What is the Balanced Scorecard?
The Balanced Scorecard (BSC) is a strategic performance management framework developed by Robert Kaplan and David Norton in the early 1990s. It moves beyond traditional financial measures to provide a more comprehensive view of organisational performance across four interconnected perspectives.
The four perspectives are: Financial (how do we look to shareholders?), Customer (how do customers see us?), Internal Processes (what must we excel at internally?), and Learning and Growth (how can we continue to improve and create value?). Together, these perspectives provide a "balanced" view of performance that covers both lagging indicators (like financial results) and leading indicators (like customer satisfaction and employee capability).
Why the Balanced Scorecard was created
Kaplan and Norton developed the Balanced Scorecard in response to growing recognition that traditional financial measures alone were insufficient guides to strategic management. Financial results tell you what has already happened — they are lagging indicators. By the time a financial problem shows up in the accounts, the root cause has often been present for months.
The Balanced Scorecard adds leading indicators — customer satisfaction, process efficiency, and employee capability — that predict future financial performance. Managing these proactively allows leaders to intervene before problems become serious.
How to build a Balanced Scorecard
Building a Balanced Scorecard starts with the organisation's strategy. For each of the four perspectives, the organisation identifies strategic objectives, determines appropriate measures or KPIs, sets targets, and defines the initiatives that will achieve those targets.
The scorecard is then displayed as a strategy map — a visual representation that shows how the objectives in each perspective connect to each other and ultimately drive the financial outcomes the organisation is seeking.
Common mistakes in implementing the Balanced Scorecard
One common mistake is treating the Balanced Scorecard as a reporting tool rather than a management tool. The scorecard is most powerful when it drives strategic conversations and decisions, not just when it summarises what has happened.
Another mistake is including too many measures. A scorecard with thirty KPIs provides no clarity about what matters most. The discipline of selecting five to seven truly important measures per perspective forces the thinking that makes the scorecard genuinely useful.
How Empiraa relates to the Balanced Scorecard
Empiraa's goal and performance tracking capabilities complement the Balanced Scorecard approach. Organisations using Empiraa can structure their goals and metrics across perspectives similar to the BSC, track performance against targets in real time, and connect strategic objectives to the specific actions and initiatives that will achieve them.
For advisors using Empiraa GPS, helping clients implement a Balanced Scorecard approach is a structured way to build more comprehensive and forward-looking performance management.