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- 10 Marks
Question
a) The aim of a balanced scorecard is to provide a comprehensive framework for translating a company’s strategic objectives into a coherent set of performance measures. It allows managers to look at the business from four different perspectives.
Required: Identify and explain these FOUR (4) perspectives.
Answer
- Customer Perspective:
- Explanation: In the customer perspective of the Balanced Scorecard, managers identify the customer and market segments in which the business unit will compete and the measures of the business unit’s performance in these targeted segments. This perspective typically includes core measures such as customer satisfaction, customer retention, new customer acquisition, customer profitability, and market share in targeted segments.
- Key Question: What do existing and new customers value from us?
- Importance: This perspective emphasizes delivering value propositions that attract and retain customers in targeted market segments.
- Internal Business Process Perspective:
- Explanation: This perspective focuses on the critical internal processes in which the organization must excel to deliver value propositions to customers and satisfy shareholder expectations of excellent financial returns. It aims to improve internal processes and decision-making, ensuring consistent levels of product and service quality.
- Key Question: What processes must we excel at to achieve our financial and customer objectives?
- Importance: It emphasizes the importance of efficient and effective internal processes to achieve strategic goals.
- Innovation and Learning Perspective:
- Explanation: The learning and innovation perspective focuses on the organization’s capacity to continue improving and creating future value. It involves developing employee capabilities, encouraging innovation, and ensuring the business can maintain its competitive position through the acquisition of new skills and development of new products.
- Key Question: Can we continue to improve and create future value?
- Importance: This perspective is crucial for long-term growth and sustainability, as it addresses the organization’s ability to adapt and innovate.
- Financial Perspective:
- Explanation: The financial perspective involves the traditional financial performance measures that indicate whether the company’s strategy, implementation, and execution are contributing to bottom-line improvement. These measures include profitability, growth, and shareholder value.
- Key Question: How do we create value for our shareholders?
- Importance: It ensures that the company’s strategy is aligned with financial objectives and that financial performance is monitored to meet shareholder expectations.
- Tags: Balanced Scorecard, Performance Measurement, Strategic Management
- Level: Level 2
- Topic: Other Aspects of Performance Measurement, Performance analysis
- Series: NOV 2020
- Uploader: Dotse