What is Balanced Scorecard?
The concept of Balanced Scorecard was introduced by Robert S. Kaplan and David P. Norton in a report published in 1992 in Harvard Business Review. Their aim was to develop a tool for enhancing corporate long-term strategic planning. The results showed that the traditional performance measurement, focusing on external accounting data, was quickly becoming obsolete. Something more was needed to provide the information age enterprises with efficient planning tools. For this purpose, Kaplan and Norton introduced four different perspectives from which a company's activity can be evaluated. These perspectives are financial processes, customer satisfaction, internal processes, and learning and innovation. The perspective of financial processes is more or less the traditional viewpoint of performance measurement. The three other perspectives focus on the management of intangible assets, as they are likely to determine the company's success in the long run.
The process of creating a Balanced Scorecard for your company means clarifying the vision and laying out strategies. A carefully prepared Balanced Scorecard is a description of the company's strategy. It involves the entire organization: everybody's contribution is vital in commenting the Balanced Scorecard draft. Balanced Scorecard works as a real-time testing device: you can incorporate the feedback from business and comments from within the organization to modify and improve the scorecard.