Organisational behaviour
Balanced scorecard
The balanced scorecard (BSC) was developed by Kaplan and Norton in 1992 as an alternative to traditional performance measurement approaches that focus solely on.
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Balanced scorecard vs The balanced scorecard
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Close overlapFinanceFinanceKPI / metric
Accounting
The balanced scorecard
Traditional management accounts, with their emphasis on financial performance, tell us how a firm has performed in the past, but offer little information about how it might perform in the future.
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Use this when.
Use the BSC when traditional financial reporting is too narrow to manage strategy. It complements financial outcomes with the non financial drivers of future success across financial , internal business processes , learning and growth and customer perspectives. The scorecard asks:
Build a rounded view of performance for an organisation, business line or unit.
Extracted signals
Strengths, limits, and pitfalls.
Balanced scorecard
- Start with the strategy and its cause and effect logic, then choose measures. Every KPI should indicate either a desired outcome or a driver that management believes will produce it.
- Begin by clarifying mission and vision. These define the desired performance and guide the choice of strategic objectives, success factors and KPIs in each perspective:
- Financial perspective. Provide managers with timely, accurate evidence of economic performance. Return on investment (ROI) and economic value added are common measures, but the appropriate set depends on the company and industry.
Watch for
- Avoid turning the scorecard into a KPI catalogue. Too many disconnected measures obscure priorities, encourage local optimisation and prevent the organisation from testing whether its strategic hypothesis is working.
The balanced scorecard
- Choose measures because they test the strategy’s most important cause and effect assumptions, then connect the review to decisions and action.
- Clarify vision and strategy. State the organisation’s purpose, choices and priorities precisely enough to guide measurement.
- Define the perspectives and critical success factors. Describe what the strategy requires the organisation to achieve in each area.
Watch for
- Poor proxies distort behaviour, while too many indicators bury priorities. Balance does not mean measuring everything.
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