The balanced scorecard is standardized management methodology in a way that analyzes the organizational performances by using 4 different perspectives: financial, customer, internal processes and organizational learning perspectives. Each of these 4 perspectives together create a strategic framework by using cause and effect relationships among various perspectives.
The internal process perspective deals with the measuring and monitoring of the internal business processes of the organization. This is the value creation system where the company produces and delivers its products and services. On the balanced scorecard report, the internal process perspective is between the customer perspective and the organizational learning perspective. It creates the value for the customer in order for the company to achieve its financial goals and objectives.
On the other side the learning and growth perspective supports the internal business system and process perspective by developing people, methods, tools and know-how for continuously improving the value creation system.
The internal business process perspective includes the KPIs and metrics for measuring the productivity and quality based on the predefined customer requirements. In addition all important operational metrics such as supply chain metrics, logistics metrics, production and manufacturing metrics, inventory metrics, etc. are included in this section of the scorecard.
It answers the question how good we are at delivering value based on the customer requirements and how efficient we are in doing so. At a strategic level the internal perspective answers the question: what are the key internal areas where the organization has to excel.
Just like in developing and managing the other 3 perspectives, there are 4 steps in managing the internal business processes.
1. Setting objectives
What we are trying to achieve? Based on the business strategy the internal business process goals and objectives are defined.
2. Defining metrics
How we are going to measure our success? Based on the goals and objectives, appropriate KPIs and metrics must be defined in order for the users to be able to track the performance.
3. Assigning targets
What are the specific targets we need to achieve? Now that we have the goals, objectives and metrics to measure the progress, we need a specific targets – quantifiable and measurable goals which can easily be tracked and monitored.
4. Developing initiatives
How do we improve our key internal processes? This part is where the continuous improvement takes place. Based on the goals, objectives, metrics and targets the organization can measure its current performance and progress in delivering the required targets.
At the same time, all internal performance gaps and areas of improvement can be identified and appropriate initiatives can be developed and managed in order to improve the current organizational performance.