The Balanced Scorecard (BSC) is a widely used management framework designed to help an organization monitor its performance and manage the execution of its strategy. Developed in the early 1990s by Robert Kaplan and David Norton, the BSC translates the organization’s mission and strategy into tangible objectives and measures. Its main characteristic is that it views the organization from four interrelated perspectives:
- The financial perspective reflects the interests of the shareholders. It includes measures such as operating income, return on capital employed, and economic value added.
- The customer perspective asks how the company should appear to the customers in order to achieve its vision. It covers measures such as customer satisfaction, customer retention, market share goals, and product and service attributes.
- The internal business processes perspective asks what operational processes the company must excel at in order to satisfy shareholders and customers. Measures include cost, throughput, and quality.
- The learning and growth perspective is concerned with how the organization can stay competitive in the future. It covers measures such as human capital, skill sets, employee training, leadership, etc.
By incorporating both financial and non-financial measures, the BSC helps managers to gain a more “balanced” view of how their organizations are actually performing.