The Balanced Scorecard: Brilliant Business Tool or MBA Overkill?

What my MBA taught me about strategy, what happened when reality overtook the plan, and why some of those lessons still matter for smaller businesses.

When I did my MBA, one of the strategic management tools I learnt about was the Balanced Scorecard, developed by Robert Kaplan and David Norton. At the time, it made perfect sense. Look beyond the financial numbers. Think about your customers, your internal processes and your people. Set objectives and decide how you're going to measure progress. make sure the different parts of the business are working towards the same strategic goals.

It all sounded very logical. After I graduated I had the opportunity to put some of that learning into practice and that's when I discovered something rather important about business strategy. Things don’t always go to plan!

From MBA Theory to British Airways

Before launching my own business, I did some consultancy work for British Airways, looking at the customer experience for small business travellers. It was a fascinating experience. This was a huge organisation, with loads of customers, employees, processes and moving parts.

The challenge was to think about the experience from the customer's perspective and identify where improvements could make a difference. It was a very different environment from the businesses I would eventually go on to build but it reinforced something I had learnt during my MBA: you need to understand the whole system, not just one part of it.

Customer experience doesn't exist in isolation. It is affected by processes, people, systems, communication, technology and ultimately the strategy of the organisation. A problem that looks like a customer service problem might actually be a process problem. A process problem might actually be a people problem and sometimes what looks like an operational problem is actually a strategic one. That way of thinking stayed with me.

Founding my First Business

When I went on to co-found Railbookers, I had the opportunity to apply everything I had learnt much more directly. Before we launched, I put together a strategy and being a good MBA students, we didn't just have one version of the future, we had scenarios. We considered what things might look like if everything went really well. We considered a more conservative scenario and we considered what might happen if things went badly.

We thought about the numbers, the market, the customers, the operation and what we would need to do to support the business as it grew. It felt very thorough; very strategic, very sensible. And then we launched. Within six months, we had gone over our best-case scenario by a mile. We had found a niche in the market and with the help of Google PPC (which had only just become available, replacing banner ads) the phones started to ring, and didn’t stop - creating an entirely different challenge

The assumptions we'd based our original plan on were no longer relevant and much of our carefully constructed strategy went out of the window. We had to adapt, and quickly. So was all that planning a waste of time? Absolutely not and this is probably the biggest lesson I took from it.

Strategy isn't about predicting the future perfectly. It is about understanding where you're trying to go, understanding the assumptions you're making and having enough visibility to recognise when reality is changing. Our original plan gave us a starting point. It gave us a framework for thinking and it helped us understand what we believed would happen and why.

When reality didn't match the plan, we had something to compare it with. We could see where our assumptions had been wrong. More importantly, we could make decisions rather than simply reacting to whatever happened next. That experience has stayed with me throughout my career and it is one of the reasons I still believe there is value in frameworks such as the Balanced Scorecard; but I also think we need to be careful about how we use them.

Is the Balanced Scorecard still relevant?

Kaplan and Norton introduced the Balanced Scorecard in Harvard Business Review in 1992. The basic idea was that financial measures alone weren't enough to understand how an organisation was performing.

The original framework looked at four perspectives:

1. Financial – How are we performing financially?

2. Customer – How do our customers see us?

3. Internal processes – What do we need to be good at operationally?

4. Learning and growth – Do we have the people, skills and capabilities we need for the future?

More than 30 years later, I think that basic principle remains incredibly relevant; but I wouldn't necessarily suggest that every small business needs to implement a traditional Balanced Scorecard. In fact, I think that could create more work than value. What I would encourage is Balanced Scorecard thinking.

Don't just look at the money. This is particularly important for a growing founder-led business. Revenue is an obvious measure and when you're trying to get from £100k to £1m, it's very easy to become fixated on it but revenue doesn't tell you everything.

👉You could be growing revenue while your margins are falling.

👉You could be winning lots of new customers while losing existing ones.

👉You could be increasing sales while your team is becoming overwhelmed.

👉You could be growing the business while the founder is working longer and longer hours because every decision still depends on them.

On paper, you're growing but underneath the surface, the business might be becoming increasingly fragile. That's why I like the principle of looking at several different perspectives.

The problem with applying it too literally

This is where I think the Balanced Scorecard can become less useful for a small business. You can turn a really useful idea into a bureaucratic exercise. Suddenly you've got: KPIs. Dashboards. Targets. Reports. Reviews. Traffic lights and before you know it, you're spending more time measuring the business than actually running it.

I've seen this happen with businesses of all sizes. The question shouldn't be: "What can we measure?" It should be: "What do we need to know to make better decisions?" There is a big difference. For a small business, I would rather see eight meaningful measures that are actually used than forty KPIs sitting on a beautifully formatted dashboard that nobody looks at.

And don't forget what the numbers can't tell you. One of the limitations of any measurement framework is that not everything important is easily measurable. You can measure employee turnover but that doesn't tell you everything about your culture. You can measure customer satisfaction but that doesn't necessarily tell you why customers feel the way they do. You can measure revenue but it doesn't tell you whether the business is giving the founder the life they actually wanted.

Sometimes you need to ask questions, talk to customers, talk to your team. Listen and use judgement. That's something I learnt through experience rather than from doing an MBA.

The Connection to my B.U.I.L.D Framework™

Looking back, I can see why the principles I learnt during my MBA have stayed with me. My B.U.I.L.D Framework™ has evolved from my own experience of building and scaling businesses and from working with founders.

It looks at:

Blueprint – Vision and Strategy
Uncover – Finance and Control
Implement – Systems and Processes
Leverage – Team and Leadership
Develop – Future Growth

It isn't the Balanced Scorecard but there is a common thread. A healthy business needs more than a healthy P&L. You need a strategy. You need to understand your numbers. You need systems that work. You need people who can take responsibility. And you need to keep looking ahead.

About the Author

Sarah is a business founder, MBA graduate and coach who has built and scaled businesses to over £8 million in revenue with teams of up to 25.. She now helps ambitious founders gain clarity, build motivated teams and create businesses that support the life they want to lead.

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