The Financial Perspective In A Business Commerce Essay


According to Atrill and McLaney (2009:335), this aspect of the balanced scorecard will specify the financial returns deemed by the organisation's shareholders as well as return on capital employed (ROCE), operating profit, sales revenue growth and capital acquisition (Alkaraan, & Northcott, 2006: 173-179).

The customer perspective

Key to the customer perspective is the need to 'leverage relationships across different business units to offer the customer lower prices, better access to goods and services, and more complete offerings' (Kaplan & Norton, 2006:104), as illustrated by the case of McDonald's. Furthermore, this area of the balanced scorecard attempts to identify the kind of customer or market the organisation wishes to serve and as a result will devise measures to gauge customer satisfaction as well as record new customer growth levels (Atrill & McLaney, 2009:335).

The process perspective

This aspect of the balanced scorecard deals with the synergies gained through sharing common processes (Kaplan & Norton, 2006:103), e.g. purchasing, manufacturing, distribution and research that can capitalise on economies of scale or core competences to leverage advantage (Slack, Chambers & Johnston, 2007:73). In addition, this aspect of the balanced scorecard will feature measures to gauge the percentage of sales derived from new products, time to market details, product life cycles times as well as response times to customer complaints (Atrill & McLaney, 2009:335).

The learning and growth perspective

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Atrill & McLaney (2009:335) state that this area of the balanced scorecard focuses on leveraging value from 'human capital development'. Essentially, it is the identification of those people, systems and procedures that are deemed necessary for long-term growth. In order to assess this, there ought to be measures such as employee motivation, employee skill profiles, staff turnover levels and career development that create intangible assets that support cross-unit collaboration (Johnston & Stoughton, 2009:564-590) and, ultimately, the organisation as a whole.

Evaluation of the four perspectives

Atrill and McLaney (2009:335) point out that the balanced scorecard is not prescriptive of any particular objective or measure that should be implemented across the board. This is probably due to the fact that organisation is a diverse entity made up of different business units that consist of different organisational structures and operate in different business environments and, as a result, it would be prudent to allow such units to develop their own balanced scorecards to reflect these differences (Kaplan & Norton, 2006:104). However, from a corporate level, the balanced scorecard represents a pyramid approach to setting objectives and measures (based on environmental factors) that cascade down to all the business units in the organisation but still maintain linkages with the original "master "or corporate scorecard. Although the balanced scorecard incorporates other measures (i.e. process) these do not detract from the overall of importance of the financial perspective, but relate back to it in the form of cause-and-effect relationships. For instance, an investment in staff development (learning and growth perspective) may lead to an improvement in customer service being offered (process perspective) that is registered in increased customer satisfaction (customer perspective) that is ultimately represented in increased sales and profits (financial perspective) (Atrill & McLaney, 2009:337).

The line of best fit?

It would be difficult to allocate the balanced scorecard to the notion of best fit vis-à-vis the four perspectives (as outlined by Slack, Chambers and Johnston (2007:67-70)), as the strategic themes used are applicable throughout the organisation. Despite that, I would venture to say that the balanced scorecard does lend itself quite nicely to the market perspective as well as the operations resources perspective.

Corporate strategy and the balanced scorecard

As mentioned above, the balanced scorecard can be allocated to all four perspectives on operations strategy outlined by Slack, Chambers and Johnston (2007:64). For example, the top-down approach can be supported by the corporate balanced scorecard in order to articulate what objectives (i.e. the who, what, when, where, how much questions) will define the initial corporate strategy that the organisation wishes to pursue. Alternatively, a balanced scorecard developed by a business unit (i.e. bottom-up approach) may reflect its need to overcome day-to-day constraints (i.e. the level of skilled people available to do a particular job in the local job market) or promote order-wining capabilities (e.g. capitalise further on a core competence, such as distribution). This could, in turn, act as a catalyst for emergent strategies (Slack, Chambers & Johnston, 2007:64). As for a market/customer perspective (Slack, Chambers & Johnston, 2007:67), the balanced scorecard's customer objectives and measures will, needless to say, prove useful in identifying competitive factors (i.e. delivery, time, production specification, etc.) that can be interpreted as key performance objectives contributing to an organisation winning more custom. This could, in turn, act as a catalyst for emergent strategies allowing an organization to determine the degree of possible segmentation in the market and address it (Slack, Chambers & Johnston, 2007:67-70). Finally, the learning and growth objectives and measures of the balanced scorecard could prove extremely useful in providing a better understanding of the resources and capabilities within an organisation. This will allow the said organization to leverage added value from its business unit's core competences and intangible resources (i.e. relationships with suppliers and customers) to make headway in the market (Kaplan & Norton, 2006:104). However, Child (2008:87) offers a cautionary word of warning about focusing on one aspect of the scorecard (i.e. core competences) at the expense of the other objectives. He cites the Hatfield derailment in 2000, as an example of uneven focus and poor integration of strategies. However, by the same token, Child (2008:90) also says that good integration of strategies (i.e. corporate, business, functional and emergent) can facilitate 'dynamic capabilities' that will allow an organisation to 'seize new opportunities allowing it to reconfigure itself and achieve sustainable competitive advantage.'


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It would be wrong to see operations strategy as originating from one particular source, e.g. top-down. Clearly, the business unit's operations strategy is open to many influences from the business environment as well as internal/external organisational forces. However, if the balanced scorecard is designed well (Atrill & McLaney, 2009:337-339), it can help the said business unit develop useful objectives and measures by which to gauge and improve performance that benefit the organisation financially as a whole and provide a link between strategy and structure (Kaplan & Norton, 2006:104).