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The Balanced Scorecard
The Balanced Scorecard (BSC) is a system of measurement that provides a more
comprehensive view of organizational performance6than traditional financial indicators
(Meredith & Shafer, 2023). According to Humphreys (2023), the BSC was born out of a
necessity to identify organizational performance beyond financial performance, as traditional
measurement methods failed to predict the demise of corporate giants. The BSC measures an
organization’s financial performance, customer performance, internal business process
performance, and organizational growth and learning (Meredith & Shafer, 2023). When
implemented correctly, the BSC can provide managers with a broader scope of information that
allows them to make strategic decisions that align with organizational goals (Hegazy et al.,
2020).
The balanced scorecard was chosen as the topic for this assignment6because it seems to
be a tool that can be applied to various kinds of organizations. Another factor for selecting this
topic was early work experience at a Sears Roebuck store, which was focused on gross sales and
profit margin percentages. These financial indicators were tracked daily, weekly, monthly,
quarterly, and annually. It was difficult to grasp how it was an accurate performance measure at
the time. Also, the most significant daily measurement was comparing the day’s gross sales to
the same calendar day for the previous year. The idea of having a balanced scorecard at that
Sears store 20 years ago was intriguing.
Comparison
Since its introduction in the early 1990s, the BSC has been6implemented by several
organizations as a strategic management tool to communicate the strategy and mission to
stakeholders. The BSC was initially used to supplement traditional methods to help build myopic
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decision-making. Later, it was incorporated into control systems and strategic planning (Mio et
al., 2021). Although the BSC can include financial and non-financial indicators, managers must
determine the additional indicators depending on the organization’s strategic goals.
Organizations are constantly under pressure from stakeholders, governments, and the
public to be more environmentally conscious and sustainable. Many organizations consider
sustainability, environmental, and social impact goals as important as their financial goals
(Jassem et al., 2021). Sustainability is not a fad or trend but a path to an organization’s long-term
success. The Sustainability Balanced Scorecard (SBSC) was developed to help organizations
monitor their sustainability goals and other metrics (Mio et al., 2021). SBSC is typically
implemented in one of two methods known as SBSC-4 and SBSC-5. In SBSC-4, the
sustainability metrics are integrated with the other BSC parameters. In SBSC-5, the sustainability
metrics are monitored as a stand-alone fifth metric separate from the other BSC parameters
(Jassem et al., 2021).
Article Summary
The article “Thirty Years with the Balanced Scorecard: What We Have Learned”
discusses the BSC and its impact over the past thirty years. Researchers Tawse and Tabesh
review how the BSC evolved from a simple performance measurement tool into a strategic
management framework. The article also discusses the global impact, lessons learned, and
potential to influence organizations in the future.
Beginnings and Evolution
The BSC was initially designed to address the limitations of legacy financial performance
metrics. Kaplan and Norton developed the BSC to give organizations a more expansive view of
their performance by incorporating non-financial measurements. These included metrics for
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internal processes, customers, growth, and learning (Tawse & Tabesh, 2023). The BSC further
evolved from measuring performance into a framework that could be used for strategy execution
and strategy management. This assisted organizations to align their mission, vision, and goals
with daily operations.
The Four BSC Perspectives
The BSC measures performance in four primary categories that focus on important areas
of the organization: Financial, Customer, Internal Business Processes, and Learning and Growth.
The financial perspective measures revenue, profitability, and cost management. The customer
perspective measures market share, customer satisfaction, and retention. Internal business
processes refer to the processes that drive innovation, strategy, and operational efficiency.
Learning and growth focus on organizational culture and the ability to adapt in the long term
(Tawse & Tabesh, 2023).
Lessons Learned
One of the BSC's advantages is its ability to use it as a tool for strategic alignment.
Managers can link various levels of an organization with a common strategy, allowing high-level
strategies to be implemented at middle and lower levels. The BSC has also proven adaptable
across several disciplines, goals, and organizational sizes. This adaptability has also contributed
to continuous improvement strategies. Organizations can track performance across various
perspectives and refine their strategies (Tawse & Tabesh, 2023).
Biblical Integration
Many examples in scripture6discuss money that can be used as examples of financial
performance measurement. The parable of the five talents is an example of a focus on traditional
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financial measurements. The book of Mathew illustrates a parable where a master goes on a
journey and entrusts his wealth to three of his servants. The first two servants invest the money
and make a profit. The third servant, fearful he would lose the money, buries it and gives it back
to the master upon his return. The master praises the first two servants for investing his money
wisely. The master then rebukes the third servant, gives his money to the best-performing
servant, and casts him out (NIV Bible 1978/2024, Mathew 25:14-30).
Many often use this parable as an excellent example of using what one was given.
However, it can also be an example of poor leadership. The book of Proverbs says that where
there is no guidance, people will fall but will fall (NIV Bible 1978/2024, Proverbs 11:14). The
parable stated that the third servant failed to act out of fear. Before giving an employee a task, a
leader should ensure he has the tools, knowledge, and training to complete the task. Furthermore,
the first and most successful servant was praised and rewarded, but he failed to help his peers.
