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The Balanced Scorecard: What Is It and What Does It Mean?

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The Balanced Scorecard: What Is It and What Does It Mean?

In 1992, Robert S. Kaplan and David P. Norton introduced the balanced scorecard, a set of measures that allow for a holistic, integrated view of business performance. The scorecard was originally created to supplement traditional financial measures with criteria that measured performance from three additional perspectives: customers, internal business processes, and learning and growth. By 1996, user companies further developed it as a strategic management system linking long-term strategy to short-term targets. The development of the balanced scorecard method occurred because many business organizations realized that focus on a one-dimensional measure of performance, such as return on investment or increased profit, was inadequate. Too often, bad strategic decisions were made in an effort to increase the bottom line at the expense of other organizational goals. The theory of the balanced scorecard suggested that rather than the focus, financial performance is the natural outcome of balancing other important goals because these other goals interact to support excellent overall organizational performance. Hence, if any individual goal is out of balance with other goals, the performance of the organization as a whole will suffer. The balanced scorecard system emphasizes articulation of strategic targets in support of goals. In addition, measurement systems are developed to provide data necessary to know when target goals are being achieved or when performance is out of balance or being negatively affected.

In the world of academia, performance indicators can be powerful tools and can provide substantive information for strategic decision making when tied to the values and goals of the institution or school system. Of course, the values and goals should emanate from performance objectives. To effectively utilize the balanced scorecard methodology in an educational setting, it is imperative that values and goals be closely tied to the specific problems to be solved, decisions and improvements to be made, and the resource allocation choices available. The balanced scorecard provides an integrated perspective on goals, targets, and measures of progress (performance indicators, for example).

Though there is no guarantee that any decision will be "correct," the balanced scorecard can provide a common frame of reference to all parties and clarify the choices and performance challenges involved. It naturally facilitates conversation and decision making, thus providing a real framework for real dialogue regarding the values and strategic objectives of the institution or school system and the contributions of individuals to those objectives.