5 Advantages of a Balanced Scorecard

Developed in the early '90s by American management consultants David Norton and Robert Kaplan, the balanced scorecard (BSC) has quickly become a go-to tool for performance measurement and strategic planning. In fact, around half of Fortune 1000 companies in the USA and 40% of large European firms now rely on it (Source: Bernard Marr).

enlightened buddhist as a metaphor for the advantages of balanced scorecard

At its heart, the BSC framework goes beyond purely a look at financial performance. It gives a broader view of success, taking various aspects of a business into account such as business processes and stakeholder engagement. Over time, the original BSC model has evolved. Today, there are three main versions of the BSC: 1) the Four Perspectives model, 2) the Strategy Maps model, and 3) the KPI Tree model.

Let’s jump into the top 5 advantages of using the balanced scorecard approach.

5 Advantages of a Balanced Scorecard

The key benefits of a balanced scorecard include:

A 360° View of Performance
The balanced scorecard lets organisations take a comprehensive look at their performance, not just financially but across areas like learning and growth, internal processes, and customer satisfaction. This 360° view helps teams see the full picture and spot where they can improve.
Aligning with Strategic Goals
The BSC helps teams align all activities with top strategic goals, boosting overall organisational focus. This ensures that efforts are not wasted but instead channelled toward what truly matters for growth and impact.
Better Decision-Making
With the balanced scorecard, decisions are backed by data from multiple perspectives. By tracking a range of key performance indicators (KPIs), leaders can make more informed choices on resource allocation and prioritise efforts that will improve outcomes.
Better Accountability
The BSC creates clear performance measures that everyone can rally around. By having specific performance targets, it’s easier to track progress and accountability across teams, creating a culture that drives better results.
Boosting Engagement and Buy-In
Developing a balanced scorecard invites different team members to contribute. By involving key players in setting metrics and targets, organisations can build stronger buy-in and align metrics with various team needs, creating better engagement and teamwork.

I usually recommend my clients implement a balanced scorecard approach but advise against using the first or second models. Instead, the KPI Tree (the third model) is more versatile and covers complex, interconnected goals.

The KPI Tree's Biggest Strength

One of the biggest strengths of a KPI Tree is how it connects big business goals with everyday tasks. It keeps everyone on track and shows each team member how their work directly drives the organisation forward. This clear focus not only helps improve performance but also boosts team motivation—everyone can see the impact they’re making towards the business's strategic objectives.

It's no wonder the Harvard Business Review editors named the balanced scorecard initiative one of the most significant performance management tool ideas of the last 75 years.