The book of Hebrews says to do good and share with others; such sacrifices please God (NIV
Bible, 1978/2024, Hebrews 13:16). Had the first servant shared his knowledge (Growth and
Learning)6and means as to how he earned money (Internal processes), they could have
potentially earned the master more money. Compared to the BSC, the scenario illustrated in the
parable can illustrate how an organization can make myopic decisions on a single measurement.
Application
The BSC is credited for being a significant innovation in performance management that
has grown into strategy planning and management. Humpherys (2023) found that managers
given strategy maps can better understand objectives after evaluating performance using the
BSC. The BSC can potentially improve several organizations that are not already using it. For
example, an organization like a utility company may be limited in the price at which they can sell
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Annotated Bibliography
Hegazy, M., Hegazy, K., & Eldeeb, M. (2022). The balanced scorecard: Measures that drive
performance evaluation in auditing firms.Journal of Accounting, Auditing &
Finance,37(4), 902-927.6https://doi.org/10.1177/0148558X20962915
The authors discuss the development of the BSC framework6specific to auditing firms. The BSC
was developed using five measures, including learning and growth, internal business,
clients, processes, finance, and audit-related perspectives of corporate ethics. The study
was conducted using a combination of surveys, descriptive analytics, and confirmatory
analysis. The goal of the new BSC was to improve the firm’s performance under
regulatory auditing standards. Because auditing firms observe performance rather than
the quality of outputs, the BSC was developed to address those key factors. The study
found that using the proposed SBC would improve performance and develop a better
understanding of performance drivers and strategies that could give them a competitive
advantage.
Humphreys, K. A. (2023). The balanced scorecard: Do managers need a strategy map when
evaluating performance?Accounting and Finance (Parkville),63(4), 4357–
4373.6https://doi.org/10.1111/acfi.13097
The author explores whether the inclusion of strategic information and maps can enhance
organizational managers' ability to utilize the BSC effectively. The effect of managerial
understanding of strategic causal relationships in measures is discussed. The author
identifies a bias when measuring performance with the BSC. Managers tend to give more
importance to performance metrics measured across divisions; this downplays measures
exclusive to individual divisions. Managers were given strategy maps and strategic
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information to mitigate bias6in their performance evaluations. One of the most significant
findings of the research was that adding strategy maps can play an essential role in
enhancing strategic comprehension for better decision-making.
Jassem, S., Zakaria, Z., & Che Azmi, A. (2022). Sustainability balanced scorecard architecture
and environmental performance outcomes: A systematic review.International Journal of
Productivity and Performance Management,71(5), 1728-
1760.6https://doi.org/10.1108/IJPPM-12-2019-0582
The researchers discuss the sustainability balanced scorecard (SBSC) and how it relates to
environmental outcomes and performance. They found that SBSC is used in the main
configurations SBSC - 4 and SBSC - 5. The first configuration integrates sustainability
into the existing four components of the BSC. The second configuration measures
sustainability as a fifth standalone measurement. The SBSC was born out of a need to
satisfy stakeholders, governments, and public opinion. As people become more aware of
environmental challenges, more pressure is put on organizations to operate sustainably.
Many organizations are now giving sustainability as much importance as other measures,
as it can indicate long-term survival and growth.
Meredith, J. R., Shafer, S. M. (2023). Operations and Supply Chain Management for MBAs,
8th Edition. [[VitalSource Bookshelf version]]. Retrieved from vbk://9781119898641
Mio, C., Costantini, A., & Panfilo, S. (2022). Performance measurement tools for sustainable
business: A systematic literature review on the sustainability balanced scorecard
use.Corporate Social-Responsibility and Environmental Management,29(2), 367-
384.6https://doi.org/10.1002/csr.2206
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The authors discuss sustainability, the SBSC, and how it evolved from the legacy BSC. The
SBSC was based on the traditional BSC but integrates additional components related to
sustainability like environmental, social, and governance (ESG). The study discusses
some of the determinants of the implementation of an SBSC, including sustainability
strategy, stakeholder influence, organizational culture, size, and structure. The authors
found that using an SBSC improves sustainability reporting, enhances stakeholder
engagement, addresses their concerns, and improves transparency. Studies also found that
organizations that use an SBSC tend to perform better in resource efficiency, cost
reduction, and social responsibility. The SBSC provides a broader view of
performance6and short-term financial6and long-term sustainability goals.
New International Version Bible. (2024). Https://Biblegateway.com. (Original work published
1978)
Tawse, A., & Tabesh, P. (2023). Thirty years with the balanced scorecard: What we have
learned.Business Horizons,66(1), 123-132.6https://doi.org/10.1016/j.bushor.2022.03.005
The authors discuss the history of the BSC as a strategic tool for managing and implementing
organizational strategies. The BSC is a critical framework for aligning organizational
activities with its vision and strategy by measuring performance beyond legacy financial
measures. The authors discuss the origin and evolution of the BSC, its impact on
business, its adaptability, and its future potential. The BSC has proven adaptable to
various types of organizations, contributing to its widespread adoption. Government
agencies, private companies, and non-profit organizations have globally adopted the
BSC. The BSC has also contributed to the strategic alignment across organizations by
linking objectives, goals, and key performance indicators.
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