The Balanced Scorecard has been around for 25 years. A great moment to take a step back and see what the Balanced Scorecard added to modern management.
In this first article, I would like to share with you 6 crucial facts about the Balanced Scorecard.
1. The Balanced Scorecard, invented by Art Schneiderman
Contrary to popular belief, the first Balanced Scorecard was not created by Dr Robert S. Kaplan and Dr David P. Norton, but by Art Schneiderman – a fact that I was unaware of until a few years ago.
At the time of its conception, Schneiderman worked as an independent consultant for Analog Devices, a mid-sized semi-conductor company. Here’s the story. In 1990, Schneiderman took part in a research study by Robert Kaplan of the Harvard Business School and US management consultancy Nolan-Norton.
Subsequently, Kaplan and Norton included anonymous details of this use of the Balanced Scorecard in their 1992 article on the BSC. Their article Measures That Drive Performance published in the Harvard Business Review (1992) wasn’t the only paper published on the topic that year, but it was a great success and received much attention. In 1996, they published the bestselling The Balanced Scorecard, Translating Strategy into Action.
The initial high-profile articles and this highly successful book have made the BSC well-known, but perhaps also wrongly led to Kaplan and Norton being seen as the creators of the Balanced Scorecard concept.
So if you are a Scorecard fan, give credit to Robert Kaplan and David Norton, the founding fathers of modern Strategy Execution thinking, for making it common knowledge. But thank Art Schneiderman for conceptualising the Balanced Scorecard itself.
While the term and the concept of the Balanced Scorecard was invented by Art Schneiderman and made famous by Kaplan and Norton, the roots of performance management as an activity go further back in time. Management historian Alfred Chandler points out that early performance management practices go right back to the early 19th century and the emergence of complex organizations.
2. The Balanced Scorecard, 6th in the world
Today, the Balanced Scorecard is considered an indispensable instrument for clarifying, communicating and managing strategy across organisations. According to research by Bain, the Balanced Scorecard is the sixth most used management instrument in today’s organisations, with around 50 percent of all 11,000 survey participants making use of it. The world of academia has also jumped on the concept. By the end of 2011, Amazon listed nearly 4,000 English-language books related to the Balanced Scorecard. Meanwhile, many people have something to say about the Balanced Scorecard with Google hits close to seven million.
3. The Balanced Scorecard, more than KPI’s
What does a Balanced Scorecard actually do? The Scorecard provides a framework for translating an abstract strategy into specific, concrete objectives, measures, indicators and actions. It combines a ‘balanced’ (cause/effect) view with a ‘scoring’ (measuring/tracking) view. It focuses on aligning the goals of business units, teams and individual employees with the company’s overall business strategy.
A great Balanced Scorecard breaks a business strategy down into specific and measurable chunks. It also keeps the long-term strategic goals visible on the radar.
The ultimate goal of a Balanced Scorecard is to experience Strategy Execution as a continuous process. Today, the BSC provides much more than multi-view measurement; in many organizations, it’s an essential management system and a cornerstone of successful Strategy Execution.
The Institute for Strategy Execution identifies the Balanced Scorecard as a cornerstone of a solid strategy execution approach.
4. The Balanced Scorecard, foundation for operational management
By helping organizations detect problem areas and ensuring that managers and employees focus their energies in the right areas, the Balanced Scorecard also becomes an important foundation for operational management. It’s a crucial part of the strategy implementation framework.
5. The Balanced Scorecard, creating strategy focus
The Balanced Scorecard should not be viewed as a controlling instrument. Its ultimate goal is to create focus for what’s really important for the future, ensuring that all employees contribute to the realization of the company’s mission and strategic goals. Measurement is a means to reaching a goal and not a goal in itself.
The Scorecard is also about learning and teaching; about your strategy, the assumptions you have made regarding winning in the marketplace and the value proposition you have put forward. It can be a crucial lever to communicating your strategy.
6. The Balanced Scorecard, automation helps
If you look into the Balanced Scorecard, at some point you will face the automation challenge. According to 2GC research, more than 100 BSC reporting applications (supporting the automation of data collection, reporting and analysis) were available at the time of their audit. A previous survey revealed that, of all the companies that used BSC software, roughly one-third used office software to report their Balanced Scorecard, one-third used bespoke software developed specifically for their own use and one-third used one of the many commercial packages available.