A widely used framework for assessment achievement of financial and non-financial objectives.

Robert Kaplan and David Norton developed the concept of a balanced scorecard.

Aim of the scorecard: To align business activities to the vision and strategy of the business, improve internal and external communications, and monitor business performance against strategic goals.

Key features of the balanced scorecard

  • Top-down approach
  • Starts with the mission and vision of the business
  • Identifies key performance indicators from four different perspectives
  • Emphasises importance of non-financial measures

Four perspectives of the balanced scorecard

Vision & strategy:

  • Financial
  • Customer
  • Internal Processes
  • Organisational capacity

KPI - Key Performance Indicator

Advantages of the Balanced Scorecard

  • Broader view of business performance
  • Links performance measurement to long-term mission and vision
  • Involves everyone in the business (not just financial stakeholders)
  • Highly flexible - KPIs chosen by the business

Drawbacks of the Balanced Scorecard

  • Danger of too many KPIs
  • Need to have balance between the four perspectives - not easy
  • Senior management may still be too concerned with financial performance
  • Needs to be updated regularly to be useful