Balanced Scorecard

 

Balanced Scorecard is a strategic management tool, used in both strategy formulation, organisational alignment and performance management (Brudan, 2010). More than providing information on whether or not business targets are achieved, Balanced Scorecard also clarifies the impact on corporate strategy. This way, the BSC is a source of business intelligence, used in various organisational decision making processes, such as its initiative generation and prioritisation.

 

Balanced Scorecard Perspectives

Seen at its beginnings as a simple balanced list of performance measures, the Balanced Scorecard is structured in four perspectives: Financial, Customer, Internal Processes, People, Innovation and Learning.

 

The four perspectives offer a balance between short-term and long-term objectives, between desired outcomes and performance drivers of those outcomes, and between hard objective measures and softer, intangible measures:

 Balanced Scorecard Perspectives

Source: adapted from Kaplan & Norton (1996)

 

  • The financial perspective. In the private sector, these measures have typically focused on profit and market share. Managers must answer the question: How do satisfy the financial expectations of our stakeholders?
  • The customer perspective. Managers must know if their organization is satisfying customer needs. They must determine the answer to the question: How do customers see us?
  •  The internal business perspective. Managers need to focus on those critical internal operations that enable them to deliver their work program. They must answer the question: What must we excel at?  
  • The innovation and learning perspective. An organization's ability to innovate, improve, and learn ties directly to its value as an organization. Managers must answer the question: Can we continue to improve and create value for our services?  

 

 

Evolution

The introduction and metamorphosis of the Balanced Scorecard lead towards a (r)evolution in performance management. Kaplan and Norton introduced the BSC, presenting the concept as a performance measurement tool, used by organisations to capture besides the financial measures, the value-creating activities from an organisation's intangible assets (Kaplan and Norton, 1992).

 

Over a span of 17 years, the BSC evolved from a measurement tool, to a management tool, to a system and then to a tool within a system, thus completing a full circle. This demonstrates that the separation between performance measurement and management in a research context must be carefully considered for each research article on these topics and filtered through the most recent changes in this field as some literature is outdated.

 

Some authors use performance measurement to refer to what by today's standards is considered performance management and vice versa. Overall, strategic performance management is today represented by the BSC, as the most popular system used for strategy implementation.

 

References

  • Brudan, A. (2010), Rediscovering performance management: systems, learning and integration, Measuring Business Excellence, Vol. 14, No. 1, pp. 109-123.
  • eab group (2010), Balanced Scorecard Perspectives, available at: http://www.eabgroup.com.au/files/section/Balanced-Scorecard-eab-group--35.pdf (accessed 12 August 2010). 
  • Kaplan, R., S. & Norton, D., P. (1992), The Balanced Scorecard - Measures That Drive PerformanceHarvard Business Review, Vol. 70, No. 1, pp. 71-79.
  • Kaplan, R., S. & Norton, D., P. (1996), Using the Balanced Scorecard as a strategic management system, Harvard Business Review, January-February, 1996.

Integration : Systems

 

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