Balanced Scorecard

The Balanced Scorecard was developed in the early 1990s by Robert Kaplan and David Norton at the Harvard Business School

The key problem that they tried to address was that many companies tended to manage their businesses based solely on financial measures.

There are several problems with this approach:-

  • They tend to be short term (often quarterly driven)
  • There is a temptation to use them more to drive down costs rather than to promote growth by investing in new product development
  • They can only report what has happened in the past — where a business has been, but not where it is headed. It’s like driving a car by looking in the rearview mirror.

To try to overcome some of these problems Kaplan and Norton developed the Balanced Scorecard, which tries to achieve balance across different aspects of the business (shown below in the diagram) by balancing the financial metrics against other kinds of metrics.

Balanced Scorecard Diagram

You may already be using Balanced Scorecards, or you may be thinking of doing so. Either way the trick is to link them to your strategy and the process for new product development.

Contact us if you would like to discuss the best way to do this at your company.