As a simple example of how the Balanced Scorecard measures and links peformance
across its four perspectives, consider the partial scorecard produced by a small
manufacturing company that wins business on the basis of low-cost, high-quality
products that it consistently delivers on-time to its customers. The company’s most
important financial metric is return on investment, which it places in its financial
perspective, (see the following diagram). The company expects to generate increased
revenues for improving its return on investment financial measure by retaining and
expanding sales to existing customers. Therefore, it includes measures in the customer
perspective for percentage of repeat customers and the growth in sales with existing
customers.
The financial and customer measures represent the "what" of strategy, that is, what the
company wants to accomplish with its two most important external constituents:
shareholders and customers. The process perspective describes "how" the strategy will be
executed; it identifies the processes that are most important to meet the expectations of
shareholders and customers. For example, short cycle times and high-quality production
processes are necessary to achieve_exceptional on-time delivery.
Therefore, a measure of employees' skills and capabilities in process improvement is
included within the learning and growth perspective.
MISSION
A concise, internally focused statement of how an organization expects to compete and
deliver value to customers. The mission often states the reason for the organizations
existence, the basic purpose toward which its activities are directed, and the values that
guide employee's activities.
Examples :
The mission of the City of Charlotte is to ensure the delivery of quality public services
that promotethe safety, health, and quality of life of its citizens. Organizations identify
and respond to community needs and focus on the customer through the following:
• Creating and maintaining effective partnerships
• Attracting and retaining skilled and motivated employees
• Using strategic business planning
Such vision and mission statements set the general direction for the organization. They
should help shareholders, customers, and employees understand what the company is
about and what it intends to achieve. These statements however, are far too vague to
guide day-to-day actions and resource allocation decisions. Companies can make their
statements more operational when they define a strategy of how the vision and mission
will be achieved. Michael Porter, a founder and leader of the strategy field, argues that
strategy is about selecting the set of activities in which an organization will excel to
create a sustainable difference in the marketplace.
Financial Perspective
The Balanced Scorecard's financial perspective contains objectives and measures that
represent the ultimate success measures for profit-maximizing companies. Financial
performance measures, such as operating income and return on investment, indicate
whether the company's strategy and its implementation are delivering increases in
shareholder value. The company's financial performance improves through two basic
approaches: revenue growth and productivity.
One source of revenue growth is to deepen relationships with existing customers, such as
selling them additional products and services beyond the first product or service they
purchase. Companies also generate revenue growth by introducing new products, selling
to new customers, and expanding operations into new markets.