The Balanced Scorecard
The Balanced Scorecard was developed in 1987 by Analog Devices. It began as a concept for measuring whether the short-term, smaller-scale operational objectives match the long-term, larger objectives of a company. It focuses on human issues, as well as, financial outcomes.
In 1992, Robert Kaplan and David Norton made the Balanced Scorecard popular by discussing its use in a series of journal articles. According to Kaplan and Norton, “The Balanced Scorecard provides managers with the instrumentation they need to navigate to future competitive success”. They developed the scorecard because of the shortcomings of traditional management control systems. They created it around a performance planning and measurement framework and used it to execute and monitor the organizational strategy by using a combination of financial and non-financial measures. It also ensures that strategies become a coherent set of performance measures.
The Balanced Scorecard was broken down into four basic processes. These were to translate a vision, communicate that vision, business planning, and feedback and learning. During the mid 1990s the scorecard had its design methods improved. Measures were selected based on a set of strategic objectives. These objectives were distributed across a set of perspectives. Managers were then required to create goals within each perspective, and then show how each goal was inter-connected with the others. Wikipedia states that the Balanced Scorecard was, “designed to translate vision and strategy into objectives and measures across four balanced perspectives”.
These four perspectives are the financial perspective, customer perspective, Internal process perspective, and the learning and growth perspective. Each persp ...