Bank of Montreal, S Balanced Scorecard

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FAQ Answer: What is the
Balanced Scorecard?
In 100 words

2GC ● FAQ Answer

A Balanced Scorecard monitors the performance of all or part of an organisation, towards (usually) strategic goals. It uses financial and non-financial performance measures (normally less than 25, spread across two or more ‘perspectives’) to highlight areas where the organisation is failing to do what is required or was expected. Popularised in the early 1990s, Balanced Scorecard is widely adopted across the private, public and NGO sectors.

To be useful, a Balanced Scorecard has to include the right measures and targets – a difficult thing to do. Modern Balanced Scorecards (see FAQ1b) make this design activity easier and more reliable.

In slightly more detail…
e Balanced Scorecard was first brought to public attention through an article in the January 1992 edition of the Harvard Business Review. e article, by Robert Kaplan and David Norton drew upon the prior experiences of several firms, including Analog Devices, which appears to be where the idea was first developed in the mid 1980s.

Early (‘First Generation’) Balanced Scorecard designs featured a small number of performance measures typically spread across four perspectives. Kaplan & Norton proposed a set of perspective names (Financial, Customer, Internal Processes, Learning & Growth) to help with the design process (that is to say, ‘… to work out what measures to use, you should think about choosing five or six measures from each of these categories…’). But nonetheless organisations found the selection of measures and targets difficult, and many early Balanced Scorecards failed. One reason for the failure was that many organisations had attempted to use the Kaplan & Norton perspectives without thinking about whether they were suitable. Many suggestions have been and continue to be made for changes to the names of (and number of) perspectives. However, the causes of early Balanced Scorecard failure went beyond the choice of...
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