BSC typology

 

 

The Balanced Scorecard concept is well known for its malleability, being a very fluid concept, subject to considerable adaptation and interpretation. However, the numerous applications and adaptations of the BSC are not clearly documented in the existing literature on this topic. As a result, there is a considerable degree of confusion surrounding this subject in both practice and theory. Almost every article about the BSC has a different version of its use and almost every BSC implementation has a different approach to BSC and its utility.

 

Thus, researching blindly the topic ‘Balanced Scorecard’, evaluating and generalising the BSC impact on organisations that implemented it can be a very difficult, and possibly irrelevant exercise as each organisation actually has a different interpretation of the concept presented under this term (Brudan, 2005).

 

For this reason, one of the issues yet to be resolved in existing BSC literature is the lack of an overarching analysis of the BSC concept and an agreed typology.There are three main propositions regarding BSC typologies. Brudan (2005) proposes a Balanced Scorecard typology structured on five models of implementations. Based on the BSC components and the use of the BSC in organisations, the following BSC typology map is proposed.

     

 

BSC Type

Upstream Components

Core Components

Downstream Components

1

Reporting BSC

 -

 -

 -

Measures & Targets

 -

 -

Data gathering

Performance reporting

 -

2

Functional BSC

Strategy & Business Plan

 -

 -

Measures & Targets

 -

 -

Data gathering

Performance reporting

Initiative management

3

Control BSC

Corporate philosophy

Strategy & Business Plan

 -

Measures & Targets

Strategy Maps

 -

Data gathering

Performance reporting

-

4

Alignment BSC

Corporate philosophy

Strategy & Business Plan

Destination Statement

Measures & Targets

Strategy Maps

Objectives

Data gathering

Performance reporting

 -

5

Complete BSC

Corporate philosophy

Strategy & Business Plan

Destination Statement

Measures & Targets

Strategy Maps

Objectives

Data gathering

Performance reporting

Initiative/Integration Management

Source: Brudan, 2005


Type 1 - Reporting Balanced Scorecard

The Reporting Balanced Scorecard is the most basic type of BSC and is represented by a list of financial and non-financial indicators grouped under several perspectives. Only a selective set of components (three) are used by this BSC type: measures and targets as core components, data gathering, and performance reporting as integration components.

 

This type of BSC does not include upstream/context components, as it is not linked to strategy. The main use of the Reporting Balanced Scorecard is as an internal/external communication tool, used for reporting. A relatively popular use of this type of BSC is as a knowledge management tool, used to track both tangible and intangible assets under different organisational perspectives. Overall the focus of this type of BSC is on balanced reporting of both financial and non-financial indicators. It represents a very basic form of BSC, as described in the first Kaplan and Norton article on the topic in 1992. Similar tools to this type of BSC are the Scandia Navigator (Edvinsson and Malone, 1997) and the Intangible Assets Monitor (Sveiby, 1997), both referred to as intellectual capital measuring tools.

 

Type 2 - Functional Balanced Scorecard

The Functional Balanced Scorecard is a variation of the Reporting BSC, consisting of both financial and non-financial indicators grouped under different perspectives, the difference being its focus on functional areas. Examples of this type of BSC are: the IT Balanced Scorecard, the HR Balanced Scorecard, the Marketing Balanced Scorecard, or Distribution Balanced Scorecard. The components of the Functional BSC are similar to the reporting one, however, in addition to the core component – measures and targets - it also includes a complete set of downstream/integration components as well as one element from the upstream-context set of components – Strategy and Business Planning.

The main use of this type of tool is performance measurement for different functional areas within the organisation, the secondary roles being internal/external communication and Human Resources Performance Management. Overall, this type of BSC has a strong focus on a functional area within an organisation, not capturing all the corporate strategic objectives, but just the ones that relate to the specific contribution of the functional area.

 

Type 3 - Control Balanced Scorecard

The Control BSC is a corporate BSC implementation that has most of the components of the concept as described by Kaplan and Norton. However it lacks the Destination Statement, the use Strategic Objectives and the Initiative Management System. The main role of the Control BSC is Corporate Performance Management, secondary roles being: Human Resources Performance Management, Internal/External Communication and Intellectual Capital Management.

 

Type 4 - Alignment Balanced Scorecard

The Alignment BSC is a corporate BSC implementation that takes a step further towards a complete BSC implementation, by using in addition to the components of the Control BSC a Destination Statement and Strategic Objectives.

Strategic Management, with a focus on Alignment is the main role of this type of BSC, secondary roles being: Corporate Performance Management, Human Resources Performance Management, Internal/External Communication, Intellectual Capital Management, Financial Management and Project Management.

