This principle applies to both business/IT processes (operations) and the bottom line (finances). The Balanced Scorecard is an excellent tool to integrate these perspectives.

Historically, financial measures have faced criticism from operations teams due to their well-documented limitations—they are often backward-looking and do not capture the full picture. Operations leaders have argued: "Forget financial measures. Focus on operational metrics like cycle time and defect rates; financial results will follow." 

But in reality, it's not that simple.

Some companies have shown significant improvements in manufacturing capabilities—such as quality, speed, and performance—but these enhancements haven't necessarily translated into increased profitability. Their operational achievements were real, yet they failed to capitalize on them financially.

This disconnect between operational excellence and disappointing financial results can create frustration among senior executives. The hard truth is that if improved operational performance isn't reflected in the bottom line, leadership needs to reexamine their underlying strategy and mission.

Managers require a balanced view of both financial and operational measures. No single metric can provide a complete picture or focus attention on the critical areas of the business.

The Balanced Scorecard includes financial measures that reflect past results, but it also complements these with operational metrics related to customer satisfaction, internal processes, and organizational learning and innovation—the drivers of future financial performance.

Firstly, the scorecard consolidates various elements of a company's strategic agenda into a single management report. It forces managers to pinpoint the most critical measures. By focusing on a small set of key measures, the Balanced Scorecard helps managers concentrate on what truly matters. Instead of numerous metrics, it emphasizes the right ones.

Secondly, it guards against suboptimization. By requiring senior managers to consider all operational areas together, it reveals whether improvements in one area might be achieved at the expense of another.

The Balanced Scorecard addresses four fundamental questions:

• How do customers see us? (Customer Perspective)

It prompts managers to translate their mission statement into specific metrics that matter most to customers—typically focused on time, quality, performance, and cost, all aligned with Lean Six Sigma principles.

• What must we excel at? (Internal Processes)

Managers need to identify and prioritize the internal operations essential for satisfying customer needs.

• Can we continue to improve and create value? (Innovation and Learning)

Metrics such as the percentage of sales from new products help evaluate innovation. If sales from new offerings decline, it signals potential issues in product design or launch processes.

• How do we look to shareholders? (Financial Perspective)

If operational improvements do not lead to better financial results, executives must revisit their strategy and execution plans. Excess capacity must either be leveraged to increase revenue or eliminated through cost reduction to ensure operational gains impact the bottom line.

The Balanced Scorecard—Measures that Drive Performance

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