Balanced Scorecard

The Balanced Scorecard is a conceptual framework for translating an organisation’s vision and mission into a set of performance indicators set around four perspectives:

• Financial,
• Customer,
• Internal Business Processes, and
• Learning and Growth.

Thus, the scorecard provides an enterprise view of an organisation’s overall performance by integrating financial measures with other key performance indicators.

The Learning & Growth perspective is a measure of potential future performance – it directs attention to the basis of all future success – the organisation’s people and infrastructure. Adequate investment in these areas is critical to all long term success.

The Internal perspective focuses attention on the performance of the key internal processes which drive the business. Obviously, the nature of the processes are dependent on the nature of the organisation – the scorecard is not a ‘fully-cooked’ solution, it must be tempered and tailored to meet the specific circumstances of each organisation.

In order to translate effective internal processes into organisational success, customers/clients must be happy with the service they receive. The Customer perspective considers the business through the eyes of the customers, measuring and reflecting upon customer satisfaction.

Finally, the Financial perspective measures the results that the organisation delivers its stakeholders. Together, these four perspectives provide a balanced view of the present and future performance of the business.

The aim of this measurement process is to direct, and help manage, change in support of longer-term strategy – and to manage, rather than simply measure, performance.

The concept was introduced by Professor Robert Kaplan and Dr. David Norton in 1992, and has since been adopted by a wide range of organisations around the globe. It is well-represented in the business press, having been the subject of a best-selling book (see below) and numerous articles in prestigious journals.

If used properly, the Balanced Scorecard becomes a catalyst for change. The performance measurement is not an end in itself; it simply serves to illustrate, to diagnose, to aid analysis. ‘Accuracy’ is therefore not essential – but confidence in the measures as true indicators is.

The Scorecard must become integrated into the strategic planning of the organisation – as a tool for identifying pressure points, conflicting interests, objective setting, prioritisation, planning and budgeting. It offers managers a balanced view of their organisation upon which they can make strong decisions and upon which they can base real change.

See The Balanced Scorecard Institute http://www.balancedscorecard.org/

See The Balanced Scorecard
Robert S. Kaplan and David P. Norton
Harvard Business School Press 1996