Definition of Balanced Score Card (BSC)
A balanced scorecard is a strategic planning and management system that is used
extensively in business and industry to align business activities to the vision and strategy of
the organization.
History
The first balanced scorecard was created by Art Schneiderman (an independent
consultant on the management of processes) in 1987 at Analog Devices, a mid-sized semi-
conductor company. Art Schniederman participated in an unrelated research study in 1990
led by Dr. Robert S. Kaplan in conjunction with US management consultancy Nolan-
Norton, and during this study described his work on Balanced Scorecard. Subsequently,
Kaplan and David P. Norton included anonymous details of this use of balanced scorecard in
their 1992 article on Balanced Scorecard]. Kaplan & Norton's article wasn't the only paper on
the topic published in early 1992. However, in 1992 Kaplan & Norton paper was a popular
success, and was quickly followed by a second in 1993. In 1996, they published the book The
Balanced Scorecard. These articles and the first book spread knowledge of the concept of
Balanced Scorecard widely, but perhaps wrongly have led to Kaplan & Norton being seen as
the creators of the Balanced Scorecard concept.
Kaplan & Norton's first book, The Balanced Scorecard, remains their most popular.
The book reflects the earliest incarnations of Balanced Scorecard - effectively restating the
concept as described in the second Harvard Business Review article. Their second book, The
Strategy Focused Organization, echoed work by others (particularly in Scandinavia) on the
value of visually documenting the links between measures by proposing the "Strategic
Linkage Model" or strategy map. Since then Balanced Scorecard books have become more
common - in early 2010 Amazon was listing several hundred titles in English, which had
Balanced Scorecard in the title.
Characteristic of Balanced Scorecard
The core characteristic of the Balanced Scorecard and its derivatives is the
presentation of a mixture of financial and non-financial measures each compared to a
'target' value.
BSC is not a static list of measures, but a framework for implementing and aligning
strategy and carrying out complex programs of change.
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Objectives of Balanced Scorecard
A Balanced Scorecard begins with the premise that traditional financial measures are
not sufficient to manage an organization.
In other words, while financial measures tell the story of past events, they are not
helpful to guide the creation of future value through investments in customers,
suppliers, employees, technology, or innovation.
It improves internal and external communications, and monitor organization
performance against strategic goals.
The report is not meant to be a replacement for traditional financial or operational
reports but a succinct summary that captures the information most relevant to those
reading it.
It is the method by which this 'most relevant' information is determined (i.e. the
design processes used to select the content).
It tells what investments in people, systems, and procedures are necessary to propel
their firms down the road to profitability.
Designs of a Balanced Scorecard
It is ultimately about the identification of a small number of financial and non-financial
measures and attaching targets to them, so that when they are reviewed it is possible to
determine whether current performance 'meets expectations'.
Steps required designing a Balanced Scorecard:
1. Translating the vision into operational goals;
2. Communicating the vision and link it to individual performance
3. Business planning; index setting
4. Feedback and learning, and adjusting the strategy accordingly
Kinds of designs of Balance Scorecard
1. Original design method: The four perspective used are
a. Financial: "How do we look to shareholders?"
b. Customer: "How do customers see us?"
c. Internal Business Processes:"What must we excel at?"
d. Learning and Growth:"Can we continue to improve and create value?".
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2. Improved design methods
Infosys Balance Score card
Infosys invested in a portfolio of organization-wide planning and execution processes
and systems, which involves participation from a cross-section of our employees.
Infosys executed the key strategies resulting in growth and differentiation of the
organization.
The award was based on five key principles:
1. Mobilizing change through executive leadership;
2. Translating strategy into operational terms;
3. Aligning the organization around its strategy;
4. Motivating to make strategy everyone's job, and
5. Governing to make strategy a continual process.
