Balanced Scorecard Basics

The balanced scorecard is a strategic planning and management system that is used
extensively in business and industry, government, and nonprofit organizations worldwide
to align business activities to the vision and strategy of the organization, improve
internal and external communications, and monitor organization performance against
strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and
David Norton as a performance measurement framework that added strategic nonfinancial performance measures to traditional financial metrics to give managers and
executives a more 'balanced' view of organizational performance. While the phrase
balanced scorecard was coined in the early 1990s, the roots of the this type of approach
are deep, and include the pioneering work of General Electric on performance
measurement reporting in the 1950s and the work of French process engineers (who
created the Tableau de Bord literally, a "dashboard" of performance measures) in the
early part of the 20th century.
The balanced scorecard has evolved from its early use as a simple performance
measurement framework to a full strategic planning and management system. The
new balanced scorecard transforms an organizations strategic plan from an attractive
but passive document into the "marching orders" for the organization on a daily basis. It
provides a framework that not only provides performance measurements, but helps
planners identify what should be done and measured. It enables executives to truly
execute their strategies.
This new approach to strategic management was first detailed in a series of articles and
books by Drs. Kaplan and Norton. Recognizing some of the weaknesses and vagueness
of previous management approaches, the balanced scorecard approach provides a clear
prescription as to what companies should measure in order to 'balance' the financial
perspective. The balanced scorecard is a management system (not only a measurement
system) that enables organizations to clarify their vision and strategy and translate them
into action. It provides feedback around both the internal business processes and
external outcomes in order to continuously improve strategic performance and results.
When fully deployed, the balanced scorecard transforms strategic planning from an
academic exercise into the nerve center of an enterprise.
Kaplan and Norton describe the innovation of the balanced scorecard as follows:
"The balanced scorecard retains traditional financial measures. But financial measures
tell the story of past events, an adequate story for industrial age companies for which
investments in long-term capabilities and customer relationships were not critical for
success. These financial measures are inadequate, however, for guiding and evaluating
the journey that information age companies must make to create future value through
investment in customers, suppliers, employees, processes, technology, and innovation."

Adapted from Robert S. Kaplan and David P. Norton, Using the Balanced Scorecard as a Strategic Management
System, Harvard Business Review (January-February 1996): 76.

Perspectives
The balanced scorecard suggests that we view the organization from four perspectives,
and to develop metrics, collect data and analyze it relative to each of these perspectives:
The Learning & Growth Perspective
This perspective includes employee training and corporate cultural attitudes related to
both individual and corporate self-improvement. In a knowledge-worker organization,
people -- the only repository of knowledge -- are the main resource. In the current
climate of rapid technological change, it is becoming necessary for knowledge workers to
be in a continuous learning mode. Metrics can be put into place to guide managers in
focusing training funds where they can help the most. In any case, learning and growth
constitute the essential foundation for success of any knowledge-worker organization.
Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes
things like mentors and tutors within the organization, as well as that ease of
communication among workers that allows them to readily get help on a problem when it
is needed. It also includes technological tools; what the Baldrige criteria call "high
performance work systems."
The Business Process Perspective
This perspective refers to internal business processes. Metrics based on this perspective
allow the managers to know how well their business is running, and whether its products
and services conform to customer requirements (the mission). These metrics have to be
carefully designed by those who know these processes most intimately; with our unique
missions these are not something that can be developed by outside consultants.
The Customer Perspective
Recent management philosophy has shown an increasing realization of the importance of
customer focus and customer satisfaction in any business. These are leading indicators:
if customers are not satisfied, they will eventually find other suppliers that will meet their

needs. Poor performance from this perspective is thus a leading indicator of future
decline, even though the current financial picture may look good.
In developing metrics for satisfaction, customers should be analyzed in terms of kinds of
customers and the kinds of processes for which we are providing a product or service to
those customer groups.
The Financial Perspective
Kaplan and Norton do not disregard the traditional need for financial data. Timely and
accurate funding data will always be a priority, and managers will do whatever necessary
to provide it. In fact, often there is more than enough handling and processing of
financial data. With the implementation of a corporate database, it is hoped that more of
the processing can be centralized and automated. But the point is that the current
emphasis on financials leads to the "unbalanced" situation with regard to other
perspectives. There is perhaps a need to include additional financial-related data, such
as risk assessment and cost-benefit data, in this category.

Strategy Mapping
Strategy maps are communication tools used to tell a story of how value is created for
the organization. They show a logical, step-by-step connection between strategic
objectives (shown as ovals on the map) in the form of a cause-and-effect chain.
Generally speaking, improving performance in the objectives found in the Learning &
Growth perspective (the bottom row) enables the organization to improve its Internal
Process perspective Objectives (the next row up), which in turn enables the organization
to create desirable results in the Customer and Financial perspectives (the top two
rows).

