On the Relevance of the Balanced Scorecard

The balanced scorecard, BSC for short, revolutionized conventional thinking about performance metrics.

The BSC complements the financial measures with three sets of operational measures having to do with customer satisfaction, internal processes, and the organization’s ability to learn and improve–the activities that drive future financial performance.

Robert Kaplan and David Norton first introduced the concept already in 1992, but it seems that the method is still very relevant. Gartner Group suggests that over 50% of large US firms have now adopted the BSC.

When constructing a BSC, I think the Customer Perspective should be thought of first. The overall customer experience is a major issue in any business. The process begins by setting measurable, and attainable goals.

I think the traditional Financial Perspective must come second to the Customer Perspective.

This is because otherwise, we might end up overlooking the customer’s point of view.

Kaplan and Norton describe the innovation of the balanced scorecard as follows:

“The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation.”

This is especially true, when we set out to refine the Internal Business Process Perspective and the Learning & Growth Perspective. Focusing on the internal business processes encourages the identification of measures that answer the question “How can we continue to improve, create value and innovate?”

The balanced scorecard method comes in handy in strategy mapping. But most importantly, it comes in handy when translating the organization’s vision and strategy into an action plan.

The balanced scorecard can be applied in any organization, not just those that are making profit, but in non-profit organizations as well.

At my current workplace, for example, we have succeeded in applying it to digital service design.

To me, the BSC still seems like one of the best tools to apply in turning the strategy into a roadmap for the future.

Author: Iiris Konttinen

I am a digital service design and digital marketing professional based in Helsinki, Finland.