The balanced scorecard is a management system aimed at translating an organization’s strategic goals into a set of performance objectives that, in turn, are measured, monitored and changed if necessary to ensure that the organization’s strategic goals are met.
A key premise of the balanced scorecard approach is that the financial accounting metrics companies traditionally follow to monitor their strategic goals are insufficient to keep companies on track. Financial results shed light on what has happened in the past, not on where the business is or should be headed.
The balanced scorecard system aims to provide a more comprehensive view to managers by complementing financial measures with additional metrics that gauge performance in areas such as customer satisfaction and product innovation.
Four balanced scorecard perspectives
The balanced scorecard approach examines performance from four perspectives.
- Financial analysis, which includes measures such as operating income, sales growth and return on investment.
- Customer analysis, which looks at customer satisfaction and retention.
- Internal analysis, which looks at how business processes are linked to strategic goals.
- Learning and growth analysis, which assesses employee satisfaction and retention, as well as information system performance.