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...