CHAPTER ONE
Integrating the Balanced Scorecard for Improved Planning and Performance Management
OVERVIEW
The balanced scorecard is a management tool developed by Drs. Robert Kaplan and David Norton in the early 1990s. Since that time, the scorecard has become a standard management practice adopted by large and small organizations throughout the world. The balanced scorecard is based on the simple premise that people and organizations respond and perform based on what is measured. Often this is described as “People respond to what is inspected, not expected.” Measurement becomes a language that communicates clear priorities to the organization.
Because the primary goal of any organization (commercial, governmental, or nonprofit) is to create value for its stakeholders and because the strategy is the way the organization intends to create value, the measurement system should be closely linked to the strategy. The balanced scorecard provides a measurement system that translates the strategy into operational terms through a series of causal relationships defined around four key perspectives (see Exhibit 1.1):
Exhibit 1.1 Four Perspectives of the Balanced Scorecard
1. Financial perspective. For commercial organizations, the financial perspective defines the value created for the shareholders. For noncommercial organizations, ...
