In 1992, Robert S. Kaplan and David P. Norton’s concept of balanced scorecards revolutionized conventional thinking about performance metrics. By going beyond traditional measures of financial performance, the concept has given a generation of managers a better understanding of how their companies are really doing. This article was published in HBR, July-August 2007.

A company around the world transform themselves for competition that is based on information, their ability to exploit intangible assets has become far more decisive than their ability to invest in and manage physical assets. Several years ago, in recognition of this change, a concept was introduced called balanced scorecards. The balance scorecards supplemented traditional financial measures with criteria that measured performance from three additional perspectives- those of customers, internal business processes, and learning and growth.

Manager using balanced scorecards do not have reliance on short-term financial measures as the sole indicators of the company’s performance. The scorecard lets them introduce four new management processes that, separately and in combination, contribute to linking long-term strategies objectives with short-term action.

The first new processes translating the vision-helps managers build a consensus around he organization’s vision and strategy.

Translating Vision and Strategy: Four Perspectives

The second process communicating and linking- lets managers communicate their strategy up and down the organization and link it to departmental and individual objectives.

The third process –building planning- enables companies to integrate their business and financial plans.

The fourth process- feedback and learning- gives companies the capacity for what we call strategic learning.

Use of this in Professional Life:

We can use these Balance scorecards in our regular professional life. E.g. As a Marketing Consultant, we can use this scorecard by defining our Customer (by defining how we should appears to our customer), Financial strength (how should the firm appears to the shareholder), Internal Business Process (What business processes must excel at?) and Learning and Growth (We sustain our ability to change and improve?). All these components are inter-linkage to each other and it must have correlation with all others.