The Balanced Scorecard is a strategic planning and management framework that is used to “to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals”.(source: Balanced Scorecard Institute)
The Balanced Scorecard was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance. The Balanced Scorecard has evolved from its early use as a simple performance measurement ‘dashboard’ to a full strategic planning and management system. It transforms an organization’s strategic plan from a passive document into the ‘marching orders’ for the organization on a daily basis.
The Balanced Scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.
The Balanced Scorecard has four perspectives (see Figure):
· The Learning and Growth Perspective: employee training and corporate cultural attitudes related to both individual and corporate self-improvement.
· The Business Process Perspective: internal business processes.
· The Customer Perspective: customer focus and customer satisfaction.
· The Financial Perspective: financial and financial-related data, such as risk assessment and cost-benefit data.
A Balanced Scorecard should be enhanced with cause-and-effect relationships between measures: outcome measures (lag indicators of past performance) and performance drivers (lead indicators). A well-developed scorecard should contain a good mix of these two metrics.
Figure: Four perspectives of the Balanced Scorecard
(Adapted from Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January-February 1996): 76.; source: www.balancedscorecard.org)
Senior management; strategic planners; business managers
Scope and constraints
The Balanced Scorecard was initially developed at enterprise level. It can easily be adapted to align IT projects, IT departments and IT performance to the needs of the business.
· The Balanced Scorecard is used extensively in business and industry, government and non-profit organizations worldwide
· Use of an IT Balanced Scorecard is one of the most effective means to support the board and management in achieving IT and business alignment.
· Visions and strategies that are not actionable
· Strategies that are not linked to departmental, team and individual goals
· Strategies that are not linked to long- and short-term resource allocation
· Feedback that is tactical, not strategic.
Relevant links (web links)
Original paper: Kaplan R S and Norton D P (1992) "The Balanced Scorecard: measures that drive performance", Harvard Business Review Jan – Feb pp. 71–80.
Relevant website for related material