What is the Balanced Scorecard?
The Balanced Scorecard is a framework to implement and manage strategy by linking a vision and mission to strategic priorities, objectives, measures, and initiatives. It integrates financial measures with other objectives and key performance indicators related to customers, internal business processes, and capacity. It provides a view of an organisation’s overall performance.
It was originally published by Dr Robert Kaplan and Dr David Norton as a paper in 1992 and then formally as a book in 1996. Both the paper and the book led to its widespread success. It is interesting to note that although Kaplan and Norton published the first paper, they anomalously referenced work by Art Schneiderman who is believed to be the creator.
It is not just a scorecard, it is a methodology that identifies a small number of financial and non-financial objectives related to strategic priorities. It then looks at measures, setting targets for the measures and finally strategic initiatives (often called projects). It is in this latter stage where the approach differs from other strategic methodologies. It forces an organisation to think about how objectives can be measured first and then what initiatives can be put in place to satisfy the objectives. This avoids creating costly initiatives or projects that have no impact on the strategy.
The ‘balance’ is brought about by a focus on financial and non-financial objectives that are attributed to four areas of an organisation and described as Perspectives. They are: Financial, Customer, Internal Processes and Organisational Capacity.