Balanced Scorecard Software

The balanced scorecard is not a piece of software. Unfortunately, many people believe
that implementing software amounts to implementing a balanced scorecard. Once a
scorecard has been developed and implemented, however, performance management
software can be used to get the right performance information to the right people at the
right time. Automation adds structure and discipline to implementing the Balanced
Scorecard system, helps transform disparate corporate data into information and
knowledge, and helps communicate performance information. The Balanced Scorecard
Institute formally recommends the QuickScore Performance Information SystemTM
developed by Spider Strategies and co-marketed by the Institute.
More about Software >>
Why Implement a Balanced Scorecard?

Increase focus on strategy and results

Improve organizational performance by measuring what matters
Align organization strategy with the work people do on a day-to-day basis
Focus on the drivers of future performance
Improve communication of the organizations Vision and Strategy
Prioritize Projects / Initiatives

Balanced Scorecard Software: Business Intelligence, Dashboards

and Performance Management Systems
The automation of a balanced scorecard is addressed in detail in Step Seven of the Nine Steps
to Success methodology. In this step, the scorecard implementation process begins by
applying performance measurement software, such as the QuickScore Performance
Information System, to get the right performance information to the right people at the right
time. Automation adds structure and discipline to implementing the balanced scorecard
system, helps transform disparate corporate data into information and knowledge, and helps
communicate performance information. In short, automation helps people make better
decisions because it offers quick access to actual performance data.
TM

There are over a hundred balanced scorecard and/or performance management automation
development companies. Some of the options are specifically dedicated to performance
management and/or the balanced scorecard. Others include tools which are primarily
designed for business intelligence, analytics or data warehousing, but have modules dedicated
to performance management. The Balanced Scorecard Institute formally recommends the
balanced scorecard software QuickScore Performance Information System developed by
Spider Strategies and co-marketed by the Institute, but also advises clients on the many
excellent software options available and acts as an honest broker between the client and the
software vendors, of which many are also partners of the Balanced Scorecard Institute, such
as CorVu and Actuate/Performancesoft. A free personal strategy map / balanced scorecard
product is available here.
TM

If you would like to learn more about how the Balanced Scorecard Institute can help your
organization with software evaluation or QuickScore Balanced Scorecard software
purchase, contact us or register for our Automation Overview Webinar.
QuickScore Performance Information SystemTM

T
h
e
B
a
l
a
n
c
e
d
S
c
o
r
e
c
a
r
d

I
n
s
t
i
t
u
t
e
i
s
p
r
o
u
d
t
o
a
n
n
o
u
n
c
e
t
h
e
s
o
f
t
w
a
r
e
a
u
t
o
m
a
t
i
o
n

o
f
t
h
e
N
i
n
e
S
t
e
p
s
t
o
S
u
c
c
e
s
s
T
M

f
r
a
m
e
w
o
r
k
.
T
h
e
n
e
w
s
o
l
u
t
i

o
n
,
Q
u
i
c
k
S
c
o
r
e
T
M

,
i
s
a
n
e
a
s
y
t
o
u
s
e
,
w
e
b
b
a
s
e
d
b
a
l
a
n
c
e
d

s
c
o
r
e
c
a
r
d
a
u
t
o
m
a
t
i
o
n
t
o
o
l
t
h
a
t
a
l
l
o
w
s
a
n
o
r
g
a
n
i
z
a
t
i
o
n
t
o

q
u
i
c
k
l
y
s
e
e
r
e
s
u
l
t
s
f
r
o
m
t
h
e
i
r
b
a
l
a
n
c
e
d
s
c
o
r
e
c
a
r
d
i
n
v
e
s

t
m
e
n
t
.
P
o
w
e
r
e
d
b
y
t
h
e
l
a
t
e
s
t
c
u
t
t
i
n
g
e
d
g
e
w
e
b
t
e
c
h
n
o
l
o
g
i

e
s
a
n
d
d
e
v
e
l
o
p
e
d
b
y
I
n
s
t
i
t
u
t
e
s
o
f
t
w
a
r
e
p
a
r
t
n
e
r
S
p
i
d
e
r
S
t

r
a
t
e
g
i
e
s
,
Q
u
i
c
k
S
c
o
r
e
T
M

B
a
l
a
n
c
e
d
S
c
o
r
e
c
a
r
d
S
o
f
t
w
a
r
e
g
i
v
e
s

y
o
u
r
e
a
l
t
i
m
e
a
c
c
e
s
s
t
o
t
h
e
d
a
t
a
y
o
u
n
e
e
d
a
n
d
t
r
a
n
s
f
o
r
m

s
s
t
a
t
i
c
p
e
r
f
o
r
m
a
n
c
e
m
e
a
s
u
r
e
m
e
n
t
d
a
t
a
i
n
t
o
b
u
s
i
n
e
s
s
i
n
t
e

