The Balanced Scorecard method of Kaplan and Norton is a strategic approach and performance management system that enables organizations to translate a company's vision and strategy into implementation, working from 4 perspectives:

1. Financial perspective,
2. Customer perspective,
3. Business process perspective,
4. Learning and growth perspective.

The Financial Perspective

Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it.

In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.

There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

The Customer Perspective

Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business.

These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.

The Business Process Perspective

It refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately.

In addition to the strategic management process, two kinds of business processes may be identified: a) mission-oriented processes, and b) support processes.

Mission-oriented processes are the special functions of government offices, and many unique problems are encountered in these processes. The support processes are more repetitive in nature, and hence easier to measure and benchmark using generic metrics.

The Learning and Growth perspective

This includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode.

Government agencies often find themselves unable to hire new technical workers and at the same time is showing a decline in training of existing employees.

Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools such as an Intranet.

The integration of these four perspectives into a graphical appealing picture have made the Balanced Scorecard method very successful within the Value Based Management philosophy.

Related Links

Balanced Scorecard Institute