What is the balanced scorecard?

Darryl Bachmeier
Mar 22, 2019

Balanced scorecard is a strategic management tool modeled after successful organizations. It was found that successful businesses have clear vision and do not only rely on the financial performance to determine their success. The balanced scorecard brings a balance between financial and non-financial measures. It is made up of four perspectives, financial, customers, internal processes and knowledge and growth. These four perspectives act as four legs to a table, all must be working together or the company will lose balance.

Balanced scorecard allows management to make better business decisions. It makes it easier for the business to find areas it needs to make improvements. It gives a holistic view of the company. In developing strategic goals, balanced scorecard gets management to consider changes in one area may affect another.

Each of the perspectives contain their own strategic objectives, targets and performance measures to determine success or failure. Performance measures should be done regularly to get a pulse of the company. Some measures will be trailing and others will be leading.

One of the great things about balanced scorecard is that the measures can be applied against different locations or business units.

Balanced scorecard promotes continuous improvement. Performance measures are meaningful and management can compare actual values from goals.

The financial perspective looks at producing value for shareholders. It includes revenues, earnings, cash flow, market share and sales growth.

The customer perspective focuses on how customer see the company. It includes customer satisfaction, types of customers, customer feedback, customer loyalty, customer retention, and customer service and customer complaints.

The internal processes perspective looks at the internal workings of the company. It includes productivity rate, quality measure, employee performance, morale, turnover, employee retention, employee satisfaction, bottlenecks, delays and wastage.

The knowledge and growth perspective looks at how the company can improve. It includes training, culture, employee’s education and competitive advantage.

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