A balanced scorecard is a strategy performance management tool – a well-structured report used to keep track of the execution of activities by staff and to monitor the consequences arising from these actions.
However it is clear from the same survey that a larger proportion (about 30%) use corporate balanced scorecard elements to inform personal goal setting and incentive calculations.
None of these influences is explicitly linked to in the original descriptions of balanced scorecard by Schneiderman, Maisel, or Kaplan & Norton.
The book reflects the earliest incarnations of balanced scorecards – effectively restating the concept as described in the second Harvard Business Review article.
The Execution Premium in 2008,[17] "Intelligent Design of Inclusive Growth Strategies" in 2019[18]); many others also continue to refine the device itself (e.g. Abernethy et al.[19]).
The characteristic feature 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 within a single concise report.
It is the method by which this 'most relevant' information is determined (i.e., the design processes used to select the content) that most differentiates the various versions of the tool in circulation.
The balanced scorecard indirectly also provides a useful insight into an organization's strategy – by requiring general strategic statements (e.g. mission, vision) to be precipitated into more specific/tangible forms.
These categories were not so relevant to public sector or non-profit organizations,[21] or units within complex organizations (which might have high degrees of internal specialization), and much of the early literature on balanced scorecard focused on suggestions of alternative 'perspectives' that might have more relevance to these groups (e.g. Butler et al. (1997),[22] Ahn (2001),[23] Elefalke (2001),[24] Brignall (2002),[25] Irwin (2002),[26] Radnor et al. (2003)[27]).
The variations appeared to be part of an evolution of the balanced scorecard concept, and so the paper refers to these distinct types as "generations".
[2][38] Design of a balanced scorecard is 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'.
This is illustrated by the four steps required to design a balanced scorecard included in Kaplan & Norton's writing on the subject in the late 1990s: These steps go beyond the simple task of identifying a small number of financial and non-financial measures, but illustrate the requirement for whatever design process is used to fit within broader thinking about how the resulting balanced scorecard will integrate with the wider business management process.
[8] The first generation of balanced scorecard designs used a "four perspective" approach to identify what measures to use to track the implementation of strategy.
These categories were not so relevant to public sector or non-profit organizations,[21] or units within complex organizations (which might have high degrees of internal specialization), and much of the early literature on balanced scorecard focused on suggestions of alternative 'perspectives' that might have more relevance to these groups(e.g. Butler et al. (1997),[22] Ahn (2001),[23] Elefalke (2001),[24] Brignall (2002),[25] Irwin (2002),[26] Flamholtz (2003),[41] Radnor et al. (2003)[27]).
[7] This type of approach provides greater contextual justification for the measures chosen, and is generally easier for managers to work through.
One problem with the "second generation" design approach described above was that the plotting of causal links amongst twenty or so medium-term strategic goals was still a relatively abstract activity.
In practice it ignored the fact that opportunities to intervene to influence strategic goals are (and need to be) anchored in current and real management activity.
It was quickly realized that if a Destination Statement was created at the beginning of the design process then it became easier to select the appropriate strategic activity and outcome objectives which if achieved would deliver it.
[7] In 1997, Kurtzman[44] found that 64 percent of the companies questioned were measuring performance from a number of perspectives in a similar way to the balanced scorecard.
The simplest mechanism to use is to delegate these activities to an individual, and many balanced scorecards are reported via ad hoc methods based around email, phone calls and office software.