The Four Perspectives of Business
Keeping your eye on what’s important
It’s a universal fact: what we measure gets done. But beware-measuring the wrong thing can not only lead to disaster, but waste valuable time and money.

The key element to measuring success is not focusing solely on the financial results of your company but also focusing on the human and cultural aspects of your company. These elements are the true indicators of a company's future performance and ultimately affect those bottom-line financials. For example, do your employees understand your company strategy and how their efforts affect that strategy in their daily work? Can your employees quickly adapt to key business changes while continuing to provide excellent service to your customers?

The Four Perspectives of the Balanced Scorecard forces management to focus on holistic performance metrics by balancing the financial perspective with customer, process, and employee perspectives. The Scorecard facilitates a management style that enables businesses to clarify their vision and strategy and translate them into actionable, tangible tasks. Sounds like a lot of work right? While it’s true that moving your business from a planning organization to an execution organization takes effort, keeping your eyes on these four simple perspectives ensures you are focusing on you and acting in your long-term best interest.  

The Four Perspectives in Detail
Perspective 1—Financial Perspective 
How do you look to your stakeholders?

Most of us are all too familiar with this perspective—and not always in a good way. The problem with using the financial perspective as your only measurement of success is that this measurement lags—it's a snapshot in time, and usually taken at the end of the month or quarter.

It's pretty hard to steer a ship, no matter what size, when all you can see is where you‘ve been. Perhaps the Titanic would make a great analogy here. "Sorry Captain, but we were so busy looking at where we were, we just didn't see that iceberg ahead!”.

Don’t take this to mean that the financial perspective it not an important one, for of course it is. The key is using this perspective in the right way: package it with the other three perspectives to see the holistic view of your business, and don’t use it as a sole measure of your success.

Perspective 2—Learning and Growth Perspective
How do you sustain your ability to change and improve?

Is your organization a learning organization? You might answer “Of course we are! Our employees receive excellent training.” or “Sure. We’ve captured and documented all of our processes.” 

Sorry, but that does not make your organization a learning organization. In his book The Fifth Discipline: The Art and Practice of the Learning Organization¹, Peter Senge defined a learning organization as “human beings cooperating in dynamical systems that are in a state of continuous adaptation and improvement.”

The concept of the learning organization is that the successful organization must, and does, continually adapt and learn in order to respond to changes in environment and to grow².

Let’s go back to the Titanic again. As a learning organization (especially on a maiden voyage), the crew might have asked “What could go wrong?” The answer might have been “Well, since we’re traveling in freezing water, we might just hit an iceberg. Maybe we should post a watchman to look out for them.” 

How about your organization? Are you sailing in uncharted waters for the first time? Have you truly asked yourself “What could go wrong?” Do you have a plan in place in case something does? Do your employees have a sense of security when the waves hit or do they go into a state of panic?

If you try to plan for every contingency your plan will never get off the ground! Empower your employees through learning and growth to act toward a centralized plan that they can understand. 

Perspective 3—Internal Process Perspective
What are the areas in which your organization needs to excel?
 
Have you ever undergone a process change and spent thousands of dollars just to see it go nowhere? If you answered “no.” please call us. We need to know your secret!

Over the last decade, organizations have allocated large amounts of money and resources simply trying to increase productivity. Some have upgraded their information technology or implemented business process improvement theories, such as Baldrige, Six SigmaÒ, Lean, and Total Quality Management. According to the Federal Reserve, the net result is that as a nation we have doubled our average labor productivity over the past decade!

What we don’t know, however, is what it cost us to double our production? Why are process changes so difficult and costly to implement?

The words change and risk often get in the way. In addition, because of a lack of focus on the learning and growth perspective, organizations don’t deposit enough time and money to ensure their employees can adapt and respond quickly.

So, by now we know that steering a ship like the Titanic should not be done by looking to the past. We also know it’s a pretty good idea to look out for icebergs in freezing water. But what if we didn’t have a process for getting the iceberg data to the captain in time to make the correction? Disaster would still strike. A plan without a process is a waste of time.

Let’s face it, you can’t prevent change from happening, but good internal processes can help make sure you don’t lose the whole ship.

Perspective 4—Customer Perspective
How do you look to your customers?

How would you answer this question: What do our customers see when they look at us? As you contemplate your answer, take into consideration the following questions:
• Does your organization have a culture that focuses on the customer?
• Are your employees empowered to be innovative with customers? 
• Are your customers talked about constantly by your employees?
• Do your customers see a focused organization?
• Do you meet regularly with your customers? As much as your competitors do?

The two most important elements of your customers’ perspective are culture and innovation. These elements can be difficult to measure, so organizations tend to place some subjective measures to somehow balance them out.

This perspective is far too important for a company’s survival in today's global economy to simply guess at it. In order to increase financial performance, organizations need actionable ways to determine a customer’s perspective and enhance customer culture. This is primarily determined through your customer’s experience.

It’s safe to say that the customer experience on the Titanic was not good! In times like this, we like to find and assign blame; however, blame isn't really one of the four perspectives of business. Instead, ask your customer—before it’s to late—how they think you are performing. They will be excited at the chance to provide input and will feel important that you asked them.

Businesses must constantly revisit the Four Perspectives of Business to continually see how they are doing. For example, if your captain is compensated on travel time, he or she may overlook a few icebergs. If your crew doesn’t understand what is expected of them, how can they possibly do it correctly? And finally, if you don’t have a process, how will anything ever get done accurately?

Now it’s your turn. How well do you think you measure up against each perspective? Take this quick survey to tell us. Take survey

 1. The Fifth Discipline: The Art and Practice of the Learning Organization by Peter Senge, Doubleday, 2006

 2. Organizational Behavior  by Stephen P. Robbins, Pearson Prentice Hall: 2005