Balanced scorecard: the four perspectives

A look at the four perspectives used to view an organisation in the original balanced scorecard model.


The basic principles of Kaplan and Norton's original balanced scorecard model have proved hugely influential on subsequent thinking about the subject. While individual organisations tailor the quadrant of perspectives to suit their own circumstances, the general spread of viewpoints has changed little - and is worth examining.

• The business process perspective
  Balanced scorecard measures based on this perspective help managers see how well their business is running and whether its day-to-day activities support the organisation's key goals.
  
  There are two kinds of business processes in balanced scorecard terms: mission processes - those that enable the delivery of the organisation's overall mission (making them more critical, and often unique, in a non-profit organisation); and support processes, which are the repetitive tasks people carry out in the course of their work and can range from the specialised to the generic.

• The learning and growth perspective
  This angle looks at the training of an organisation's people, and its shared corporate attitudes to self-improvement. Measuring development in this area allows managers to use the balanced scorecard to identify where to focus training funds to make them most effective.
  
  In addition to training, an organisation can use concepts like mentoring to share learning and best practice and foster the spread of shared corporate cultural values.

• The customer perspective
  Measuring a company's performance against the needs of its customers seems so self-evident today that it is hard to comprehend how revolutionary the idea was when the balanced scorecard idea was introduced in 1991. But it was Mobil Corp's need to do just that that led them to the concept, helping it become established as a valid management tool.
  
  Unlike financial reporting, which looks to the past, customer satisfaction metrics can point to future performance - so a good set of results from this perspective can suggest future financial gains, while the reverse could indicate the onset of a financial decline.

• The financial perspective
  Timely and accurate financial data is always needed by an organisation (apart, of course, from being a legal requirement for a trading company). But too much should not be read into financial data alone; its role is as part of a balanced perspective - hence the balanced scorecard.

Different balanced scorecards for different organisations
Of course, the traditional balanced scorecard model does not suit every organisation in every way. Charities differ from commercial enterprises in that their primary goals are non-financial, although they still need to be organised in a financially efficient way and appeal to donors enough to maximise their revenue-generating potential.

A military organisation needs to be able to implement directives quickly and effectively; a government agency's principal focus might be delivering service improvements to the public. But each organisation will remain relatively fixed to the spirit of Kaplan and Norton's original balanced scorecard quadrants.

Balanced scorecards at the Advanced Performance Institute The Advanced Performance Institute is a world-leading independent research and advisory organisation specialising in organisational performance. The institute provides expert knowledge, research, consulting and training on concepts like balanced scorecards, performance measurement and corporate performance management.

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