Question Tag: Non-Financial Metrics

Balanced Scorecard Approach:

The balanced scorecard is a strategic management technique for communicating and evaluating the achievement of the strategy and mission of an organization. It comprises an integrated framework of financial and non-financial performance measures that aim to clarify, communicate, and manage strategy implementation. The balanced scorecard focuses on four key perspectives:

1. Financial Perspective:
   This perspective considers how the organization appears to shareholders, focusing on value creation through revenue growth, cost reduction, and asset utilization. It aligns financial objectives with the business strategy to drive long-term shareholder value.
2. Customer Perspective:
   This perspective assesses how the organization appears to customers. It identifies customer and market segments in which the business competes, emphasizing customer satisfaction, retention, and market share. Success in this perspective is linked to achieving revenue objectives.
3. Internal Business Processes Perspective:
   This perspective focuses on the internal processes that the organization must excel at to achieve its financial and customer objectives. It includes the innovation process, operations process, and post-sales service process, ensuring that internal processes are aligned with customer and financial goals.
4. Learning and Growth Perspective:
   This perspective examines the organization’s ability to innovate, improve, and learn, which are critical for long-term growth. It includes employee training, organizational culture, and knowledge management, ensuring that the organization can sustain its operations and adapt to changes in the environment.

The balanced scorecard translates an organization’s strategy into specific objectives and performance measures across these four perspectives, ensuring a holistic approach to performance management.

(Total: 5 marks)