Thinking: after 22 years of refinement, the balanced scorecard must continue its development.

AuthorSulaiman, Suzana
PositionINFORM

The balanced scorecard (BSC) was proposed by US academics David Norton and Robert Kaplan in the early 1990s to address inadequacies in traditional performance measures, which focused purely on finance. The key point was that it was impossible to portray a firm's overall performance using accounting measures alone.

The first generation of the BSC included a combination of financial and non-financial measures. These were categorised into four perspectives: financial, customer, internal business processes, and learning and growth. Measures, targets and initiatives were identified, based on the assigned objectives of each of the four perspectives. In essence, the first generation of the BSC was designed as a method of helping managers to get a grip on their organisation. It was simply a collection of metrics for operational measurement purposes. It was not designed to describe strategy and change or to explain in detail how measures were selected and filtered.

These weaknesses led to the development of the second-generation BSC, which focused on factors affecting organisational performance and a few measures that would become known as key performance indicators. Yet it still featured unjustified causal links. Practical problems concerning measurement, target-setting and implementation at lower levels of an organisation also remained.

The third generation of the BSC simplified matters of causality with a reshuffling of perspectives. The learning and growth and internal business process perspectives were replaced by a single activity perspective, while both the financial and customer perspectives were represented by the outcome perspective. But this version was still unable to respond to the fast-changing business environment, which requires strategies for managing uncertainty and risk. Its focus on targets, controls and measures remained inadequate.

The latest generation of the BSC therefore includes a model...

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