In 1993, Robert S. Kaplan, a professor at Harvard, and David P. Norton created the Balanced Scorecard approach to measuring corporate performance. Beginning with the publishing of their book, six years later, this became a rapidly adopted and popular approach. In particular, their approach was designed to measure financial (and some human) capital performance against corporate strategies and mission. This was one of the early attempts to align corporate strategies with corporate missions in a way that could be measured numerically and continuously in terms of dollars.
The Balanced Scorecard measures performance in four main areas:
• Financial (Are the organization’s strategies and tactics creating financial value?)
Cash Flow, ROI, ROE, etc.
• Customer (Do the organization’s offerings provide value to customers?)
Customer satisfaction, loyalty, retention, etc.
• Internal Business Processes (Are the organization’s processes driving value in the first two areas?)
Accident ratios, effectiveness, activities, etc.
• Learning and Growth (Is the organization growing in terms of human, information, and organization capital?)
Investments and returns, employee turnover, gender and racial ratios, etc.