The Balanced Scorecard

The Balanced Scorecard

The balanced scorecard is a strategic planning and management system that is used to align business activities to the vision and strategy of the organization, improve communications, and monitor performance against strategic goals.

It was originated by Dr Robert Kaplan and Dr David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of the performance of an organization.

It works from four perspectives:

  • Financial perspective: covers financial objectives
  • Customer perspective: covers customer satisfaction
  • Internal Business Process perspective: covers internal operations and processes
  • Learning and growth perspective: covers employee training, corporate culture and leadership

The more recent use of the balanced scorecard transforms an organization’s strategic plan from a passive to an active document. It provides a framework that not only provides performance measures, but also helps planners to identify what should be done and measured. It enables organizations to sharpen their vision and strategy and translate them into action.

When it was first introduced the Balanced Scorecard perspectives were presented in a four-box model where perspectives were measured independently from one another. This model has now been superseded by the concept of a Strategy Map which places the four perspectives in relation to each other to show how the objectives support each other. A Strategy Map shows that delivering the right performance in one perspective (e.g. financial success) can only be achieved by delivering the objectives in the other perspectives (e.g. improved internal processes or delivering customer’s requirements).