Balanced Scorecard: A Quick Introduction To The Four Perspectives

The basic principles of Kaplan and Norton's original Balanced Scorecard model have proved hugely influential on subsequent thinking about the subject. While individual organisations tailor the quadrant of perspectives to suit their own circumstances, the general spread of viewpoints has changed little - and is worth examining.

The financial perspective

Focuses on financial performance of an organisation. It normally covers the revenue and profit targets of commercial companies as well as the budget and cost-saving targets of not-for-profit organisations. The financial health of an organisation is a critical perspective for managers to track. It is important to note that financial performance is usually the result of good performance in the other three scorecard perspectives.

 

The customer perspective

Focuses on performance targets as they relate to customers and the market. It usually covers customer growth and service targets as well as market share and branding objectives. Typical measures and KPIs in this perspective include customer satisfaction, service levels, net promoter scores, market share and brand awareness.

 

The internal process perspective

Focuses on internal operational goals and covers objectives as they relate to the key processes necessary to deliver the customer objectives. Here, companies outline the internal business processes goals and the things the organisation has to do really well internally in order to push performance. Typical example measures and KPIs include process improvements, quality optimisation and capacity utilisation.

 

The learning and growth perspective

Focuses on the intangible drivers of future and is often broken down into the following components:

Typical example measures and KPIs include staff engagement, skills assessment, performance management scores and corporate culture audits.

 

Different balanced scorecards for different organisations

While the four perspectives of the Balanced Scorecard are clearly broad ranging some companies have extended the four perspectives to add other perspectives to highlight particular areas of performance that particularly matter to them such as health and safety or corporate social responsibility and environmental performance.

Also, the order and emphasis of the traditional Balanced Scorecard model does not necessarily suit every organisation in the same way. Charities and most government organisations differ from commercial enterprises in that their primary goals are non-financial, although they still need to be organised in a financially efficient way and appeal to donors enough to maximise their revenue-generating potential. But overall the four quadrants of Kaplan and Norton's original balanced scorecard will remain relevant to organisations of any type.

The key is that these perspectives are not seen in isolation to each other but as an integrated set of goals that support each other. The best way to achieve that is to map the goals into a strategy map.



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Written by

Bernard Marr

Bernard Marr is a bestselling author, keynote speaker, and advisor to companies and governments. He has worked with and advised many of the world's best-known organisations. LinkedIn has recently ranked Bernard as one of the top 10 Business Influencers in the world (in fact, No 5 - just behind Bill Gates and Richard Branson). He writes on the topics of intelligent business performance for various publications including Forbes, HuffPost, and LinkedIn Pulse. His blogs and SlideShare presentation have millions of readers.

 

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