Balanced Scorecard
Definition
The Balanced Scorecard is a strategy management framework, introduced by Robert Kaplan and David Norton in a 1992 Harvard Business Review article, that measures performance across four perspectives — Financial, Customer, Internal Business Process, and Learning & Growth — rather than on financial results alone. Each perspective carries its own objectives, measures, targets, and initiatives, so the drivers of future performance are tracked alongside the outcomes they eventually produce.
The four perspectives are read as a chain running upward: investment in people and systems improves the way work gets done, which improves what customers experience, which shows up in revenue and margin. A scorecard usually holds 15 to 25 measures spread across the four, each with a baseline, a target, and a named owner. Most organizations review the full scorecard quarterly and the fastest-moving measures monthly.
The weak point is the cause-and-effect chain itself, which is asserted at design time and rarely tested afterwards. A scorecard can stay green on training hours and cycle time for a year while the financial measures drift, and nothing in the method forces anyone to ask whether the assumed link was real. Scope drifts too: once every department adds its own measures, the scorecard becomes a reporting pack rather than a statement of strategy.
Example
A regional bank links Learning & Growth (advisor certification 54% to 90%) to Internal Process (loan approval cycle 11 days to 4) to Customer (client retention 82% to 89%) to Financial (fee income per client $340 to $420).
See also: Balanced Scorecard software