Balanced scorecard (BSC)
First generation balanced scorecard
Second generation balanced scorecard
Third generation balanced scorecard
Balanced scorecard (BSC)
is a strategy performance management tool - a semi-standard structured report, supported by design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions. The critical characteristics that define a balanced scorecard are: its focus on the strategic agenda of the organization concerned the selection of a small number of data items to monitor
a mix of financial and non-financial data items.
It has three generations. The 1st generation used a "4 perspective" approach namely Financial, Customer, Internal business processes and Learning and growth. Although it is still part of academic studies for strategic management, it is obsolete in business use. The problem with the "2nd generation" design approach was that the plotting of causal links among 20 or so medium-term strategic goals was still a relatively abstract activity. In practice it ignored the fact that opportunities to intervene, to influence strategic goals are, and need to be, anchored in current and real management activity. The 3rd generation refined the 2nd generation to give more relevance and functionality to strategic objectives. The major difference is the incorporation of Destination Statements. Other key components are strategic objectives, strategic linkage model and perspectives, measures and initiatives.
Balanced scorecard is an example of a closed-loop controller applied to the management of the implementation of a strategy. Closed-loop or cybernetic control is where actual performance is measured, the measured value is compared to an expected value and based on the difference between the two corrective interventions are made as required. Such control requires three things to be effective - a choice of data to measure, the setting of an expected value for the data, and the ability to make a corrective intervention. Within the strategy management context, all three of these characteristic closed-loop control elements need to be derived from the organisation's strategy and also need to reflect the ability of the observer to both monitor performance and subsequently intervene - both of which may be constrained. Two of the ideas that underpin modern balanced scorecard designs concern facilitating the creation of such a control - through making it easier to select which data to observe, and ensuring that the choice of data is consistent with the ability of the observer to intervene. History
Organizations have used systems consisting of a mix of financial and non-financial measures to track progress for quite some time. One such system was created by Art Schneiderman in 1987 at Analog Devices, a mid-sized semi-conductor company; the Analog Devices Balanced Scorecard. Schneiderman's design was similar to what is now recognised as a "First Generation" Balanced Scorecard design. In 1990 Art Schneiderman participated in an unrelated research study in 1990 led by Dr. Robert S. Kaplan in conjunction with US management consultancy Nolan-Norton, and during this study described his work on performance measurement.Subsequently, Kaplan and David P. Norton included anonymous details of this balanced scorecard design in a 1992 article.Kaplan and Norton's article wasn't the only paper on the topic published in early 1992 but the 1992 Kaplan and Norton paper was a popular success, and was quickly followed by a second in 1993. In 1996, the two authors published a bookThe Balanced Scorecard. These articles and the first book spread knowledge of the concept of balanced scorecard widely, and has led to Kaplan and Norton being seen...
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