A short look at the development of the balanced scorecard – “one of the most significant management ideas of the past 75 years”

The balanced scorecard is a concept that has become deeply embedded in organisations of all kinds around the world – and yet, remarkably, it has only existed for fifteen years.

By 2003, the editors of the Harvard Business Review were naming the balanced scorecard as one of the most significant management ideas of the past 75 years, and a survey has found that around half the Fortune 1000 companies in the USA and 40 percent of those in Europe use balanced scorecards. Yet the concept was only developed in the early 1990s.

The balanced scorecards of the 1990s 

The concept of the balanced scorecard was first touted in the Harvard Business Review in 1992 in a paper written by Robert S Kaplan and David P Norton. The paper introduced the idea of focusing on human issues as well as financial ones, and measuring performance across a much wider spectrum than businesses had done before.

By the mid-1990s other organisational theorists had taken up Kaplan and Norton’s work and modified the design method of balanced scorecards, ironing out early flaws. Kaplan and Norton published their ideas in full in The Balanced Scorecard: Translating Strategy into Action in 1996 and it became a business bestseller.

Balanced scorecards in a new millennium

The idea of balanced scorecards spawned variations like the “performance prism”, “results-based management” and the “third-generation balanced scorecard”.

The idea of three generations of balanced scorecards was built on in Cobbold and Lawrie’s work of 2002, which described how the balanced scorecard – or BSC, as it is often referred to – can support three distinct management activities and has evolved into the use of strategy maps as a strategic management tool.

The future of the balanced scorecard

Balanced scorecards, and management tools and strategies based on them, are used by some of the world’s most successful companies – and by companies of all sizes.

Specialist software tools have been developed to help companies benefit from the theories of balanced scorecards. An increasingly diverse range of organisations, including charities, government agencies and sports teams as well as businesses, are finding them profitable.