The four perspectives in business productivity evaluation
The new and revolutionary idea about balanced scorecard was inclusion of nonfinancial indicators to the set of KPIs to be evaluated in order to track performance and the way the company implements its strategic goals. Balanced scorecard was not just another performance management system as it introduced in new idea. It helped management of different companies to get distracted from traditional financial and accounting figures. BSC introduced nonfinancial indicators which represented operational management. These nonfinancial indicators are factors that directly influenced financial performance of the company. It became possible to link operational management and strategic goals of the company through evaluation of key performance indicators in the four categories/perspectives: financial, customer, internal processes, learning and growth.
Balanced Scorecard perspectives
It should be noted that the last three perspectives are directly linked and subordinated to financial perspective. It is not a secret that almost every company and any business pursues financial goals. In general, the goal of any business is making money. So, improvements in the customer, internal processes and learning and growth perspectives of should result in greater revenue, larger market share, attraction of new customers, increasing share value, improving company image and reputation etc. In other words, all measures and all response actions are subordinated to company strategic goals.
However, financial perspective and its measures and objectives should not be ignored. At the same time obsession with figures will not yield positive results. Thus, KPIs and objectives in the three other perspectives should focus on implementation of financial goals.
In measuring business productivity, it is very important to take into account business life cycle. Some businesses are in the development stage while others are already mature. Sure, business is a different stages required different metrics and different response actions. For example, a developing business requires investment, new customers and new products/services, while the image your business aims at increasing cash flow, i.e. getting benefit from private investments.
Business life cycles require different metrics and goals
The wrong choice of key performance indicators and strategic goals can become a catastrophe for the company using balanced scorecard. In such a way this system we’ll be helpless and useless. One needs to keep goals realistic and select measures that are really important to a particular business or business unit.
That’s why, before making decision to implement balanced scorecard it is imperative to check if the company is ready to use it and if the company really needs it.
Tags: balanced scorecard implementation, bsc perspectives, key performance indicators