l
l
i
g
e
n
c
e
.
A
v
a
i
l
a
b
l
e
a
s
a
n
o
n
s
i
t
e
s
e
r
v
e
r
b
a
s
e
d
i
n
s
t
a
l
l
a

t
i
o
n
o
r
a
s
a
h
o
s
t
e
d
/
s
o
f
t
w
a
r
e
a
s
a
s
e
r
v
i
c
e
o
f
f
e
r
i
n
g
.
T
h

e
Q
u
i
c
k
S
c
o
r
e
P
e
r
f
o
r
m
a
n
c
e
I
n
f
o
r
m
a
t
i
o
n
S
y
s
t
e
m
T
M

w
a
s
d
e
s
i
g

n
e
d
t
o
a
u
t
o
m
a
t
e
t
h
e
I
n
s
t
i
t
u
t
e
'
s
N
i
n
e
S
t
e
p
p
r
o
c
e
s
s
a
n
d
g

e
t
p
e
r
f
o
r
m
a
n
c
e
i
n
f
o
r
m
a
t
i
o
n
t
o
t
h
e
r
i
g
h
t
p
e
o
p
l
e
a
t
t
h
e
r

i
g
h
t
t
i
m
e
.
A
u
t
o
m
a
t
i
o
n
a
d
d
s
s
t
r
u
c
t
u
r
e
a
n
d
d
i
s
c
i
p
l
i
n
e
t
o

i
m
p
l
e
m
e
n
t
i
n
g
t
h
e
B
a
l
a
n
c
e
d
S
c
o
r
e
c
a
r
d
s
y
s
t
e
m
,
h
e
l
p
s
t
r
a
n

s
f
o
r
m
d
i
s
p
a
r
a
t
e
c
o
r
p
o
r
a
t
e
d
a
t
a
i
n
t
o
i
n
f
o
r
m
a
t
i
o
n
a
n
d
k
n
o

w
l
e
d
g
e
,
a
n
d
h
e
l
p
s
c
o
m
m
u
n
i
c
a
t
e
p
e
r
f
o
r
m
a
n
c
e
i
n
f
o
r
m
a
t
i
o
n
.

I
n
s
h
o
r
t
,
a
u
t
o
m
a
t
i
o
n
h
e
l
p
s
p
e
o
p
l
e
m
a
k
e
b
e
t
t
e
r
d
e
c
i
s
i
o
n
s

b
e
c
a
u
s
e
i
t
o
f
f
e
r
s
q
u
i
c
k
a
c
c
e
s
s
t
o
a
c
t
u
a
l
p
e
r
f
o
r
m
a
n
c
e
d

a
t
a
.

Q
u
i
c
k
S
c
o
r
e
T
M

i
s
a
n
o
n
l
i
n
e
m
e
t
r
i
c
a
s
s
e
s
s
m
e
n
t
,
a
c
t
i

o
n
p
l
a
n
n
i
n
g
,
a
n
d
p
e
r
f
o
r
m
a
n
c
e
c
o
l
l
a
b
o
r
a
t
i
o
n
t
o
o
l
d
e
s
i
g
n
e

d
t
o
h
e
l
p
y
o
u
d
r
i
v
e
m
e
a
s
u
r
a
b
l
e
i
m
p
r
o
v
e
m
e
n
t
.
I
t
b
r
i
n
g
s
y

o
u
r
k
e
y
d
a
s
h
b
o
a
r
d
s
a
n
d
r
e
p
o
r
t
s
t
o
t
h
e
w
e
b
f
o
r
a
n
y
w
h
e
r
e

a
c
c
e
s
s
.
A
l
e
r
t
s
n
o
t
i
f
y
y
o
u
w
h
e
n
m
e
t
r
i
c
s
t
a
k
e
a
t
u
r
n
f
o
r

t
h
e
w
o
r
s
e
,
a
n
d
y
o
u
c
a
n
p
u
t
c
o
r
r
e
c
t
i
v
e
a
c
t
i
o
n
s
i
n
p
l
a
c
e

t
o
f
i
x
p
r
o
b
l
e
m
s
a
s
t
h
e
y
c
o
m
e
u
p
.
Q
u
i
c
k
S
c
o
r
e
t
h
e
n
r
o
l
l
s

u
p
a
l
l
o
f
y
o
u
r
m
e
t
r
i
c
d
a
t
a
a
n
d
s
h
o
w
s
y
o
u
r
p
r
o
g
r
e
s
s
t
o
w
a

r
d
s
r
e
a
c
h
i
n
g
y
o
u
r
s
t
r
a
t
e
g
i
c
o
b
j
e
c
t
i
v
e
s
.

P
r
i
n
t
B
r
o
c
h

u
r
e
Screen Shots