Strategic planning the balanced scorecard way looks at implementing change from various aspects of a business. These aspects are known as balanced scorecard perspectives. The basis of balanced score card is that these perspectives are interconnected and changes in one will have ramifications in the others.
Traditionally there are four perspectives:
- Financial perspective
- Customer perspective
- Process perspective
- Innovation perspective
Both the number of balanced score card perspectives and the naming of them is discretionary depending on the organisation. For example, ‘student’ may be more relevant to a university than ‘customer’.
Whatever the business financial success will ultimately be driven by human satisfaction for what is on offer. Be it students or customers, the happier they are with the product, service etc the more likely they are to spend so maximising the customer experience i.e. customer satisfaction should be the focus for change.
In pursuit of customer satisfaction employee abilities may need to be improved, processes improved and innovations implemented. Internal processes may need investment. The changes deemed necessary in the Process perspective and the Innovation perspective will drive the outcomes in the Customer perspective and ultimately the Financial perspective
With balance scorecard strategies each strategy will usually have several scorecard objectives. The perspectives are used to assist in setting the objectives. They also assist is choosing useful measures of performance so the strategy success can be determined.
Does the strategy deliver the required financial result? What will we use to measure success – profitability, return on capital employed, economic profit, growth..
What do the owners expect?
What outcomes will the strategy give to our customers? We can measure new customers obtained, existing ones retained, customer satisfaction. Without customers there is no business. What will the strategy deliver for them?
The internal processes of the organisation are often critical to the success of a strategy. The organization should do these well, improve them, work on them. Whereas the financial and customer perspective are outcomes, the process perspective is a driver. What happens here determines the outcomes achieved.
What new processes must be done to achieve the outcomes desired?
Innovation perspective (or learning and growth / renewal and development)
What skills do you need that you haven’t got, or that need improvement, to achieve your long-term goals. This perspective requires thinking of people skills, and system capabilities like what other systems do you need to achieve your strategies?
What must the organization do to ensure its long-term success? What can it do to sustain the processes so that financial outcomes continue to be achieved in the future?
With the balanced scorecard you can filter the results in any number of ways. You can concentrate on portions like the financial scorecard or customer scorecard or Innovation scorecard dealing with each balance scorecard perspective or role up to the whole business scorecard.
See how perspectives fit into the progressive implementation of the balanced scorecard with 20-20 Balanced scorecard software.
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