Balanced
Scorecard History
Let’s go back
to Balanced Scorecard History. The first Balanced Scorecard was
created in 1987 at Analog Devices, a mid-sized semiconductor
company. The Balanced Scorecard is a performance management tool,
which helps organizations to link their strategic objectives to
performance measures. It was devised by Kaplan and Norton as a way
of providing managers with the information that they need to
‘navigate’ to future success. It assists an organization to
translate its mission and strategy into a comprehensive set of
performance measures, through which performance can be
managed.
Before joining
Harvard in 1984, Kaplan was dean of Carnegie
Mellon University's Graduate School
of Industrial Administration as well as a faculty member there. He
has won numerous academic awards, among them the AAA's Outstanding
Accounting Educator Award in 1988 and the Institute of
Management Accountants Distinguished
Service Award in
2001.
Balanced
Scorecard History: The Balanced Scorecard is described as the
instrumentation that managers need to navigate to success. It is
seen as a new framework for integrating measures derived from
strategy. It develops from selected financial measures of past
performance and the organizational mission and strategy - the
drivers of future performance. These drivers encompass customers,
the internal business process, growth and learning and the final
measurement is the progress from an explicit and rigorous
translation of the organization’s strategy.
According to
the Balanced Scorecard History, the scorecard brings together
financial, customer, internal process and people into one
performance monitoring system.
It enables managers to understand the linkages between these
areas and helps them focus their efforts. Rather than having a
plethora of monthly performance reports, the balanced scorecard
brings together the key indicators for management to run their
organization. In
addition, the balanced scorecard is a dynamic system where measures
are reviewed in light of changes to vision, strategy or mission of
an organization.
In the past
many organizations have collected financial and business results
measures. Whilst these are crucial, they only tell the story of past
events. Alone, they are inadequate for guiding and evaluating an
organization’s journey towards best value and continuous
improvement. The Balanced Scorecard brings together the financial
measures of past performance with the ‘drivers’ of future
performance.
There is a lot
of talk about Coast Guard commands developing a balanced scorecard
of measures for leaders to use to make decisions and gauge the
health of their organizations. Kaplan and Norton literally wrote the
book on the balanced scorecard approach. The approach became very
popular in the 1990s with for-profit and not-for profit
organizations that are interested in measuring overall performance,
implementing a long-term strategy, and managing change more
effectively. The balanced scorecard helps companies translate vision
and strategy into a coherent set of objectives and performance
measures.
Increasingly,
many public and private sector organizations have adopted this
approach and adapted it to suit their needs. Cheshire Social
Services is one public sector organization that has been using this
approach for several years. Like many organizations it has a long
history of strategic planning and performance management and, over
the years, a vast number of performance measures have been developed
internally and externally. However, a set of measures are only
useful if they are closely linked to and inform policy, strategy and
performance.
