Accounting and Finance for Managers by Matt Bamber

Author:Matt Bamber
Language: eng
Format: epub
Publisher: Kogan Page

Financial perspective

The financial perspective considers the organization’s performance from the point of view of the shareholders. The primary concern is how well the organization is creating value for its owners. Kaplan and Norton suggested three core areas that should drive the business strategy: revenue (growth and mix); cost reduction; and asset utilization.

Customer perspective

This perspective considers the organization’s performance from the point of view of customers. The organization should understand its customer profile and the market segments in which it competes.

Internal perspective

This perspective is concerned with the internal workings of the organization and what must be done well in order to satisfy customers. It involves identifying critical business processes. Kaplan and Norton identified three key areas of added value: the innovation process; the operations process; and the post-sales process.

Learning and growth perspective

This perspective focuses on continual improvement and innovation within the organization. It involves a recognition that markets, products and processes are continually changing and that in order to continue satisfying customers and making good financial returns the organization must keep learning and developing. An emphasis of this perspective is continued investment in infrastructure – systems, organizational procedures and people, in order to provide the capability to perform and improve in the other three perspectives.

Using a balanced scorecard

The four perspectives detailed above are those initially put forward by Kaplan and Norton. In practice, each organization should choose perspectives which it feels are most appropriate to its corporate mission and strategic vision. It should then select performance measures and set targets in line with these perspectives. Extract 6.4 shows an extract from the balanced scorecard of a major electricity utility supply company.

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