 

Type 5 - Complete Balanced Scorecard

The complete BSC is the most comprehensive type of BSC implementation as described by Kaplan and Norton (1996a, b, 2001, 2004a, 2004b, 2005). It has a full set of components and its main role is Strategic Management, focusing on both Alignment and Control. This type of BSC is also proactively managed towards a wide integration in organisational systems.

 

       

BSC Type

Primary Role

Other Roles

Estimated usage rank

1

Reporting BSC

Internal/External Communication

Intellectual Capital Management

Third most common

2

Functional BSC

Performance Measurement

Performance Management (HR)

Internal / External Communication

Second most common

3

Control BSC

Corporate Performance Management

Performance Management (HR)

Internal / External Communication

Capital Management

Most common

4

Alignment BSC

Strategic Management - Alignment

Corporate Performance Management

Performance Management (HR)

Internal/External Communication

Intellectual Capital Management

Financial Management

Project Management

Fourth most common

5

Complete BSC

Strategic Management - Alignment and Control

All roles

Management towards polyvalent BSC use

Fifth most common

Source: Brudan, 2005


Speckbacher et al (2002), propose three types of Balanced Scorecards used in German speaking countries.

 

BSC Type

Criteria

Balanced Scorecard Type l

(i) strategic measures and/or objectives

(ii) grouped into perspectives

Balanced Scorecard Type ll

Type I +

(iii) Employs cause-and-effects chains

Balanced Scorecard Type lll

Type II +

(iv) Contains action plans/targets

(v) Linked to incentives

Source: adapted from Speckbacher et al, 2003


As the classification presented above are mostly derived from the evolution of literature a different perspective of BSC typology based on academic research is presented below. The classification is based on the BSC components and the use of the BSC in organisations (Brudan, 2005)

 

Cobbold and Lawrie (2002) grouped Balanced Scorecard based on how the concept matured over time, identifying three generations.

  • 1st generation Balanced Scorecard – focusing on performance measurement. It combines financial and non financial measures grouped in four perspectives
  • 2nd generation Balanced Scorecard – focusing on performance management and consisting of the four perspective KPI scorecard and the Strategy Map
  • 3rdgeneration Balanced Scorecard – A Destination Statement is added to the Scorecard and Strategy Map components of the second generation balanced scorecard (Cobbold and Lawrie, 2002)

 

It appears that even a 4th generation Balanced Scorecard is proposed.  It is presented as a solution that takes current scorecard techniques to the next level, linking scorecards to Value Advisory Services and the value of the company, and to map the firm's footprint on the environment and the community (The Business Farm, 2010).

 

 

References

 

  • Brudan, A. (2005), Balanced Scorecard typology and organisational impact, act, KM Online Journal of Knowledge Management, Vol. 2, No. 1.
  • Cobbold, I. & Lawrie, G. (2002a), Performance Measurement Association.

  • Edvinsson, L. & Malone, M., S. (1997), Intellectual Capital: Realizing your Company’s True Value by Finding Its Hidden Brainpower, Harper Business, New York, NY.

  • Kaplan, R., S. & Norton, D., P. (1992), The Balanced Scorecard - Measures That Drive Performance, Harvard Business Review, Vol. 70, No. 1, pp. 71-79.

  • Kaplan, R., S. & Norton, D., P. (1996a), Using the balanced scorecard as a strategic management system, Harvard Business Review, Vol. 74, No. 1, pp. 75-85.

  • Kaplan, R., S. & Norton, D., P. (2001), The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, Harvard Business School Press, Boston, MA.

  • Kaplan, R., S. & Norton, D., P. (2004a), Measuring the strategic readiness of intangible assets, Harvard Business Review, Vol. 82, No. 2, pp. 52-63.

  • Kaplan, R., S. & Norton, D., P. (2004b), Strategy Maps: Converting Intangible Assets into Tangible Outcomes, Harvard Business School Press, Boston, MA.

  • Kaplan, R., S. (2005), How the balanced scorecard complements the McKinsey 7-s model Strategy and Leadership, Vol. 33, No. 3, pp. 41-46.

  • Speckbacher et al. (2003), A descriptive analysis on the implementation of Balanced Scorecards in German-speaking countries, Management Accounting Research, Vol. 14, pp. 361-387.

  • Sveiby, K., E. (2004), Methods for Measuring Intangible Assets, available at: http://www.sveiby.com/articles/IntangibleMethods.htm.

  • The Business Farm (2010), 4th Generation Balanced Scorecard, available at: http://www.thebusinessfarm.com.au/LeftMenu/4th+Generation+Balanced+Scorecard.html. 

BSC concept : Definition

 

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