Balanced business scorecard

The balanced business scorecard was developed by Robert S Kaplan and David P Norton to overcome an imbalance in business planning. If you accept that what gets measured gets done, then it is unfortunate if you only measure money.

The traditional means of measuring success through financial performance focuses on achievement to date. It is backward looking and can be counter productive in terms of securing a successful financial future. As Kaplan and Norton say "Financial measures are inadequate for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology and innovation."

The business scorecard balances financial success with processes that will generate success in the future.

The scorecard retains a financial perspective and achieves 'balance' by introducing a customer perspective, an internal perspective and a learning and growth perspective. In addition, it introduces objectives and measures, identifying both critical success factors and critical measurements.

This creates a four column by three row matrix. You can download an example of the scorecard applied to Investors in People and a set of blank forms for your own use.

A management system

The scorecard is a management system that involves setting measures based upon the priorities of the strategic plan. It provides the key business drivers and criteria to motivate managers to develop and apply processes that will contribute to future success – rather than dwelling on historic performance. By requiring four perspectives, it provides a richer more holistic view of the organisation.

The business scorecard model:

The four perspectives in the original paper are shown below. However, the model can be used with any selection of perspectives appropriate to a particular exercise.

Financial perspective

To succeed financially, how should we appear to our shareholders?
    Objectives
    Measures
    Targets
    Initiatives

Customer perspective

To achieve our vision, how should we appear to our customers?
    Objectives
    Measures
    Targets
    Initiatives

Internal business processes

To satisfy our shareholders and customers, what business processes must we excel at?
    Objectives
    Measures
    Targets
    Initiatives

Learning and growth

To achieve our vision, how will we sustain our ability to change and improve?
    Objectives
    Measures
    Targets
    Initiatives

The balanced scorecard has been around for a few years now and in some organisations is seen as a flavour of the past. However, it remains a valuable and powerful tool.

The authors of the orginal HBR paper have developed their ideas into a book. You may click here to buy Balanced Scorecard: Translating Strategy into Action by Robert S. Kaplan, Arthur Lowes, David P. Norton. Or visit our books site for more ideas and recommendations.

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