The four perspectives
- Financial: how we look to shareholders or owners: revenue, margin, cost, asset use.
- Customer: how customers see us: on-time delivery, quality, service, retention.
- Internal business process: what we must excel at: cycle time, yield, safety, productivity.
- Learning and growth: how we sustain the ability to improve: skills, engagement, systems, culture.
The perspectives are causal. Capable, engaged people improve processes; better processes satisfy customers; satisfied customers produce financial results. The strategy map draws those arrows.
What goes in each perspective
For each perspective the scorecard lists a few objectives, the measures that show progress, the targets for each measure, and the initiatives (projects) that will move them. A good scorecard has fewer than twenty measures in total; a long one is a dashboard, not a scorecard.
Balanced scorecard and hoshin kanri
Both connect strategy to measures. Hoshin kanri adds the catchball process that negotiates targets down through the levels and the annual review that renews them. Many organisations use the scorecard to state the strategy and hoshin kanri to deploy it.
Common mistakes
- Measures chosen because they are available rather than because they matter.
- No strategy map, so the four lists do not explain each other.
- Reviewed quarterly by the executive team and invisible to everyone else.
Balanced scorecard and daily management
A scorecard that stops at the executive level changes nothing on the floor. The link is the tier structure: the site's scorecard measures become the Tier 3 board, the drivers of those measures become the Tier 2 and Tier 1 measures (often as SQDCP), and the initiatives become projects with owners reviewed in the same meetings. The scorecard then has a daily pulse rather than a quarterly report.