Balanced scorecard

The balanced scorecard is a strategy performance management tool – a semi-standard structured report, 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. The balanced scorecard is a strategy performance management tool – a semi-standard structured report, 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. The phrase 'balanced scorecard' primarily refers to a performance management report used by a management team, and typically this team is focused on managing the implementation of a strategy or operational activities – in a recent survey 62% of respondents reported using Balanced Scorecard for strategy implementation management, 48% for operational management. Balanced Scorecard is also used by individuals to track personal performance, but this is less common – only 17% of respondents in the survey using Balanced Scorecard in this way, however it is clear from the same survey that a larger proportion (about 30%) use corporate Balanced Scorecard elements to inform personal goal setting and incentive calculations. The critical characteristics that define a balanced scorecard are: Balanced scorecard is an example of a closed-loop controller or cybernetic control applied to the management of the implementation of a strategy. Closed-loop or cybernetic control is where actual performance is measured. The measured value is compared to a reference value and based on the difference between the two corrective interventions are made as required. Such control requires three things to be effective: Within the strategy management context, all three of these characteristic closed-loop control elements need to be derived from the organisation's strategy and also need to reflect the ability of the observer to monitor performance and subsequently intervene – both of which may be constrained. Balanced Scorecard was initially proposed as a general purpose performance management system. Subsequently, it was promoted specifically as an approach to strategic performance management. Balanced scorecard has more recently become a key component of structured approaches corporate strategic management. Two of the ideas that underpin modern balanced scorecard designs concern making it easier to select which data to observe, and ensuring that the choice of data is consistent with the ability of the observer to intervene. Organizations have used systems consisting of a mix of financial and non-financial measures to track progress for quite some time. One such system was created by Art Schneiderman in 1987 at Analog Devices, a mid-sized semi-conductor company; the Analog Devices Balanced Scorecard. Schneiderman's design was similar to what is now recognised as a 'First Generation' Balanced Scorecard design. In 1990 Art Schneiderman participated in an unrelated research study led by 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 balanced scorecard design in a 1992 article. Kaplan and Norton's article wasn't the only paper on the topic published in early 1992 but the 1992 Kaplan and Norton paper was a popular success, and was quickly followed by a second in 1993. In 1996, the two authors published a book The Balanced Scorecard. These articles and the first book spread knowledge of the concept of balanced scorecard widely, and has led to Kaplan and Norton being seen as the creators of the concept. While the 'corporate scorecard' terminology was coined by Art Schneiderman, the roots of performance management as an activity run deep in management literature and practice. Management historians such as Alfred Chandler suggest the origins of performance management can be seen in the emergence of the complex organisation – most notably during the 19th Century in the USA. More recent influences may include the pioneering work of General Electric on performance measurement reporting in the 1950s and the work of French process engineers (who created the tableau de bord – literally, a 'dashboard' of performance measures) in the early part of the 20th century. The tool also draws strongly on the ideas of the 'resource based view of the firm' proposed by Edith Penrose. None of these influences is explicitly linked to in the original descriptions of balanced scorecard by Schneiderman, Maisel, or Kaplan & Norton.