Balnced Score Card

The Balanced Scorecard

A Literature Review on

the Balanced Scorecard’s impact on performance

Craig Sasse, Ph.D.

Vice President, Information

LeaderPoint

www.leaderpoint.biz

Copyright: LeaderPoint

www.leaderpoint.biz

Balanced Scorecard

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Executive Summary

Since Kaplan and Norton introduced the Balanced Scorecard (BSC) in

the early 1990s, it has become widely adopted by companies and

divisions within companies. The BSC was conceived as way to

operationalize a company’s vision and strategy. In this regard, it is a

management system, or as the originators note, a tool for change within

the firm or unit. Not surprisingly, the swift adoption and creation of

BSCs has led to a number of different applications and variations of the

tool. When implemented well, it appears that BSC is consistent with the

principles of good management in that it promotes strategic planning,

better definition of accountabilities, and more effective feedback.

Background

When Kaplan and Norton introduced the Balanced Scorecard in 1992,

companies were already searching for new measurement systems to

replace the age-old accounting measurements used for budgetary

control. The BSC is an apparent antidote to the limitations of using lag

measurements that are historically based and cannot be used to help the

manager moving forward (e.g., financial ratios). In addition, the BSC

attempted to bring objective value to non-financial measures such as

customer satisfaction and operational processes. The BSC is an

integrated tool that is designed to link sets of activities and outcomes by

individuals and groups to broader strategic goals of the firm. Done

correctly, the BSC is believed to help the troops see how their work

impacts the important company goals.

The BSC is more of a conceptual tool, where the company and each unit

within the company must customize the scorecard to their particular

goals and strategy. In fact, the literature is clear by those...