he balanced scorecard is a strategic performance measurement system developed by
Robert S. Kaplan and David P. Norton to help organizations achieve breakthrough results by embedding strategy at the heart of the organization. Developed 12 years ago, the concept was significantly different from any existing performance measurement system and generated considerable excitement. A variety of applications and variations of the balanced scorecard have emerged since its inception. It was received and used so enthusiastically and effectively that the Harvard Business Review labeled it in 1997 as one of the 75 most influential ideas of the
20th Century.
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Early on, a navigation metaphor was used to illustrate the need for additional performance measures. Over time, the navigation metaphor expanded to include the process of strategic mapping and decisions about where to lead your company. This article outlines the evolution of the balanced scorecard.
BALANCEDSCORECARD: THEINCEPTION
In 1990, the Nolan Norton Institute, the research arm of KPMG, sponsored a one-year, multi-company study on the future of performance measurement. David Norton, CEO of Nolan Norton, was the study leader, and
Robert Kaplan served as an academic consultant. The
12 companies that formed the original study group believed that the exclusive reliance on financial performance metrics alone was causing their companies to do the wrong things. Many of the activities that create organizational value are not derived from the tangible, fixed assets of the firm. Intangible assets such as customer and supplier relationships, innovative product development, and intellectual capital are where most of the value lies. Decisions based on traditional financial measures often fail to incorporate the importance of these real value drivers.
Severe cost-cutting programs can have a significant