What is the BSC? (Balanced Score Card)

An in-depth analysis of the four perspectives of the BSC framework

The BSC or Balanced Scorecard is a strategic control tool that allows management to monitor, evaluate and measure organizational performance.” The BSC model works with a holistic and integrated view of the business” (Dwivedi, R. et al., 2021). The BSC consists of both financial and non-financial perspectives. The non-financial perspectives are the main perspectives of the BSC and assist in providing a strategic view on managing a business (Benková, E. et al, 2021).

The balanced scorecard is measured according to goals, metrics, targets and initiatives which help prevent domineering strategic directives (Venter and Botha. 2019). The BSC has four different perspectives to analyze whether strategic goals are being achieved in a balanced way. They are as follows:

1. The financial perspective

This perspective asks the following question, “To succeed financially, how should we appear to our shareholders?” (Kaplan, R & Norton, D. 1992).

The financial perspective represents the value of an enterprise which the owners/shareholders look at as a financial investment. Financial performance measures demonstrate whether a firm's strategy, implementation, and execution are assisting in bottom-line improvements (Kaplan, R & Norton, D. 1992). Critics argue that traditional financial measures fail to improve customer satisfaction, quality, cycle time, and employee motivation which form part of the main perspectives of the BSC which relate to socio-economic factors (Dwivedi, R. et al., 2021).

Monitor the key performance indicators such as ROI, expenses, revenue, and net income daily, weekly, monthly, and annually to account for financial gains/losses caused by internal processes.

2. Internal business perspective

This perspective asks the following question, “To satisfy our shareholders and customers, what business processes must we excel at?” (Kaplan, R & Norton, D. 1992).

The internal business perspective relates to all the internal business processes that contribute to organizational goals. This perspective focuses on core capabilities that enable organizations to be competitive (Venter and Botha. 2019). Internal operations and non-financial measures such as business processes, decisions and actions contribute to the main aim of satisfying shareholders and customers. Customer satisfaction derives from business processes that encourage quality, employee skills, and productivity within an organization which in turn generates revenue and as such satisfies the shareholders. Identifying and measuring core competencies and processes are essential in the internal business perspective (Kaplan, R & Norton, D. 1992).

Do an audit on all business processes to ensure they have no problematic gaps and resolve any discrepancies by improving quality and efficiency. I would also do an inventory audit to account for any errors.

3. Learning and growth perspective

This perspective asks the following question, “To achieve our vision, how will we sustain our ability to change and improve?” (Kaplan, R & Norton, D. 1992). The learning and growth perspective focuses on sustainable growth, value creation and innovation (Venter and Botha. 2019). Encourage learning and growth within the organization by appointing mentors for employees lacking in specific skill areas. This would leave positive results in employee, customer and shareholder satisfaction.

Encourage sharing non-confidential strategic information to make employees at different levels aware and conscious of the organization's goals and the goals of their business unit. (Narayanamma, P & Lalitha, K. 2016). This would ensure employees reach their potential which would aid in employee retention, satisfaction and skill.

4. The customer perspective

This perspective asks the following questions, “To achieve our vision, how should we appear to our customers” (Kaplan, R & Norton, D. 1992). As the quote suggests, the customer perspective's main objective is customer satisfaction with their perception of the organization as the motivation for organizational goals. Keeping customers satisfied leads to financial goals and shareholder satisfaction.

Retain customers via ensuring quality goods or services as this leads to customer satisfaction and loyalty which aids in achieving long-term financial objectives.

Conclusion

The main aim of BSC and the aforementioned non-financial measures is to give an organization a more balanced view via its “modern performance evaluation procedures” (Dwivedi, R. et al., 2021). The BSC and the above-mentioned perspectives were designed to overcome the drawbacks of traditional financial indicators such as ROI (return on investment) and can be used for innovation and improvements within the business to aid in achieving business objectives.