Financial Objectives

Do your financial objectives define the performance expected from your strategy as well as being the ultimate targets for the other scorecard perspectives?
A. We have no strategic plan.
B. While we have a strategic plan, we do not use the Balanced Scorecard.
C. Our financial objectives define the performance expected from our strategy.
D. Our financial objectives define the performance expected from our strategy and consider some targets from the other scorecard perspectives.
E. Our financial objectives define the performance expected from our strategy as well as being the ultimate targets for the other scorecard perspectives.
[Score:  A=0, B=1, C=2, D=3 and E=4]
Why is this question important?

All objectives and measures in the other scorecard perspectives – Customer, Internal Process, Learning & Growth – should be linked to achieving one or more objectives in the financial perspective.

This linkage to financial objectives explicitly recognises that ultimately you need to measure strategy in terms of financial outcomes.  All strategies, programs, initiatives should enable the business achieve its financial objectives.

Each measure on the scorecard should be part of  cause-and-effect relationships, ending in financial objectives.

For most businesses the financial themes of

  1. increasing revenues
  2. improving costs and productivity
  3. enhancing asset utilisation
  4. reducing risk

provide the necessary linkages across all four scorecard perspectives.

The Balanced Scorecard (from Kaplan & Norton) has been to the fore of strategic planning approaches ever since it was first came to prominence in the mid-nineties …

In addition to being used by businesses large and small, Balanced Scorecards are now widely implemented by government agencies, military units, non-profit organisations, colleges and other institutions worldwide.

Traditionally planning was largely ‘budgeting’ – expressing the roadmap largely in terms of ‘financial numbers’

Important though they are, nonetheless financial objectives and targets are in fact ‘outcomes’, and not drivers of the strategic process.

Where does success come from in business?

  • Strategy.
  • A written, achievable coherent strategic plan.

How do you measure a successful strategic plan?

  • A healthy bottom line.
  • Strong financial results.

What is the key to a healthy bottom line?

  • Customer satisfaction.
  • Deliver excellent customer value, impeccable customer service, and build enduring customer relations.

How do you keep your customers satisfied?

  • Organisational processes.
  • Excel at ‘value-creation’ for your customers through outstanding:
    • operations management processes
    • customer management processes and
    • innovation management processes.

How do you achieve all of this?

  • Continually invest in training, learning and up-skilling to enhance your team’s capabilities and motivation;
  • foster a culture that constantly inspires positive action and keeps everyone focused, always driving the business towards success;
  • implement excellent, smooth-running systems, policies and procedures that are consistently client-centred.