Balance Scorecard
BALAncEd ScorEcArd BAckground
The balanced scorecard is a set of financial and non-financial measures relating to the company’s mission, strategies, and critical success factors. The balanced scorecard puts vision and strategy at the center of the management control system.
Vision and strategy drive performance measures, as opposed to the traditional performance measurement systems that provided their own, limited measures to management whether they were needed or not. The goal is to maintain an alignment among an organization’s vision, strategy, programs, measurements, and rewards.
An innovative aspect is that the components of the scorecard are designed in an integrative manner to reinforce each other as indicators of both current and future prospects for the company. The balanced scorecard enables management to measure key drivers of overall performance, rather than focusing on short-term, financial results. It helps management stay focused on the entire business process and helps ensure that actual current operating performance is in line with long-term strategy. Kaplan and Norton (1992) are generally given credit for creating the balanced scorecard in the early 1990’s.
One survey found that found that 60% of the Fortune
1,000 companies have or are experimenting with a balanced scorecard (Silk 1998). Such changes have been driven by the evolving focus on a team-based, process-oriented management control system. There are four perspectives or quadrants in the balanced scorecard that generate performance measures to assess the progress of a company’s vision and strategy as follows:
1. Customer perspective: how do customers see us?
2. Internal business perspective: what must we excel at?
3. Innovation and learning perspective: can we continue to improve and create value?
4. Financial perspective: how do we look to shareholders?
The BSC is a set of discrete, linked measures that gives management a
The balanced scorecard is a set of financial and non-financial measures relating to the company’s mission, strategies, and critical success factors. The balanced scorecard puts vision and strategy at the center of the management control system.
Vision and strategy drive performance measures, as opposed to the traditional performance measurement systems that provided their own, limited measures to management whether they were needed or not. The goal is to maintain an alignment among an organization’s vision, strategy, programs, measurements, and rewards.
An innovative aspect is that the components of the scorecard are designed in an integrative manner to reinforce each other as indicators of both current and future prospects for the company. The balanced scorecard enables management to measure key drivers of overall performance, rather than focusing on short-term, financial results. It helps management stay focused on the entire business process and helps ensure that actual current operating performance is in line with long-term strategy. Kaplan and Norton (1992) are generally given credit for creating the balanced scorecard in the early 1990’s.
One survey found that found that 60% of the Fortune
1,000 companies have or are experimenting with a balanced scorecard (Silk 1998). Such changes have been driven by the evolving focus on a team-based, process-oriented management control system. There are four perspectives or quadrants in the balanced scorecard that generate performance measures to assess the progress of a company’s vision and strategy as follows:
1. Customer perspective: how do customers see us?
2. Internal business perspective: what must we excel at?
3. Innovation and learning perspective: can we continue to improve and create value?
4. Financial perspective: how do we look to shareholders?
The BSC is a set of discrete, linked measures that gives management a