Balanced scorecard

An introduction and overview

The Balanced Scorecard was developed in the early 1990s by Robert Kaplan and David Norton, to provide a new form of strategic management. The Balanced Scorecard consists of:

• a core of the business "strategy" or "vision"
• four inter-related legs to achievement of that strategy:
  • financial aspects of the company
  • business processes
  • learning and development
  • the customer
• for each leg, there are four components:
  • objectives
  • measures of achievement
  • targets (ie: percentage of the measure you are aiming for)
  • initiatives

All four legs of achievement of the strategy are inter-related - eg: learning and development objectives must be related to improvement of customer service.

By way of example, a small corner-shop selling groceries might produce a balanced scorecard based around a vision of providing a personalised service to local customers:

• the financial aspect is expressed in terms of profit, turnover and stock levels
• business processes are centred around personal service in the shop and home delivery for regular orders
• learning and development involves recognising the changing nature of shopping (eg: more use of the internet)
• the main focus of customer service is personal interaction and local knowledge

A balanced scorecard can then be produced (on a single sheet of paper) covering these four aspects. For example, the financial aspect might be covered by:

• objectives are to make a profit of (say) £20,000
• achievement is measured through monthly accounts
• the target is to make a 20% profit over turnover
• initiatives to achieve that target include a review of in-shop and home-delivery pricing

There will be similar objectives and measures etc for each of the other areas (business processes, customers, learning/growth). An important facet of these is that they are all related (eg: the customer objectives must also contribute to profitability)

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