Balanced Approach Theory Characteristics

Balanced Approach Theory Characteristics

1.    Long Term Measurement

Performance is measured in relation to long term objectives. The basic criteria of balance approach is achievement of long term objective, however, short term objectives are given due consideration to achieve long term objective.

2.    Financial & Non financial Aspects

Organization has financial and non financial aspects. Primary aspect is financial aspect, however, non financial aspect should also be given due consideration.

3.    Setting Targets

In balance approach targets are set for each aspect of the business. Organization tries to achieve the set targets.

4.    Conflicting objective

In balance approach there may be conflicting objective and therefore a balanced approach is recommended to achieve long term objective. This balanced approach is key to achieve the long term objective in a balance way.

5.    Four aspect

In balanced approach there are four aspect of organization i.e. customer prospect, internal prospect, innovation & learning and financial aspect. For each aspect measuring tool are defined or identified.

6.    Customer Prospect

Organization must identify the customer value and prioritization. In simple term organization must identify the customer value. The customer value may be measured by customer satisfaction, customer retention, customer addition, etc.

7.    Internal prospect

Second prospect is to identify the process required to satisfy customer value or demand from the organization. Measure for internal prospect may include material wastage controls, internal controls, etc.

8.    Innovation & Learning

Third prospect is creating value for the customer, which is off course is not possible without innovation process. Possible measure of innovation & learning is product quality, employee satisfaction, employee efficiency, etc.

9.    Measure the Value

Fourth aspect is to measure the value created by the organization i.e. increase in profitability or earning per share.