Balanced Scorecard Development
Abstract
The balanced scorecard was introduced in 1992 as a performance measurement tool and has developed now to form a strategic management system. This paper uses eight articles, identified in Figure 1 along with extra materials to track and analyse developments in the design and implementation. The paper shows examples of the scorecard in practice and concludes that developments have been beneficial overall. It also highlights problems encountered along the way and further areas for improvement.
For years managers have used financial measures to monitor performance however a study carried out in 1990 led to the development of the first generation balanced scorecard (BSC); a strategic planning and management system. By including financial and operational measures,it solved the issue that managers were beginning to reject financial measures during the 1980s and 1990s (Letza, 1996).The BSC originated analysing four perspectives; customer, internal, learning and financial,with focus driven by four questions shown in Figure 2. The BSC encouraged managers to focus on few critical measures to prevent complexity and information overload, however ensured several areas were looked at simultaneously as organisations became more complex (Kaplan & Norton, 1992). Choice around the measures allows adaptability and flexibility when using the model. This is vital in order to keep up with global competition and the ever changing environment. Companies must acknowledge this flexibility and as their strategy changes, so must the measures to stay in line with overall aims.
The introduction of the BSC coincided with the recession in the 1980’s and 1990’s. Therefore companies will have been more enthusiastic about performance measurement and seen this as a good way to track progress towards strategy, growth and profit.
Today, 20 years on, the core perspectives have stayed with the individual measures being adapted and perspectives added depending on the company’s
The balanced scorecard was introduced in 1992 as a performance measurement tool and has developed now to form a strategic management system. This paper uses eight articles, identified in Figure 1 along with extra materials to track and analyse developments in the design and implementation. The paper shows examples of the scorecard in practice and concludes that developments have been beneficial overall. It also highlights problems encountered along the way and further areas for improvement.
For years managers have used financial measures to monitor performance however a study carried out in 1990 led to the development of the first generation balanced scorecard (BSC); a strategic planning and management system. By including financial and operational measures,it solved the issue that managers were beginning to reject financial measures during the 1980s and 1990s (Letza, 1996).The BSC originated analysing four perspectives; customer, internal, learning and financial,with focus driven by four questions shown in Figure 2. The BSC encouraged managers to focus on few critical measures to prevent complexity and information overload, however ensured several areas were looked at simultaneously as organisations became more complex (Kaplan & Norton, 1992). Choice around the measures allows adaptability and flexibility when using the model. This is vital in order to keep up with global competition and the ever changing environment. Companies must acknowledge this flexibility and as their strategy changes, so must the measures to stay in line with overall aims.
The introduction of the BSC coincided with the recession in the 1980’s and 1990’s. Therefore companies will have been more enthusiastic about performance measurement and seen this as a good way to track progress towards strategy, growth and profit.
Today, 20 years on, the core perspectives have stayed with the individual measures being adapted and perspectives added depending on the company’s
References: Drury, C., 2008. Management and Cost Accounting. 7th Edition. London: Cengage Learning. IBM, 2013. Balanced Scorecard Software. U.S. IBM. Available From: http://www-01.ibm.com/ software/analytics/cognos/balanced-scorecard-software.html IBM, 2013 Kaplan, R.S. and Norton, D.P., Using the balanced scorecard as a strategic management system, Harvard Business Review, January-February 1996, 75-85. Available from: http://scholar.google.co.uk [Accessed 23 February 2013] Letza, S., 1996 Lloyds Banking Group plc, 2009. Annual Report 2008. United Kingdom: Lloyds Banking Group plc. Available from: http://www.lloydsbankinggroup.com/investors/financial_performance/ company_results.asp#2007 Lloyds Banking Group plc, 2013