In
1992, they published a paper in Harvard Business Review about a way to monitor the
health of a business using Balanced Scorecard, discussing perspectives and metrics
that could be used to for companies to measure their relative success. They argued
that companies could not successfully manage items they could not measure, so
measurement became critical. In 1996 Kaplan and Norton published The Balanced
Scorecard: Translating Strategy into Action, a book that more fully laid out the
Balanced Scorecard concept.
Kaplan and Norton argued that companies spend far too much time focused
on financials, and that financials are often a trailing indicator of the health of the
business. Since it takes companies some time to close out a particular quarter, it
might be mid-to-late April before a business realizes just how bad the previous
quarter was, and by then some of the data is almost four months old. Kaplan and
Norton argued that while examining financial data is important, it must be only one
part of a broader picture. In other words, the financial perspective must be balanced
against other, equally important, areas.
A Balanced Scorecard is aimed at an overall view of the entire enterprise and
looks at four areas, called perspectives. These four perspectives are:
Financial
Customer
Internal Process
Learning and Growth
The financial perspective covers the standard financial goals of an organization
and is of interest to those both inside and outside the organization.
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