Balanced Scorecard: What It Is and How Finance Teams Use It

What Is the Balanced Scorecard?

The balanced scorecard, developed by Kaplan and Norton in 1992, measures organisational performance across four perspectives rather than relying on financial metrics alone. Financial results are lagging indicators — by the time poor financial performance appears, the underlying causes may have been building for months. The scorecard links financial outcomes to the operational and strategic drivers that create them.

The Four Perspectives

Financial: Revenue growth, EBITDA margin, ROCE, operating cash flow. Customer: Customer satisfaction score, NPS, market share, retention rate. Internal Process: Order fulfilment time, defect rates, new product development cycle. Learning and Growth: Employee engagement, training hours, proportion of revenue from new products.

Strategy Maps

A strategy map shows cause-and-effect relationships between objectives across the four perspectives — how improving employee skills (learning and growth) drives better processes (internal), which drives customer satisfaction, which generates financial results. Strategy maps make the business model logic explicit and testable.

How Finance Teams Use It

Finance teams typically design the measurement framework, collect and validate data, and produce the scorecard report. They ensure consistent metric definitions — ROCE must be calculated the same way each period to enable valid comparison. The balanced scorecard is examined in ACCA APM and CIMA E3.

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