A balanced scorecard refers to a planning and management tool use in a variety of industries, businesses, non-profit organizations as well as in governments. The purpose of this tool is to ensure that the activities of the organization are strategically aligned to the overall vision of the entity. In addition, the tool is useful in promoting the external and internal communications of the entity. The tool can also be critical for monitoring the performance of the entity to ensure it is achieving its strategic goal.
Every balanced scorecard system requires the entity to view itself from four different perspectives. The entity should use these four perspectives to create performance metrics, gather data, analyze it, and adapt useful elements gained relative to the perspectives.
Learning & Growth
This is the first perspective on the scorecard and entails self-improvement for both the individual and the corporation. Self-improvement on this scale is achievable through employee training, and enhancing the cultural attitudes of the company as a whole. From this perspective, the main resource for the company is a knowledgeable workforce. Thus, the management is required to create an atmosphere where the workers are in a continuous learning process.
The management should design performance metrics that guide the channeling of funds towards training programs for all of the employees, including those in the management team. In addition, a system of mentorship should be put in place to enhance the exchange of critical skills amongst the employees. Improved communication and technological skills are also critical for a knowledge-worker entity, and should be properly measured to determine the progress the company is making towards improving the two.
Financial Perspective
The balanced scorecard also calls for the entity to view itself from a financial perspective. The entity requires accurate financial data available when it is needed in order to make accurate forecasting decisions. Risk assessment and cost-effectiveness financial data should also be provided to the entity at appropriate times in order to make the managerial function more effective in the organization.
However, businesses are warned from over-focusing on the gathering and processing of financial data as this diverts attention from the other three perspectives, which are also critical in the achievement of the balanced scorecard.
Business Process Perspective
The internal business processes of the organization will also need to be balanced. The management should design and employ metrics that allow it to monitor how well the internal processes of the business are running. The metrics will also give the management the opportunity to gauge whether the services and products that the company offers matches the demands and requirements of the target customers. It is advisable that an internal consultant, one who is familiar with the internal running of the business, creates the metrics to monitor the business from the perspective of internal processes.
Customer Perspective
The last perspective focuses on prioritizing and enhancing customer satisfaction. Poor performance on the customer perspective is a clear indication that the company will begin to decline unless appropriate measures are put in place. Developing metrics for this perspective will include analyzing customers according to demographics, tastes and preferences, income, as well as the channels used to deliver the product or service to the final consumer.