Elements of a Balanced Scorecard

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The balanced scorecard affords a complete view of an organization
The balanced scorecard affords a complete view of an organization (Image: Jupiterimages/Comstock/Getty Images)

The balanced scorecard is a strategic planning and management system that is used to align an organization’s vision and strategic objectives with its tactical business activities. It allows managers to translate the organization’s vision and mission directly into meaningful financial and non-financial work plans that can be communicated to employees. It proposes that the organization be viewed from four perspectives and that managers: collect and analyze data, develop metrics and measure performance relative to these perspectives. The Learning and Growth Perspective deals with employee training, individual and corporate self-improvement and organizational culture. The Business Process Perspective is concerned with the business processes of the organization. The Customer Perspective deals with customer focus and customer satisfaction. The Financial Perspective covers traditional financial data.

The Learning and Growth Perspective

The Learning and Growth Perspective of the balanced scorecard guides employee training and organizational improvement. It recognizes that in a modern organization, knowledge is the most important resource. Managers use this perspective to guide training programs and align employee training with business needs. Metrics can be put into place to determine where training funds would best be spent. This perspective also covers developing an open organizational culture in which workers are provided with information and knowledge when required to help them perform effectively in their roles.

The Business Process Perspective

The Business Process Perspective deals with how managers view the business processes of the organization. It aligns the organization’s mission with its daily tactical business operations. Managers use this perspective to ensure that the internal business processes meet customers’ needs and expectations in an effective and efficient manner. It also ensures that the needs of the shareholders are balanced against the needs of the customers.

The Customer Perspective

The Customer Perspective deals with developing metrics to determine levels of customer satisfaction and analyzing customer needs. It is concerned with what kinds of customers an organization has, what the needs of those customers are and how best to align the internal processes to meet those needs. This perspective deals with the fact that dissatisfied customers will result in long-term financial decline for the business, regardless of the current financial situation, and places a customer focus on business operations balanced with the financial viewpoint.

The Financial Perspective

The Financial Perspective is the traditional view of the business as a profit-making enterprise. It is concerned with the business processes from a financial viewpoint and covers the accounting practices of the business. Areas of concern include return on investment, cash flow, return on capital, share price and financial results.

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