Strategic Plan, Part III: balanced scorecard
Kaplan and Norton introduced the balanced scorecard in 1992 with the intent to change the way managers viewed business operations. The scorecard gave managers an all-inclusive outlook on organizational performance rather than an outlook based purely on the financial perspective. This tactic gives emphasis to balancing internal and external areas that may influence the long-term successful performance of a business.
The purpose of a balanced scorecard is to systematize and incorporate measures from numerous, significant, and interrelated perspectives. This allows marketing managers to acquire a better understanding of the measures used by strategic managers considered vital in the long term success of the organization.
The business scorecard is a method used to both measure and monitor an organization’s performance evaluation. The scorecard uses several measurements based on customer, learning and growth, internal process, and financial perspectives.
The customer is at the heart of every marketing strategy. Markets must ensure that customer satisfaction is top priority and that each customer finds complete satisfaction in his or her experience with the company. Business must seek out and recruit new customers as well as retaining their existing customers, and they must meet the needs of these targeted customers.
Managers and marketers must analyze the different type of customers, their level of satisfaction, and the methods used to supply the customer with the products or services. The organization must figure out what it needs to do to remain, or become, a customer’s chief supplier of goods or services. To accomplish this, a company must focus on customer satisfaction, retention, and service. The company should venture into new markets and continually look for new products or services to offer its customers (Balanced Scorecard Institute, 2011).
The company must set specific goals for customer perspectives. These goals could include customer loyalty, preservation, and contentment. Additionally, the business should remain reliable, efficient, and responsive in the eye of the customer.
A business can look at several metrics to determine success in terms of customer perspectives. Looking at the market share can tell a business exactly how it stands against its competitors. A large market share typically indicates a good standing with customers. Other means of measuring success through customer perspectives include customer feedback, number of complaints or returned products, and the number of returning customers. In addition, many companies find the customer satisfaction index a useful tool in determining how customers perceive his or her products (NetMBA, 2010).
The financial perspective is an important measurement for every business. Conventional financial measuring devices include shareholder value and return on investment (ROI). A return on investment is a performance measure used to assess the effectiveness of an investment or to compare the efficiencies of several investments. Shareholder value is simply the value that a shareholder can acquire from investments made into the company. The aforementioned measures are often considered old fashioned; but they have stood the test of time and are vital tools in measuring the financial success in today’s market. However, advances in technology make it easier to gather information on customers and the market, which translates into financial data. The business can align the purpose, targets, proposals, and measures of the scorecard with the company’s employees and resources (NetMBA, 2010).
According to Balanced Scorecard Institute (2011), the shareholder’s perspective on the financial situation is critical to an organization. Shareholders concern themselves with several details of financial performance. These measure include revenue growth, return on investment, market share, and profit ratio. Other measures of success include growth, cash flow, sales revenue, cost reduction, and profitability.
Learning and Growth
How an organization succeeds in terms of development and knowledge comes directly from the learning and growth perspective. A company must continually learn as it develops. Errors and mistakes within a company can prove costly; however, these mistakes often become a means of learning, and the company can put systems in place that would prevent similar error from occurring again (NetMBA, 2010).
The area of growth not only includes physical growth, but also the development and growth of personnel. Companies must ensure that employees have the knowledge and correct tools to sustain business operations, and they must prepare employees for the future.
The learning and growth perspective takes several issues into account. This perspective concerns itself with improvement. It asks if the company can continue to improve and generate value, which areas need improvement and how it should make this happen.
Learning and growth perspectives focus in the areas of the development of new products and the continual improvement of these products as well as existing products. Other perspectives to consider in the area of learning and growth are human resources, product innovation, and leadership in technology.
The success of the learning and growth perspective is measured in many areas. Such metrics include the total of new products introduced and the percentage of sales they achieve. Other metrics used are to measure the amount of ongoing training as well as the amount of tactical skills learned (Balanced Scorecard Institute, 2011).
The internal process perspective encompasses all of the operations that occur within the company. This measurement determines exactly how well the business is performing and whether customer needs and expectations are met. In addition to customer satisfaction, this measurement determines whether the shareholder’s expectations are met. The process identifies areas in which the firm stands out and the areas where it needs to improve in the future (NetMBA, 2010).
Goals for the internal process include a motivated labor force, quality of products, technological advances, improvements of fundamentals, and upholding superiority in manufacturing (Balanced Scorecard Institute, 2011).
The successes of the aforementioned goals are measured to determine their influence on internal perspectives. Such measurements include a positive change in morale, a reduction in waste, a reduction in defective units, improvements in efficiency, and a decrease in unit cost.
Customer, financial learning and growth, and internal perspectives provide data used in the development of a balanced scorecard. Managers and planners use the scorecard to gain a viewpoint of the organization’s performance. The scorecard helps managers balance the internal and external forces that could affect the long-term operations of the business. The scorecard is important in aligning the activities of the company to its vision and strategy and the aforementioned perspectives will improve communications and will guide managers in the monitoring of the company’s performance against the established strategic goals.
Balanced Scorecard Institute. (2011). Balanced Scorecard Basics. Retrieved from
NetMBA. (2010). The Balanced Scorecard . Retrieved from