The Balanced Scorecard approach was launched in the 1990s by founding fathers Kaplan and Norton. Their article “Measures that drive performance” in Harvard Business Review (1992) received a lot of attention and led to the bestselling book The Balance Scorecard: translating strategy into action (1996).
As you can see from the title of their Harvard Business Review article, the ‘Balanced Scorecard’ concept was primarily designed to help companies measure performance in a different way − by focusing on more than financial indicators alone. Since then, the basic ideas have evolved rapidly and continue to do so. Today, in 2009, the Balanced Scorecard covers much more than multi-view measurement: in many organisations, it’s an essential management system and a cornerstone in successful Strategy Execution.
An indispensable tool
The Balanced Scorecard is now recognised as an indispensable instrument for clarifying, communicating and managing strategy across an organisation. It provides a framework for translating an abstract strategy into specific, concrete goals and indicators. The Balanced Scorecard focuses on aligning the goals of business units, teams and individual employees with the company’s overall business strategy.
The Balanced Scorecard is different from other strategic measuring instruments in that it combines a ‘balanced’ (cause/effect) view with a ‘scoring’ (measuring/tracking) view for a set of performance drivers.
Strategy Execution as a continuous process
A great Balanced Scorecard breaks down a business strategy into specific and measurable chunks. It also keeps the long-term strategic goals visible on the radar screen. The ultimate goal of a Balanced Scorecard is to experience Strategy Execution as a continuous process.
As we have said, the Balanced Scorecard is an important management tool. But by helping organisations detect problem areas and making sure managers and employees focus their energy on the right things, the Balanced Scorecard also becomes an important foundation for operational management as well.
Achieving strategic goals
The Balanced Scorecard should not be viewed as a controlling instrument. Its ultimate goal is to create focus on what’s really important for the future, making sure all employees contribute to the realisation of the company’s mission and strategic goals. Measurement is a means to getting there, and not a goal in itself.
The Balanced Scorecard is also about learning and teaching: about your strategy, about the assumptions you have made regarding winning in your marketplace, and the value proposition you have put forward.