A Brief History of Balanced Scorecard
David Norton and Robert S Kaplan introduced the concept of the “balanced scorecard” in 1992. It evolved from earlier work in using a systematic approach to performance management, such as the data warehouse and executive information systems.
Since 1992, Balanced Scorecards evolved and developed from a performance measurement tool, to a strategic implementation and management system.
The ‘balance’ in a balanced scorecard comes from including performance measures and indicators that reflect desired outcomes – balanced with measures of the activities needed to effect those outcomes.
Later, the measures were organised into groups on the basis of how long do we need to continue an activity before we see the results. A pattern was
discernible amongst scorecards from more than one hundred organisations. The pattern led to 4 characteristic groups in a Balanced Scorecard. Kaplan and Norton called these ‘perspectives’.
They are classically:
– Internal Business Process
– Learning and Innovation
The ‘Financial’ perspective contains the outcomes – profit, wealth creation, share price, and so forth. In the public sector ‘Financial’ can directly be
replaced with the ‘Performance Outcome’ indicators.
Actions affecting customers directly will have the quickest impact on the financial or performance outcomes.
Actions to improve internal business processes will take longer (often 1-2 years) before the impact can be seen on the outcomes.
Actions affecting learning, and those that are innovative for the organisation will take the longest time to impact outcomes – sometimes as much
as 5 years.
Using the balanced scorecard, management have a clear vision of past, present and their future. It allows the corporate strategy and vision to be closely monitored, and acted upon. A truly robust balanced scorecard demonstrates and delivers governance and sustainability. A truly robust balanced scorecard reduces and mitigates risk.
Balanced Scorecards cascade down through the organisation. Within each of the four perspectives, users can drill down to look at individual targets. Each of the indicators will typically have a traffic light (red, amber, & green – or even better – red, blue & green) system to indicate performance graphically against target.
With a balanced scorecard established, true performance management can begin within the organisation. The balanced scorecard has been embraced within the private and the public sectors.
Our overarching approach – “Strategy Execution” supports the balanced scorecard.
We support organisations in a number of ways:
– creating balanced scorecard in workshops
– training and development
We support you in choosing performance management / balanced scorecard IT systems, implementation and training.
Please feel free to contact us to discuss your organisation’s needs and requirements and how we can assist. click here to contact us.