Evolution of the Balanced Scorecard

The balanced scorecard (BSC) has evolved from simple metrics and performance reporting into a strategic planning and management system. It is no longer a passive reporting document which shows pretty pictures. It has transformed into a framework that not only provides performance measurements but helps analysts identify gaps and continual service improvement programs. It enables our senior staff to truly execute their strategic goals and objectives.

Dr. R. Kaplan & David Norton did extensive research and documentation on this framework in the early 1990’s. In Kaplan & Norton’s writing, the four steps required to design a BSC are as follows:

Translating the vision into operational goals;
Communicating the vision and link it to individual performance;
Business planning; index setting
Feedback and learning, and adjusting the strategy accordingly.

In the late 1990’s an updated version on the traditional balanced scorecard was introduced called the Third Generation Balanced Scorecard. The components are:

A destination statement. This is a one or two page description of the organization at a defined point in the future, typically three to five years away. The descriptions of the successful future are segmented into perspectives, for example financial & stakeholder expectations, customer & external relationships, processes & activities, organization & culture
A strategic linkage model. This is a version of the traditional ‘’strategy map’’ that typically contains 12-24 strategic objectives segmented into two perspectives, activities and outcomes, analogous to the logical framework .
A set of definitions for each of the strategic objectives.
A set of definitions for each of the measures selected to monitor each of the strategic objectives, including targets.

The BSC process begins with the development of a ‘destination statement’ to build management consensus on longer term strategic goals. This document is then used to build a ‘strategic linkage model’ which describes the shorter term management objectives to achieve. These objectives are prioritized and are assigned ‘owners’ from within the management team. These owners will then define the objective itself, plus the measures and targets associated with the objective.

The main improvements with this third generation of balanced scorecard relate to the greater relevance of the strategic objectives, because objectives are selected in the context of the organization’s longer-term strategic goals, using a destination statement, and the greater “ownership” of the objectives by managers, because objectives are selected and defined by the responsible managers themselves.

Design of a Balanced Scorecard ultimately is about the identification of continual improvement. This should highlight areas where performance deviates from expectations. Organizations can be encouraged to focus their attention on these areas, and hopefully as a result trigger improved performance and the realization of strategic goals and objectives.

Four Service Characteristics

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