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.

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”, using 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 home 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.

Carilion Clinic, a health system in Roanoke, Virginia, treated it that way from the start. Its work began in 2007 with the first scorecards for senior leadership. The former CEO had his leadership team study “The Balanced Scorecard” by Norton and Kaplan, and that book still serves as the foundation of Carilion’s performance improvement philosophy. Over 13 years, a single leadership scorecard with 70 measures grew into about 300 scorecards for the clinic, its departments, sections and individual providers.

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.

The American Association of Critical-Care Nurses (AACN) showed how far that flexibility goes. It set up its scorecard with four perspectives named for its own work: Financial, Customer Satisfaction, Internal Processes, and Learning and Development. Later, leadership decided the Balanced Scorecard was not giving enough insight into how well AACN was reaching its goals, and moved to the Input-Impact Model, also known as I2I. Tracey Birosak, Business Strategy Specialist, said that “when we were ready to implement a new performance measurement model, the ClearPoint tool offered the flexibility we needed to make the change.”

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.

Nonprofits often adapt the measures more than the structure. At the time of our case study, Rare, a conservation nonprofit, held that outcomes belong at the top of a nonprofit’s strategy map. Its biggest results, such as improving water quality and increasing forest cover, took years to show. Daniel Hayden, Senior Director of Global Programs, said: “Almost all of us have measures of impact that will take years.” Rare used process measures while program teams built up baseline data and first results. Within five years, Rare went from a $9 million a year operation to more than $20 million a year.

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. See the nonprofit and 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.

AACN hit that wall. As it grew, the spreadsheets holding information for over 25 departments became obsolete, and piecing together each department’s contribution to the Board Report in Excel took a great deal of time. In ClearPoint, each department had its own scorecard. Birosak no longer had to consolidate information from individual departments by hand, and a week-long process then took a 10-minute report click.

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!