The Balanced Scorecard (BSC) is a strategic management method developed by Kaplan and Norton in the early 1990s. It provides a comprehensive, balanced framework that maps, measures, and communicates all the key factors necessary for a company’s success. It is more than just a performance measurement tool—the Balanced Scorecard can be expanded into a full strategic management system that aligns an organization’s objectives with its strategic goals.
The term “balanced scorecard” can be roughly translated as “balanced reporting sheet” in German, but it’s important to note that the Balanced Scorecard offers far more than just a key performance indicator system. It helps organizations break down complex strategies into actionable goals, ensuring that both financial and non-financial aspects of performance are monitored.
The Balanced Scorecard concept has gained widespread adoption in recent years for several reasons:
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Translating Strategy into Action: It addresses the lack of tools to convert strategies into concrete actions, guiding organizations through the implementation process.
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Criticism of Traditional Metrics: Traditional performance metrics often emphasize financial outcomes and past performance, which fail to capture the full scope of a company’s success. These metrics are especially lacking when it comes to assessing human resources and employee satisfaction.
By integrating key performance indicators (KPIs) from multiple perspectives, the Balanced Scorecard allows companies to assess their progress toward achieving strategic objectives with a clear, well-rounded view. The system has been praised for its ability to offer actionable insights that drive organizational improvement.
Kaplan and Norton’s Balanced Scorecard Framework serves as a strategic tool to help companies align their actions with their mission, improving both short-term performance and long-term growth.
Figure 1 illustrates the typical structure of a Balanced Scorecard.
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