2.9 Balanced Scorecard

Businesses put a lot of effort into developing effective long term strategy. Such strategies and the processes used to create them can be complicated and illusive. The Balanced Scorecard which was developed in 1992 by Robert Kaplan and David Norton, identifies four key perspectives which ultimately determine long term strategy.

• Financial Perspective - Includes shareholder value, economic value, net income, etc.

• Customer Perspective - Includes customer loyalty, customer satisfaction, and market share

• Business Process/Internal Perspective - Includes quality and delivery of product or service, output, production, etc.

• Learning and Growth Perspective - Includes elements of continual growth and value creation, employee skills, training, satisfaction and retention.

The Balanced Scorecard can be represented by the four legged diagram below.

To use the balanced scorecard to its full potential, goals and the actions taken to reach those goals are determined for each perspective. Creating goals and a plan of action for each of the four aspects of long term success can become the backbone of long term strategy and thus determine long term success.