Question

what are the four measurement perspectives of a Balanced Scorecard? discuss each one

Answer 1

A balanced scorecard looks at your organization from four different perspectives to measure its health. Each of these perspectives focuses on a different side of your company, creating a balanced view of your organization.

Following are the four measurement perspectives of a Balanced Scorecard ;

1. Financial Perspective

2. Customer Perspective

3. Innovation and Learning Perspective

4. Internal Process Perspective

Financial Perspective

The opportunity of financial data usage is considered important by Kaplan and Norton. Up to date financial information is needed for every company in order to succeed. Managers should pay attention to provide proper financial data on time. The problem here is not to pay too much attention to the financial perspective as has happened to old style industrial companies before. Such actions as directing most of company’s resources into financial growth usually cause an imbalanced scorecard and companies falling into decay even down to failure in the long term.

One more thing to be noticed is that corporate systems might be very helpful to automate financial data collecting and handling. The right choice of a corporate system to implement could help reduce the cost of data processing and open opportunities to direct company’s resources into other perspectives in order to create a balanced scorecard.

Customer Perspective

Modern management studies consider client oriented business activities as an important part of a company’s strategy. The basis here is the customers’ satisfaction – unsatisfied customers will prefer the competitor’s product instead. Low performance in this perspective might cause a decay of business even if current financial and other perspectives are well performed. In order to create indicators of customer’s satisfaction special research is needed.

Innovation and Learning Perspective

This company’s activity refers to staff training and development of corporate culture. The philosophy of such concept is based on every staff member’s high educational level at our modern age of information. Oppositely to old management studies it might be effective to give more freedom to employees concerning the way how they are to execute their tasks.

Also the role of relationships between employees has became much more important than in it was considered by old style industrial companies. Psychological researches of business define corporate culture as “the character of an organization” with its unique ethical norms and managerial behaviors. Much work needs to be executed to form and support such culture.

One more thing to be noticed is extremely high speed of information technology’s perfection in our time. Sure in terms of competitive activity it becomes very important for the staff to develop their skills and get them up to date with IT tools (both software and hardware) perfection. Producers of information technology tools are trying to create easier ways to use products, but it still needs employees to be ready to study something absolutely new and be able to understand it in order to reach better performance values and improve the money spend on IT novelties’ implementation. All of this makes an innovation and learning perspective a fundamental activity for a business to succeed in long term.

Internal Process Perspective

Internal processes activity aims to form the tree of business process in order to monitor and optimize a company’s performance. It helps to improve such characteristics as the return on resources. There are several techniques of modeling the business process but it is recommended to use specialists in this sphere who also clearly understand the company’s structure in order to succeed in optimization.

Internal process perspective seems the most sophisticated activity for lots of companies’ CEOs. That is why IT market referring to business is developing so fast. With the quality of services nowadays that the information technology market could offer to business, it doesn’t seem hard to succeed in such an activity like internal process perspective. Certainly, it needs investment in such non material things, as well as in employee’s skills to operate new tools.