A Brief History Of The Balanced Scorecard—& 4 Critical Takeaways

Drs. Robert Kaplan and David Norton together developed the Balanced Scorecard (BSC), a strategy management framework that “balances” four critical perspectives within an organization. Over a 20-year period, they published five books and 13 articles together—and many more separately. Take a look at the Balanced Scorecard’s history:

Norton, a lifelong consultant, and Kaplan, a Harvard Business School professor, first worked together through a KPMG-sponsored project examining why organizations struggled with reporting on just financial measures. Most organizations in the 1990s used lagging indicators in their reporting; the focus of the study was to find a better way, i.e. leading indicators. In 1992, they published their findings in a Harvard Business Review article that introduced the idea of a Balanced Scorecard. (It’s worth mentioning that the Balanced Scorecard is the largest category in “Management” in HBR today.)

In their first book, “The Balanced Scorecard: Translating Strategy Into Action,” Norton and Kaplan highlight many case studies of organizations that use the BSC to design a scorecard reflective of their individual strategies. But their research didn’t stop there. Their seminal book on the topic, “The Strategy-Focused Organization,” published four years later in 2000. It examines the five key components of executing strategy with a Balanced Scorecard. (If you’re just getting started with your scorecard, this is the book to begin with!)

Throughout the next 10 years, Norton and Kaplan penned a number of articles and several books, including “Strategy Maps” (2004), “Alignment” (2006), and “The Execution Premium” (2008). Each went into more detail on a specific area within the “Strategy-Focused Organization”, leveraging both case studies and new research.

Since the beginning, Norton and Kaplan—along with other researchers—have been learning from consultants who implemented the framework in organizations around the world (and organizations that implemented a BSC without the help of a consultant). Many of their books and articles hone in on the success of these organizations, making it simple to trace how this strategy management framework has worked for organizations worldwide.

But to understand the BSC, you have to know more than just Balanced Scorecard history. Below are four critical takeaways you should consider if you’re looking to implement it.

Four Key Takeaways About The Balanced Scorecard

1. The Balanced Scorecard is a management framework.

The Balanced Scorecard isn’t a simple project that can be delegated to a person or team and completed in a couple of weeks or months. It is a complete revolution of the way your organization manages. If you want to get value from your BSC, you need to recognize this from the get-go and commit to remodeling your management system.

2. The Balanced Scorecard is flexible.

One of the reasons the BSC is a relevant concept in strategic management is that anyone can use it—so it has been adapted in many different ways over the years. Because of this, it is easy to look at Balanced Scorecard examples or case studies and become alarmed if yours is different. Be careful not to fall into this trap. Your scorecard should be unique to your organization. Similarly, you do not need to implement every aspect mentioned in “The Strategy-Focused Organization” or any other Norton-Kaplan scorecard texts to get value from it.

3. The Balanced Scorecard is adaptable.

While the original concept of the Balanced Scorecard was applied to the for-profit space, it was quickly adapted for nonprofit and municipal organizations. Today, a wide variety of organizations use it.

We have a number of strategy maps and measure libraries used in different scenarios. Yours will look different than the downloadable examples (based on your strategy), but you may be able to get an idea of how other organizations in your area have adapted their scorecards. Take a look at the following:
Measure libraries:

• Human Resource Measure Library
• Customer Measure Library
• Financial Measure Library
• Local Government Measure Library

Strategy map examples:

• For-Profit Strategy Map Examples
• Nonprofit Strategy Map Examples
• Healthcare Strategy Map Examples
• Municipal Strategy Map Examples

4. To get the most out of your Balanced Scorecard, you may need software.

Most organizations review their strategy four times a year or more. Often, after several of these review periods, they struggle to manage their scorecard. This is often the result of attempting to repurpose a tool like Excel or PowerPoint, when all those tools are really meant for is to help you get past the initial scorecard design phase. Balanced Scorecard software, on the other hand, is created specifically to guide you through the strategy management process. We highly suggest looking into quality software options before you run into a management wall.

Unsure where to begin?

If you’re just getting started, we recommend reading “The Strategy-Focused Organization.” From there, check out our scorecard-focused, bite-sized Balanced Scorecard resources, which will help you build out your knowledge base and learn more on each component of your scorecard and strategy. Best of luck!

FAQ:

What are balanced scorecard perspectives?

The balanced scorecard typically includes four perspectives:

- Financial Perspective: Focuses on financial outcomes and performance metrics that impact profitability and financial health.
- Customer Perspective: Measures customer satisfaction, retention, and market share to assess how well the organization is meeting customer needs.
- Internal Business Processes Perspective: Evaluates the efficiency and effectiveness of internal operations critical to delivering value to customers.
- Learning and Growth Perspective: Tracks the organization's capacity for innovation, learning, and development of its people and systems.

How does the balanced scorecard improve performance?

The balanced scorecard improves performance by:

- Providing Clarity: Communicates strategic objectives clearly throughout the organization.
- Alignment: Aligns departmental goals and activities with overall strategic priorities.
- Measurement: Establishes performance metrics to track progress towards strategic goals.
- Feedback: Provides feedback on performance to facilitate continuous improvement.
- Strategy Execution: Helps in executing strategy by translating vision and mission into actionable objectives.

How do you implement a balanced scorecard?

Implementing a balanced scorecard involves several steps:

- Define Strategic Objectives: Clarify the organization's vision, mission, and strategic goals.
- Identify Key Performance Indicators (KPIs): Select metrics that align with each perspective of the balanced scorecard.
- Set Targets: Establish specific targets or benchmarks for each KPI.
- Align Initiatives: Identify initiatives and projects that support strategic objectives.
- Communicate and Cascade: Communicate the balanced scorecard framework throughout the organization and align individual and departmental goals with the strategic objectives.
- Monitor and Review: Continuously monitor performance against targets and periodically review and adjust the balanced scorecard as needed.

Why is the balanced scorecard important for an organization?

The balanced scorecard is important because it:

- Provides a Balanced View: Offers a holistic view of organizational performance across multiple dimensions.
- Improves Decision Making: Guides decision-making processes by linking performance metrics to strategic objectives.
- Facilitates Communication: Communicates strategic priorities and performance expectations clearly across the organization.
- Drives Accountability: Holds departments and individuals accountable for their contributions to strategic goals.
- Supports Strategy Execution: Helps in monitoring progress and making necessary adjustments to achieve long-term strategic objectives.

What is the balanced scorecard in strategic management?

In strategic management, the balanced scorecard is a strategic performance management tool that translates an organization's vision and strategy into a comprehensive set of performance indicators. It helps managers to:

- Align: Align departmental and individual goals with the organization's strategic objectives.
- Monitor: Monitor progress towards strategic goals using a balanced set of performance metrics.
- Improve: Continuously improve performance by focusing on key areas across financial, customer, internal processes, and learning perspectives.

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