In the last Blog we have discussed the basics of BSC, let’s start a discussion about four perspectives of BSC.
A Balanced Scorecard looks at an organization from four different perspectives to measure its health, each of these perspectives focuses on various sides of the company and creates a balanced view of the organization.
And yes all four areas of BSC are interrelated; we cannot ignore any out of four to the success of the organization.
Financial Perspective:
This perspective views organizational financial performance and the uses of financial resources.
We need to focus on two points:
- Is the company achieving its financial goals?
- How well do the strategies and operations contribute to improving financial health?
Well, now the question is how we can measure the output from a financial perspective?
These data are always past-focused, we need to gather two types of data.
- Historical Data: How did we do last month, last week, last year, and so on.
- Current Data: How are we doing right now, Today?
For instance,
- Our net profit for the year versus last year
- Our sales revenue this year versus last year
These measures of corporate performance are based on history and also vary from organization to organization.
As the BSC is a holistic approach, any key objectives that are related to the company’s financial health and performance may include in this perspective as given below:
- Cost Saving and Efficiencies: Specified Goals: Reduced production cost 10% by 2021
- Profit Margins: increase operational profit Margins
- Revenue Sources: adding new revenue channels/department/products
In the end,
- Are you making money?
- Are your investors happy?
If yes then be happy…
The financial health of your organization may be an indicator of your past decisions but still incredibly important.
Money keeps the company alive and the financial perspective focuses solely on this.
Internal Process Perspective:
This perspective views various organizational processes and the efficiency of the particular process.
- From this view, the question should be asked what internal processes have added values within the organization and what activities need to carry in the organization (In all three perspectives).
- The internal Process perspective looks at how smoothly your business is running (Here, Efficiency is important )
- It’s all about,
- Reducing waste,
- Speeding process/ production
- Doing more with less
We need to focus on three points:
- Is the company improving the critical process?
- Are there any obstacles standing between ideas and execution?
- How quickly can you adapt to changing business conditions?
This perspective answer the question :
“what process we must excel at to satisfy our shareholders/financial Backers and customers?”
To know more about BSC please read my weekly Blog.
