Kaplan and Norton 4 four perspectives of the balanced scorecard, Its Purpose & Benefits
Balanced scorecard (BSC) is an important and prime tool used for measuring performance invented by Kaplan and Norton. Balanced Scorecard and its four 4 perspectives helps in dealing with strategic planning and performance management. The employer or the Management measure each employee productivity, performance and ability by using balance score card methods and decide the performance appraisal. The Balanced scorecard helps out in driving the financial and non financial outcome, which indicates the performance and strategic output.
Balance score card plays an important and critical role in strategic planning and performance management. Balance score card is regularly being used and it comes in the top ten management tools used by the various organizations to measure performance management worldwide.
Benefits of using Balanced Scorecard 4 (four) Perspectives:
- It is used to track and record the data.
- It helps to measure the financial and non financial inputs and outputs.
- BSC is very successful in measuring performance.
- It helps in better strategic planning
- It provides a powerful framework for building communication strategy
- The balanced scorecard helps companies to better align their organizational structure.
- It also helps identifying various Problem points / shortfalls where the improvements are required for better results.
Kaplan and Norton balanced scorecard 4 (four) perspectives help an organization for developing strategic planning and reporting culture and methodology within the organization to address four most important part of the business, these perspectives are:
- The Financial perspective
- The Customer perspective
- The Internal Process perspective
- The Learning and Growth perspective
The four 4 perspectives of Kaplan and Norton Balance Scorecard theory provides a wide clear picture about the issues require immediate attention and on the basis of which a company decide what to implement where to implement and how to implement. These angle and perspectives can be understood one by one :
The financial perspectives of Balanced Scorecard are helping to understand very important areas such as :
- Company’s turnover
- Profit and loss margins
- Fixed cost, variable cost and other costs
- Working capital of organization
- Investment capital
- Annual growth of revenue
- Market share
- Net and gross profit ratio
Customer Perspectives – covers the important parameters taken by organization are:
- Product offering and service offering
- Brand identity and brand image
- Relationship with customers existing or new
- Providing customer services
- New product and services
- Penetration into new markets
- Customer satisfaction and retention of customers
- Customer loyalty
- Quick response on customer query and complaints
Internal Business Perspective - The focus areas are:
- Operations Management Process
- Innovation Process
- Customer Relationship Process
- Regulatory & Environmental Process
Learning and growth perspective - broken into following components
- The Human capital
- The Information capital
- The Organizational capital
How Goals can be achieved by using Balance Scorecard in Performance Management:
The balanced score card helps to evaluate the performance of the employee in following ways:
- What is the strategic plan?
- How they are implementing it and on what respect?
- What is the financial investment and return ratio?
- What is the time invested?
- What is the new product developed?
- What is the feedback from customers?
The strategic evaluation done through balance score card is:
- What is the outcome of strategic implementation?
- What is the feedback from customers?
- How we can do it in a much better way?
- How we can develop the new products?
- What are the improvements and changes required?
- How to balance the stake holders and financial output?
- How we can develop the learning process in a much better way?
At Last, The Balance scorecard also helps in bringing overall development of employees- their capability, managerial skills, leadership, skills and competencies.
Balance score card can play very important role in finding the leadership quality among the employees, their capability, their outcome and their development which helps the senior management to decide to do their performance appraisal. Balance scorecard is tools which provide an opportunity to move out of traditional barriers and reach new heights of success as this process helps in continuous development and progress in business.
