Concept of Balanced Score Card (BSC):

The concept of Balanced Score Card (BSC) was introduced by Robert

S. Kaplan and David P. Norton in 1992 through an article published in
the Harward Business Review in 1992. 

This concept consists of identifying the vision and mission of an

organisation; identifying the strategies to achieve that mission and
analyzing the performance of the organization from certain
perspectives – to have an idea of how for the organization is successful
or otherwise.

Balance Score Card may be defined as follows:

Balances Score Card is an approach which seeks to provide a balanced
and comprehensive framework for judging an organization’s
performance from perspective like financial perspective, customer
perspective, business and production process perspective and learning
and growth perspective; so as to assist management in controlling the
organization in a modern and unique way.

The Concept of BSC could be depicted by means of the

following diagram:
Following is a brief account of the four perspectives of
analysis which are the core aspects of BSC:

(i) Financial perspective:

The financial perspective indicates whether a company’s strategy and
operations add value for shareholders.

(ii) Customer perspective:

The customer perspective considers the business through the eyes of
customers. It indicates whether and to what extent the company is
meeting the expectations of customers.

(iii) Business and production process perspective:

This perspective focuses attention on the performance of key internal
processes which drive the organization.

(iv) Learning and growth perspective:

Learning and growth perspective considers organization’s potential
future performance; directing attention on the basis of all future
success the organization’s people and infrastructure. In each of these
four perspectives, the managements set certain goals and performance
measures through which the attainment of these goals may be judged.

Following is an example of goals and performance measures

set in each of these four perspectives:

Point of Comment:
As a matter of fact, all the four perspectives comprised in BSC are
interrelated and inter – dependent. For example, the main goal in
financial perspective is profitability. Now, profitability is possible only
when customer’s perspective meets the goal of customer satisfaction;
as it is only satisfied customers, who lead to sales, and profits for the
organization.
Again, the organization can satisfy customers when its internal key
processes function efficiently and economically. Finally, successful
performance of internal key processes is much dependent on the
learning and growth perspective i.e. the rate or speed at which
learning is growing in the organization.

Hence, this score card is called a Balance Score Card, as it seeks to

balance various perspectives to give a comprehensive view of
organizational successful functioning, in the competitive
environmental scenario.

Advantages of BSC:
Following are some advantages of BSC:
(i) BSC adopts a balanced and comprehensive approach for judging
and controlling an organization’s performance; by setting objectives
and performance measures in four key perspective viz. financial,
customer, business and internal processes and learning and growth.

(ii) BSC facilitates communication and understanding of business

goals and strategies, at all levels of an organization.

(iii) BSC brings organization’s strategy and vision, to the centre of

management focus; so that management may never deviate from
these.

(iv) BSC integrates financial and non-financial goals and

performance measures into a single system – a thing which
traditional controlling techniques never consider.
Limitations of BSC:
BSC approach to controlling suffers from serious
limitations, some of which are as follows:
(i) BSC bases its approach to analysis around four perspectives (viz.
financial, customer, business and production processes and learning
and growth) only. In fact, there may be many more perspectives more
important than these e.g. managerial development perspectives, social
responsibility perspective and so on. As such, the so called Balanced
Score Card really turns into an imbalanced and imperfect score card.

(ii) BSC is a vague concept and approach, to controlling an

organization’s success; as there are neither any set of standard goals
nor any set of standard performance measures, for each of the four
perspectives, which from the core of BSC.

iii) Difficulties in evaluation of BSC model.