Balanced Scorecard - Customer Perspective

The scorecard process starts with the senior executive management team working together to translate its business unit's strategy into specific strategic objectives. To set financial goals, the team must consider whether to emphasize revenue and market growth, profitability, or cash flow generation. But especially for the customer perspective, the management team must be explicit about the customer and market segments in which it has decided to compete. For example, one financial institution thought its top 25 senior executives agreed about its strategy: to provide superior service to targeted customers. In formulating customer objectives for the scorecard, however, it became clear that each executive had a different definition as to what superior service represented and who were the targeted customers.

The process of developing operational measures for the scorecard brought consensus among all 25 executives as to the most desirable customer segments, and the products and services the bank should offer to those targeted segments. With financial and customer objectives established. an organization then identifies the objectives and measures for its internal business process. Such identification represents one of the principal innovations and benefits of the scorecard approach. Traditional performance measurement systems, even those that use many nonfinancial indicators. focus on improving the cost, quality, and cycle times of existing processes.

The Balanced Scorecard highlights those processes that are most critical for achieving breakthrough performance for customers and shareholders. Often this identification reveals entirely new internal processes that the organization must excel at for its strategy to be successful.

The final linkage, to learning and growth objectives, reveals the rationale for significant investments in reskilling employees, in information technology and systems, and in enhanced organizational procedures. These investments in people, systems, and procedures-generate major innovation
and improvement for internal business processes, for customers, and, eventually, for shareholders.