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The 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. It is perhaps the best known of several such frameworks (it was the most widely adopted performance management framework reported in the 2010 annual survey of management tools undertaken by Bain & Company.) Since its original incarnation in the early 1990s as a performance ...view middle of the document...
It is the method by which this 'most relevant' information is determined (i.e., the design processes used to select the content) that most differentiates the various versions of the tool in circulation. The balanced scorecard also gives light to the company's vision and mission. These two elements must always be referred to when preparing a balance scorecard.
As a model of performance, the balanced scorecard is effective in that "it articulates the links between leading inputs (human and physical), processes, and lagging outcomes and focuses on the importance of managing these components to achieve the organization's strategic priorities."
The first versions of balanced scorecard asserted that relevance should derive from the corporate strategy, and proposed design methods that focused on choosing measures and targets associated with the main activities required to implement the strategy. As the initial audience for this were the readers of the Harvard Business Review, the proposal was translated into a form that made sense to a typical reader of that journal - one relevant to a mid-sized US business. Accordingly, initial designs were encouraged to measure three categories of non-financial measure in addition to financial outputs - those of "customer," "internal business processes" and "learning and growth." Clearly these categories were not so relevant to non-profits or units within complex organizations (which might have high degrees of internal specialization), and much of the early literature on balanced scorecard focused on suggestions of alternative 'perspectives' that might have more relevance to these groups.
Modern balanced scorecard thinking has evolved considerably since the initial ideas proposed in the late 1980s and early 1990s, and the modern performance management tools including Balanced Scorecard are significantly improved - being more flexible (to suit a wider range of organisational types) and more effective (as design methods have evolved to make them easier to design, and use). In the latest book by Kaplan & Norton related to the BSC, "The Execution Premium", the BSC forms only a part of a broader Execution Premium Process (XPP) to implement and monitor strategy.
Organizations have used systems consisting of a mix of financial and non-financial measures to track progress for quite some time. One example of a such a system was created by Art Schneiderman in 1987 at Analog Devices, a mid-sized semi-conductor company; the Analog Devices Balanced Scorecard was similar to what is now recognised as a "First Generation" Balanced Scorecard design. Subsequently 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 use of balanced scorecard in a 1992 article....