
  • Customer Churn Rate (Revenue & Logo)
  • Net Promoter Score (NPS)
  • Active Users (DAU/MAU)
  • Customer Satisfaction (CSAT)

3. The Internal Business Processes Perspective (online)

Focus shifts to digital product development, marketing funnels, and customer support efficiency.

• Key KPIs:
  • Website Conversion Rate (by funnel stage)
  • Feature Adoption Rate
  • Customer Support First Response Time
  • Average Page Load Time

4. The Learning and Growth Perspective (online)

Focus shifts to innovation velocity, team skills in digital tools, and data infrastructure.

• Key KPIs:
  • A/B Testing Velocity
  • Lead Time for New Deployments
  • Team Certifications (e.g., Google Analytics, AWS)
  • Data Accessibility & Quality

How to build your own Business Balanced Scorecard (Step-by-Step)

Creating a BBSC is a strategic exercise, not just a metrics dashboard. Follow these steps:

1. Define Your Strategy: Start with your high-level vision and strategic objectives (as outlined in frameworks like Verne Harnish’s “Scaling Up”). What are your 3-5 core priorities?
2. Map Objectives to Perspectives: Assign each strategic objective to one (or more) of the four perspectives. Ensure a balance across all four.
3. Choose Key KPIs: For each objective, select 1-2 Key Performance Indicators (KPIs) that accurately measure progress. Focus on leading indicators (predictive) as well as lagging indicators (results).
4. Set Targets: Define ambitious but realistic targets for each KPI. What does success look like?
5. Identify Initiatives: What key projects or actions will you undertake to achieve these targets?

Business Cockpit KPI Deck Example

This table shows a sample output, linking objectives to KPIs for an online business.

Interpreting the Deck: This sample shows clear links. For example, improving internal processes (faster load time) should lead to better customer metrics (NPS, churn), which ultimately drives better financial results (LTV:CAC). Each KPI provides a measurable signal of strategic progress.

“What you measure is what you get.” – Robert Kaplan & David Norton

Case Example: HubSpot

Companies like HubSpot have famously used balanced approaches to align their teams (as discussed in their public growth strategy materials). By tracking metrics across product usage (Internal Processes), customer success (Customer), and revenue growth (Financial), they ensure different departments work towards shared strategic goals, not just siloed targets.

Next steps: Build your Scorecard

1. Define your 4 perspectives based on your specific business model.
2. Choose 3–5 critical KPIs for each perspective, focusing on leading indicators.
3. Assign owners responsible for tracking and reporting on each KPI.
4. Establish a review rhythm (e.g., monthly) to discuss progress and make adjustments.
5. Connect your BBSC to your financial forecasts and cash flow dashboard.

Final Thoughts

An online business can’t be run from a single spreadsheet. Building a Balanced Scorecard is about creating a strategic cockpit that gives you a holistic, real-time view of your entire operation.

It forces you to look beyond the vanity metrics and focus on the handful of KPIs that truly connect your daily actions to your long-term vision. By balancing your financial goals with the needs of your customers, the efficiency of your processes, and the growth of your team, you create a system for sustainable, long-term success.

Start designing your Business Cockpit today by downloading our Business Plan Template, as clarity drives growth.

Frequently Asked Questions (FAQs)

• How is the Balanced Scorecard different from OKRs (Objectives and Key Results)?
  They work together. The Balanced Scorecard sets the strategic framework and defines what to measure across key perspectives. OKRs are a goal-setting system used to execute that strategy by setting ambitious, time-bound targets (how much improvement by when).
• Isn’t a Google Analytics dashboard enough?
  Google Analytics is powerful but partial, it measures performance, not purpose. It primarily covers Customer & Internal Processes perspectives but lacks the financial and learning/growth context needed for a complete strategic view. The BBSC integrates all four.
• How many KPIs should I have on my scorecard?
  Focus is key. Aim for 3-5 high-level KPIs per perspective (12-20 total). Too many metrics dilute focus and make the scorecard unwieldy.
• How often should I review my Balanced Scorecard?
  Review progress against your BBSC targets monthly with your leadership team. Revisit the objectives and KPIs themselves annually or when a major strategic shift occurs.

References

• The Balanced Scorecard: Translating Strategy into Action. (1996). Kaplan, Robert S. & Norton, David P. https://www.amazon.com/Balanced-Scorecard-Translating-Strategy-Action/dp/0875846513 
• The Balanced Scorecard—Measures that Drive Performance. (1992). Kaplan, Robert S. & Norton, David P. Harvard Business Review. https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2 
• Scaling Up. (2014). Harnish, Verne. https://scalingup.com/book/ 
• Harvard Business Review Insight Center: The Gap Between Strategy and Execution: https://hbr.org/insight-center/the-gap-between-strategy-and-execution
• SaaS Metrics Benchmarks Report. (Updated Regularly). Baremetrics. https://baremetrics.com/benchmarks 
• Smits, Geert-Jan. (2007). De Internet Scorecard 2.0. Van Duuren Media. https://www.bol.com/nl/nl/f/de-internet-scorecard-2-0/30507477/