BSC for managing performance



Traditionally, performance management in organisations has been concerned with control, by setting and monitoring the achievement of targets at strategic, operational and individual levels. Measurement can have its benefits as it provides valuable information, as measuring in itself stimulates higher performance. The Hawthorn effect and the Westinghouse effect (Observer’s paradox) demonstrate the positive effects of measuring. 


At strategic level, senior management supported by management accountants and finance professionals focus their efforts in translating organisational objectives in quantifiable targets. These objectives and targets are delegated to functional areas for execution. Compliance with set targets is checked on a regular basis. These strategic objectives are then aligned with operational objectives and individual performance objectives.


However, the focus on the measurement and control in the context of performance management has started to diminish in the 1990s, driven by the increase in popularity of the Balanced Scorecard, knowledge management and intellectual capital and systems thinking.


The Balanced Scorecard was first presented in 1992 as a measurement tool promoted by the management accounting school and having roots in the quality movement. However it evolved quickly to become a complete management system supporting strategy execution as a core competency. As a performance management tool, the Balanced Scorecard enables not only measurement and control, but also communication and learning.


This shift is supported by proponents of the knowledge management/intellectual capital school of thought who argue that “the main problem with all measurement systems is that it is not possible to measure social phenomena with anything close to scientific accuracy” (Sveiby and Armstrong, 2004). They invoke Heisenberg’s uncertainty principle (uncertainties, or imprecisions, always turn up if one tries to measure the position and the momentum of a particle at the same time) to illustrate the inherent imprecision in measurement that exists even in “exact” sciences such as physics. This leaves room for interpretation in setting targets and measuring results and ultimately abuse.


Using targets for control and linking the achievement of these targets to individual performance has the risk of staff members manipulating the system to their benefit and the expense of other teams and even the entire organisation. The alternative to measurement for control is measurement for learning.



Measurement for control

Measurement for learning

Measurement drivers



Measures development

Top-down commands

Process-oriented bottom-up approach

Measurement role

Measuring and managing work in functional activities.

Measuring and managing the flow of work through the system

Measurement focus

Productivity output, targets, standards: related to budget

Capability, variation: related to purpose

Results communication



Target driven by

Budget/political aspirations

Understanding achievement versus purpose

Follow-up to results

Rewards, punishment and action to improve results

Dialogue and improvement

Learning cycle

Single loop

Double loop learning

Link to rewards

Link to individual rewards and recognition system

Group rewards, based on improvement

Source: Brudan, 2008



  • Brudan, A. (2008), From Management Accounting to Strategic Execution and System Thinking: the Balanced Scorecard (r)evolution and new research agenda, 3rd Audit and Accounting Convergence, 2008 Annual Conference, Cluj-Napoca, Romania.
  • Sveiby, K., E. & Armstrong, C. (2004), Learn to Measure to Learn!, opening key note address IC Congress Helsinki, 2 Sept. 2004.

BSC concept : Needs addressed


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