Balanced Scorecard

Balanced Scorecard

A strategic management framework that translates an organization’s vision and strategy into a comprehensive set of performance measures across four perspectives: financial, customer, internal business processes, and learning and growth.

For instance, a manufacturing company’s balanced scorecard might include financial metrics (revenue growth, gross margin), customer metrics (satisfaction scores, market share), internal process metrics (manufacturing cycle time, defect rates), and learning and growth metrics (employee satisfaction, training hours), all aligned with strategic objectives.

Developed by Robert Kaplan and David Norton, this approach overcomes limitations of purely financial measurement by including leading indicators that drive future performance. Each perspective typically contains objectives, measures, targets, and initiatives linked through cause-and-effect relationships. Financial measures show results of past actions, while non-financial measures provide insight into future performance potential. The balanced scorecard serves multiple functions: clarifying and translating strategy, communicating objectives, planning targets, and facilitating organizational learning. Effective implementation requires executive sponsorship, clear strategic linkages, and integration with management processes including budgeting, resource allocation, and performance evaluation.