Balanced Scorecard (BSC)

Many different types of organizations – for-profits, not-for-profits, regulatory bodies, and all types of government bodies – believe that financial measures alone are not sufficient to fully measure an organization’s outcomes and performance. For many years now, reporting on performance measurement has included not just financial but also the non-financial outcomes that were achieved with the assets consumed during the period.

The Balanced Scorecard (BSC) is a comprehensive framework that translates a firm’s vision and strategy into a coherent and linked set of performance measures. The key difference between EVA and the BSC is that the BSC focuses on the cause-and-effect relationships in the organization.  To implement the BSC, the company must identify the behaviors that cause, or drive, the desired outcomes.  Then measure how effectively those behaviors are carried out. EVA measures only the financial outcome and leaves it to management to determine and track drivers that contribute to increased EVA.

The BSC is based on 4 perspectives: 

1. Financial: How does the firm look to shareholders?
2. Customer perspective: How can the firm best create value for the customer?
3. Internal business process: What must the firm excel at to satisfy customer needs? and
4. Innovation and learning perspective: Can the company continue to create value in the face of global competition, when the targets for success keep changing? 

The definitive writing on the Balanced Scorecard comes from its creators, Professors Robert Kaplan and David Norton of Harvard Business School. 

• Balanced Scorecard
  - Vision statements:  what do you want to be?
  - Strategy statements:  how will you achieve this?
  - Strategy maps
  - Implementation 

• Executive Dashboard
  - Early warning signs
  - Performance drivers