The balanced scorecard is a strategic management performance metric that helps companies identify and improve their internal operations to help their external outcomes. It measures past performance data and provides organizations with feedback on how to make better decisions in the future.
Key Facts
- Financial Perspective: This perspective focuses on financial performance measures that indicate the organization’s success in achieving its financial goals. It includes metrics such as revenue growth, profitability, return on investment, and cash flow.
- Customer Perspective: This perspective looks at how the organization is meeting the needs and expectations of its customers. It includes measures related to customer satisfaction, customer loyalty, market share, and customer retention.
- Internal Process Perspective: This perspective examines the internal processes and operations that drive the organization’s ability to deliver value to customers. It includes measures related to process efficiency, quality, innovation, and operational excellence.
- Learning and Growth Perspective: This perspective focuses on the organization’s ability to learn, adapt, and improve over time. It includes measures related to employee training and development, employee satisfaction, knowledge management, and organizational culture.
Financial Perspective
The financial perspective focuses on financial performance measures that indicate the organization’s success in achieving its financial goals. It includes metrics such as revenue growth, profitability, return on investment, and cash flow.
Customer Perspective
The customer perspective looks at how the organization is meeting the needs and expectations of its customers. It includes measures related to customer satisfaction, customer loyalty, market share, and customer retention.
Internal Process Perspective
The internal process perspective examines the internal processes and operations that drive the organization’s ability to deliver value to customers. It includes measures related to process efficiency, quality, innovation, and operational excellence.
Learning and Growth Perspective
The learning and growth perspective focuses on the organization’s ability to learn, adapt, and improve over time. It includes measures related to employee training and development, employee satisfaction, knowledge management, and organizational culture.
References:
- What Is a Balanced Scorecard (BSC), How Is It Used in Business? (https://www.investopedia.com/terms/b/balancedscorecard.asp)
- The Four Perspectives of the Balanced Scorecard – Balanced Scorecard Institute (https://balancedscorecard.org/bsc-basics/articles-videos/the-four-perspectives-of-the-balanced-scorecard/)
- The Balanced Scorecard—Measures that Drive Performance (https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2)
FAQs
What are the four dimensions of the Balanced Scorecard?
The four dimensions of the Balanced Scorecard are the Financial Perspective, Customer Perspective, Internal Process Perspective, and Learning and Growth Perspective.
What does the Financial Perspective measure?
The Financial Perspective measures the organization’s financial performance, including metrics such as revenue growth, profitability, return on investment, and cash flow.
What does the Customer Perspective measure?
The Customer Perspective measures how well the organization is meeting the needs and expectations of its customers, including metrics such as customer satisfaction, customer loyalty, market share, and customer retention.
What does the Internal Process Perspective measure?
The Internal Process Perspective measures the efficiency and effectiveness of the organization’s internal processes, including metrics such as process efficiency, quality, innovation, and operational excellence.
What does the Learning and Growth Perspective measure?
The Learning and Growth Perspective measures the organization’s ability to learn, adapt, and improve over time, including metrics such as employee training and development, employee satisfaction, knowledge management, and organizational culture.
Why is the Balanced Scorecard important?
The Balanced Scorecard is important because it provides a comprehensive view of an organization’s performance, taking into account both financial and non-financial factors. This helps organizations to identify and address weaknesses and to make better decisions about how to allocate resources.
How can the Balanced Scorecard be used to improve organizational performance?
The Balanced Scorecard can be used to improve organizational performance by helping organizations to:
- Identify and prioritize strategic goals
- Develop and implement strategies to achieve those goals
- Measure and track progress towards those goals
- Make adjustments to strategies as needed
What are some examples of organizations that use the Balanced Scorecard?
Some examples of organizations that use the Balanced Scorecard include:
- General Electric
- Microsoft
- Coca-Cola
- Citigroup
- Hewlett-Packard