What is the balanced scorecard?
The balanced scorecard (BSC) is a performance management tool that goes beyond financial measures to track performance from four perspectives (financial, customer, internal business process, and learning and growth) and to translate strategy into action. Robert Kaplan and David Norton introduced it in *Harvard Business Review* in 1992.
- Authors
- Kaplan & Norton (1992)
- Core idea
- Balance financial and non-financial measures
- Perspectives
- Financial, customer, internal process, learning & growth
- Extension
- Strategy maps (2004)
Four perspectives and KPI examples
| Perspective | Key question | KPI examples |
|---|---|---|
| Financial | How do we look to shareholders? | Revenue growth, operating margin, ROI |
| Customer | How do customers see us? | Satisfaction, repeat purchase, market share |
| Internal process | What must we excel at? | Defect rate, on-time delivery, time to market |
| Learning & growth | Can we continue to improve and create value? | Training hours, key-talent retention, systems readiness |
If profits are strong this quarter, is the company on track? Financial measures are lagging indicators of past performance. If leading indicators such as employee capability or customer satisfaction are falling, profits may fall a few quarters later. The BSC links measures in a cause-and-effect chain (capability → process → customer → financial) so that future performance can be managed now.
Strategy maps
In *Strategy Maps* (2004), Kaplan and Norton showed how to visualize strategy on one page by linking objectives across the four perspectives with arrows, helping employees see how their work connects to strategy.
Public and nonprofit use
Because mission matters more than profit, public and nonprofit organizations often place a mission or citizen perspective at the top instead of financial results.
Strengths and limits
The BSC links strategy with daily work and counters short-termism. Critics note metric overload, untested causal assumptions and the risk of treating targets as ends. See strategic HRM and the McKinsey 7S model.
Frequently asked questions
- What are the four BSC perspectives?
- Financial, customer, internal business process, and learning and growth.
- Who developed it?
- Robert Kaplan and David Norton, in 1992.
- What is a strategy map?
- A one-page diagram linking strategic objectives across the four perspectives by cause and effect.
References
- Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard: Measures that drive performance. Harvard Business Review, 70(1), 71–79.
- Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Harvard Business School Press.
- Kaplan, R. S., & Norton, D. P. (2004). Strategy maps: Converting intangible assets into tangible outcomes. Harvard Business School Press.