Over recent years the Balanced Scorecard (BSC) has evolved into one of the most popular strategic management tools. The BSC was developed by Robert Kaplan and David Norton in the early 1990s and initially positioned as a strategic performance measurement innovation to counteract the prevalent financial bias in existing performance measurement systems.
The initial idea of the Balanced Scorecard
The initial idea of the Balanced Scorecard was that financial measures are lag indicators, which when used in isolation, could lead to short-term thinking. To promote the long-term value creation it was suggested that the financial perspective of performance should be complemented with measures in three supplementary perspectives, namely customer perspective, internal business perspective, and innovation and learning perspective.
Repositioning the Balanced Scorecard
In 1996, the Balanced Scorecard was repositioned as a strategic management system and it was suggested that firms move away from presenting Balanced Scorecards in a four-box model. Instead it was suggested that firms create a strategy map as the visual representation of a company's critical objectives and the cause-and-effect relationships among them.
Balanced Scorecard Today
Today, strategy maps are seen as vital components of a Balanced Scorecard as they allow firms to understand how their intangibles are converted into tangible outcomes.
For more information, articles and case study material on balanced scorecard and performance management, please visit the resources section of the Advanced Performance Institute website.
The Advanced Performance Institute (API) is a world-leading independent research and advisory organisation specialising in organisational performance. The institute provides expert knowledge, research, consulting and training on concepts like balanced scorecards, performance measurement and corporate performance management.
The aim of the API is to provide today’s performance-focused companies, governments and not-for-profit organisations with insight, advice and services that help them deliver lasting change and superior performance.
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