The balance scorecard is used as a strategic planning and a management technique. It is widely used in many organizations, regardless of their scale, to align the organization’s performance to its vision and objectives. The scorecard is also used as a tool which improves the communication and feedback process between the employees and management, and to monitor performance of the organizational objectives. There are four different perspectives of balance scorecard which are financial performance, customer knowledge, internal business processes, and learning and growth.
Each perspective represents a different aspect of the business organization in order to operate at optimal capacity. Financial perspective is about how does the firm look to shareholders. This is concerned with the shareholders view of performance. Shareholders are concerned with many aspects of financial performance. Amongst the measures of success are market share, revenue growth, profit ratio, return on investment, economic value added, return on capital employed and profitability. Customer perspective is about how do customers see the firm.
This perspective focuses on the analysis of different types of customers, their degree of satisfaction and the processes used to deliver products and services to customers. Particular areas of focus would include customer service, customer retention and customer satisfaction. Internal perspective is about how well it manages its operational processes. This seeks to identify how well the business is performing, whether the products and services offered meet customer expectations, and the critical processes for satisfying both customers and shareholders.
Learning and growth perspective is about can the firm continue to improve and create value? This perspective also examines how an organisation learns and grows. This perspective is concerned with issues such as can we continue to improve and create value? In which areas must the organisation improve? How can the company continue to improve and create value in the future? What should it be doing to make this happen? The concerns of balanced scorecard are long term with short term concerns, financial with non-financial concerns, and internal with external concerns.
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