Since its inception in 1992 the Balanced Scorecard has changed and evolved. This is important as Robert Kaplan and David Norton have managed to keep the concept fresh and aligned with current management thinking. The downside of this is that the understanding of the Balanced Scorecard concept varies widely depending on when individuals learnt about the Balanced Scorecard.
The Changing Nature of the Balanced Scorecard
The Balanced Scorecard was first introduced as a performance measurement framework but was quickly positioned as a strategic performance management tool. The Balanced Scorecard concept is much more than a collection of performance indicators in four perspectives. Today, the Balanced Scorecard allows organisations to translate their strategy into a set of interrelated objectives and performance indicators. Most significantly the overall template has moved from a four box model to a Strategy Map view as an essential component of a Balanced Scorecard.
Perspectives of the Balanced Scorecard have changed
In addition, the names and content of the four Balanced Scorecard perspectives have changed over the years. Especially the Learning and Growth Perspective has been developed and refined. In the past companies have struggled with this perspective and have often renamed it into a Human Perspective to only focus on staff satisfaction, training and turnover or into an innovation perspective to focus on future developments. The danger is that companies miss out other important enablers of future performance. To address this problem, Kaplan and Norton have articulated what they consider to be the principal components of the Learning and Growth perspective, namely:
- Balanced Scorecard Sub Section: Human Capital (Employees’ skills, talent, and knowledge)
- Balanced Scorecard Sub Section: Information Capital (Databases, information systems, networks, and technology infrastructure)
- Balanced Scorecard Sub Section: Organisation Capital (Culture, leadership, employee alignment, teamwork, and knowledge management)
While the four perspectives of the Balanced Scorecard are clearly broad ranging, critics of the balanced scorecard point out that they are not comprehensive. Key stakeholders, such as suppliers and regulators, for example, can be easily missed. As are other strategic areas such as the environmental and competitor perspectives. The way many organisations deal with this is to extend the framework and add/rename perspectives to suit their particular needs.