Balance Scorecard: The Four Key Perspectives
Robert Kaplan and David Norton examined hundreds of businesses across the world and noticed that most companies were inclined to manage their business based simply on financial measures. According to quickscore “Financial measures are defiantly important, but they only report part of the organization picture.” …show more content…
A few elements should be considered for each of these perspectives such as goals, achievements, and initiatives. These elements are interrelated and can determine areas of weaknesses, strength, places for improvement, and predict performance.
1. The Financial Perspective: How do we look to shareholders? Are we making money?
The focus of financial perspective is financial performance measured by financial accounts. Key performance indicators are return on capital employed, cash flow, project profitability, profit forecast reliability, and sales backing.
Revenue and productivity are valuable indicators of undertaken projects, as well as their economic results. The financial goal should be aligned with the company’s strategies. The execution and implementation of each strategy contributes to the improvement of desirable …show more content…
The first step is to choose strategic objectives within each perspective. Some example of strategic objectives are: increase sales, improve call handling time, and improve prevention of injuries. These objectives map out the company’s vision and strategy, therefore, the strategy map tells the path of an organization’s objectives. The balanced scorecard states that if a strategy has three objectives; the manager will succeed in all three. If there are four to ten objectives they succeed in one to two. If there are ten objectives you will succeed in none - a simple case of the law of diminishing return. The balance scorecard has become an extremely powerful tool to ensure alignment through strategy maps, improve communication through a unified message, and ultimately lead to a better performing organization that is in tune with its business strategy. Follow a strategy map