The Concept of Balanced Scorecard (BSc)

The concept of Balanced scorecard (BSC) was presented first in the early 1990s. BSC was originally developed by Dr. Robert Kaplan of Harvard University and Dr. David Norton as a framework for measuring organizational performance using a more balanced set of performance measures.

According to (Tayler, 2010) Balanced scorecard is considered one of the most significant management accounting developments. Nowadays it’s using by managers around the world to make their decisions (Rigby and Bilodeau, 2015). BSCs are used largely in business and industry, government, and non-profit organizations worldwide. More than half of major companies in the US, Europe, and Asia are using the BSC, with its use growing in those areas as well as in the Middle East and Africa.

A recent global study listed balanced scorecard fifth on its top ten most widely used management tools around the world. BSC has also been selected by the editors of Harvard Business Review as one of the most influential business ideas of the past 75 years.What makes BSC unique is that traditionally companies used only short-term financial performance as measure of success. The “balanced scorecard” added additional non-financial strategic measures to the mix in order to better focus on long-term success. The system has evolved over the years and is now considered a fully integrated strategic management system.

The Balanced scorecard is a design for describe the activities of an organization through a number of measures for (usually) four perspectives, using a small number of measures for each. The description may refer to the business’s current performance, or to its goals for the next period. Some would say that this is another way of performance report which combine the financial and nonfinancial metrics. But there is more to the scorecard than immediately meets the eye.The BSC suggests that we view the organization from four perspectives, and to develop objectives, measures (KPIs), targets, and initiatives (actions) relative to each of these points of view:

Financial: often renamed Stewardship or other more appropriate name in the public sector, this perspective views organizational financial performance and the use of financial resources

Customer/Stakeholder: this perspective views organizational performance from the point of view the customer or other key stakeholders that the organization is designed to serve

Internal Process: views organizational performance through the lenses of the quality and efficiency related to our product or services or other key business processes

Organizational Capacity (originally called Learning and Growth): views organizational performance through the lenses of human capital, infrastructure, technology, culture and other capacities that are key to breakthrough performance.*

The Scorecard is balanced: That mean is the four perspectives aim for a complete description of what we need to know about the business of the organisation. A time dimension going from bottom to top, current profitability, etc.. may largely be a consequences on what was done last quarter or last year; if new skills are added now it should have consequences for next year’s efficiency and finance.

The scorecard is balanced in another way where it shows both internal and external aspects of the business. The balanced scorecard shows the internal process within the organization from one side, and form other side, balanced scorecard shows customer’s view and other contacts that have been established in the market-place.* The scorecard is linked through cause-and effect assumption. Those linkages are reflect, what time delays they involve, and how certain the organisation about them in the face of external competition and change.