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insight Encyclopedia

Balanced Scorecard

A balanced scoreboard is an analysis technique that translates an organization’s mission statement and business strategy into specific, measurable goals, and monitors the organization’s performance in regards to achieving these goals.

First developed by Robert Kaplan and David Norton in 1992, this methodology is a thorough approach that examines an organization’s entire performance, based on the fundamental that measuring performance through financial returns only provides information about how well the organization did prior to the assessment. The future acts can then be forecasted and the right actions can be taken to produce the desired outcome. It provides feedback around both internal and external processes and outcomes in order to continuously improve performance and results.

The balanced scoreboard approach provides a clear method as to what companies should measure in order to balance out financials by recognizing some of the weaknesses of traditional management approaches. Kaplan and Norton describe the approach as “retain[ing] 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.”