The Balanced Scorecard is an approach made popular by Kaplan and Norton in the 1990s. There are several Harvard Business Review articles and several books that introduce the concept. The Balanced Scorecard; Translating Strategy into Action, Harvard Business School Press, 1996.

The attraction of the Balanced Scorecard approach is that it combines both financial and strategic thinking to provide a framework for managing a business.

Unlike traditional management approaches, the Balanced Scorecard approach takes into account the following key issues:

1. Narrowly focused financial management tends to run businesses into the ground. :Financial performance does not reflect the state of the knowledge, capabilities, quality of people and processes and customer satisfaction. So normal financial management approaches run the risk of ruining your business unless they are modified to take into account these other important issues.

2. While entrepreneurs intuitively know that financial results are not the only important results, the larger the business the more difficult it is to build a management system that keeps the company focused upon its mission and core values. The Balanced Score Card approach ties remuneration to strategic performance objectives.

3. The Balanced Scorecard approach is an experimental approach to management that is particularly appropriate for pioneering companies or companies experiencing rapid change. The BSC approach suggests that financial performance is the result of performance with respect to customers, processes and employee capabilities. In a sense, projects undertaken by a company are attempts to measure how improvement in performance in these baskets of performance measures (customers, processes and employee capabilities) lead to better financial performance.

The biggest negative of the Balanced Scorecard approach is that like many other business concepts, it is often sold as a way of selling lots of consulting time. Many firms find it difficult and expensive to implement, when they hire a large firm to implement it.

However, there are less expensive ways of implementing the Balanced Scorecard through education and the use of technology.

Good point. Many consulting assignments in large companies start off with a mission and performance measures exercises. To our view, it is a whole lot like a traditional mission and cricial success factors exercise. In fact, when large assignment to implement the Balanced Scorecard run out of money, they typically don't get much beyond the senior executive group.