Short note: Next generation BSC

The Balanced Scorecard (BSC) is a strategic performance management framework developed by Kaplan and Norton that measures an organization through four perspectives instead of financial figures alone. The Next Generation BSC (also called the second/third generation or strategy-map BSC) improves on the original by linking measures directly to strategy through cause-and-effect relations.

Four perspectives

• Financial: revenue growth, profit, return on investment.
• Customer: satisfaction, retention, market share.
• Internal business process: cycle time, quality, defect rate.
• Learning and growth: employee skills, IT capability, culture.

What is new in the next generation

• Strategy map: a diagram showing cause-and-effect links; for example, better staff training leads to better processes, which leads to happier customers, which leads to higher profit.
• Destination statement: a clear description of where the organization wants to be, used to select objectives.
• Strategic objectives first: measures are chosen after the objectives, not before.
• Targets and initiatives: every measure has a target, an owner and an action plan.
• Alignment: the scorecard is cascaded to departments and individuals, and tied to rewards.
• Extra perspectives: some versions add an IT/innovation or stakeholder perspective.

 Learning & Growth
        |
        v
 Internal Processes
        |
        v
     Customer
        |
        v
     Financial

Use in information systems

IT projects are justified by their effect on all four perspectives, and the scorecard helps management track whether an IS delivers business value, not only technical output.