About the Balanced Scorecard

 

One unique charactetitic of the Balanced Scorecard (BSC) concept is its evolving nature, as it witnessed a continual transformation process ever since its launch.

 

Instrument/tool, system or framework?

Answering the “What is it?” question is very challenging, as the way in which the concept is labeled varies from one author to another. The most simplistic way to refer to the BSC is as a tool, albeit with different blends:  a comprehensive management tool (Ahn, 2001), strategic management instrument (Hueng, 2000) or strategic management tool (Pforsich, 2005).

 

Some authors recognized early that the BSC is more than a performance measurement technique and considered it to be a management system (Butler et al., 1997). Just to be sure or in order to contribute to the confusion, some authors prefer to use both at the same time: “formal management technique and formal management system” (Hassan and Tibbits, 2000).

 

Others consider the BSC to be a management philosophy as well as a performance management system (Hanson and Towle, 2000).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: adapted from Kaplan and Norton, 1996

 

Although it is fairly common for management concepts to have various definitions, the BSC literature goes a step further. The concept is not only defined differently, but it is presented and perceived in various ways. Entire articles analyze and promote the BSC as being used as measurement tool, a performance management system or strategic management and control system. More interestingly these articles analyzing the BSC don’t follow a certain evolution timeline and pattern, as for example the one followed by Kaplan and Norton, but were published at random points in time.

 

Balanced Scorecard definitions

The following definitions of the Balanced Scorecard concept present a rich picture from multiple angles:

  • "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.” (Kaplan R.S. and Norton D.P. (1992) The Balanced Scorecard - Measures that drive performance, Harvard Business Review, Jan-Feb.)
  • A tool that translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system.” (Balanced Scorecard Collaborative, 2005, Online)
  • 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. (Balanced Scorecard Institute, 2010)
  • The balanced scorecard has multiple meanings. The initial meaning when it was first popularized in early 90s was of an approach for generating a performance report, by grouping performance measures by perspectives, the most commonly used being: Financial, Customer, Internal Processed and Innovation and Learning. Gradually, this management tool evolved to become the basis on a performance management system that usesstrategic, operational and individual performance plans as the basis for a communicating, monitoring and improving organizational performance.(eab group, 2010)

 

References

  • Ahn, H. (2001), Applying the Balanced Scorecard concept: An experience report, Long Range Planning, Vol. 34, No. 4, pp. 441-461.

  • Andon, P., Baxter, J. & Mahama, H. (2005), The Balanced Scorecard: Slogans, Seduction And State Of Play, Australian Accounting Review, Vol. 15, No. 1, pp. 29-38.

  • Balanced Scorecard Collaborative (2010), Learning Centre Section, FAQs and Glossary, available at: https://www.bscol.com/bsc_online/learning/faqs/index.cfm?id=D84E0D4C-BDC5-11D4-A8C400508BDC96C1.

  • Balanced Scorecard Institute (2010), available at: http://www.balancedscorecard.org/bscresources/aboutthebalancedscorecard/tabid/55/default.aspx.

  • Butler, A., Letza, S., R. & Neale, B. (1997), Linking the balanced scorecard to strategy,  Long Range Planning, Vol. 30, No. 2, pp. 242-253.

  • eab group (2010), Performance Management - Balanced Scorecard, available at: http://www.eabgroup.com.au/en/section/performance-management/balanced-scorecard-i18.html.

  • Hanson, J. & Towle, J. (2000), The Balanced Scorecard: Not just another fad, Credit Union Executive. Journal, Vol. 40, No. 1, pp. 12-16.

  • Hasan, H. & Tibbits, H., R. (2000), Strategic management of electronic commerce: an adaptation of the balanced scorecard, Internet Research, Vol. 10, No. 5, pp. 439-450.

  • Hueng, P. (2000), Process performance measurement system: a tool to support process-based organizations, Total Quality Management, Vol. 11, No. 1, pp. 67-85.

  • Kaplan, R., S. & Norton, D., P. (1992), The Balanced Scorecard. Measures that drive performance, Harvard Business Review, January-February, 1992,  pp. 70-79.

  • Kaplan, R., S. & Norton, D., P. (1996),  Using the Balanced Scorecard as a strategic management system, Harvard Business Review, January-February, 1996.

  • Pforsich, H. (2005), Does Your Scorecard Need A Workshop?, Strategic Finance, Vol. 86, No. 8, pp. 30-35.

BSC concept : Definition

 

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