In the July 3rd blog of my respected colleague and performance management counterpart at Oracle, Frank Buytendijk, Frank asks the question, “Did you ever wonder where the balanced scorecard came from?” His blog is titled, I wasn’t in the room when it happened … . Frank describes the origin of the balanced scorecard (BSC) as coming from workshops conducted by Drs. Kaplan and Norton who went on to research and author a series of books related to the topic.
Well, I too was not in the room back then, but I can add another clue that may shed light on BSC’s origins. In 1988, Charlie Goldenberg, then a consulting partner of KPMG Peat Marwick in the San Francisco office, sold and delivered a consulting engagement with about a dozen companies located in Silicon Valley, including National Semiconductor. The project was related to the participant’s non-financial and financial measures (that some are now referred to as key performance indicators [KPIs]). I was then a consultant working for Mr. Goldenberg. The project was kind of a collaborative high-level benchmarking study. At the time, I believe KPMG owned a minority interest in Nolan & Norton, an IT consulting firm then located two floors below KPMG’s consulting offices. I believe Dr. Norton somehow became exposed to the KPMG study and further pursued its findings.
My observations about these events may be wrong, and Dr. Norton would be a better source of what happened. But what intrigues me much more about Frank’s blog is his hypothesis about how the four strategy map perspectives defined by Drs. Kaplan and Norton were derived. (They are employee learning, growth, and innovation; internal business processes; customer intimacy; and financial objectives.) Frank offers his guess in his blog. My guess comes from my 1970s MBA courses that seemed to repeat three intersecting circles: (1) people; (2) processes; and (3) resources. Now that model is incomplete because the three combined components are like a sports car without a steering wheel or destination. The presence of the executive team’s mission, vision and formulated strategy plus customer-centric thinking completes those three circles.
Today, some organizations use modified versions of these original perspectives. Some chemical companies have added a safety, hazard and health perspective. My employer, SAS, has added a goal map above but integrated to the strategy map to serve our needs of distributing our business analytics software globally but formulate strategies locally.
Regardless of the BSC’s history, what will be more exciting is its future. Everyone knows that measurements are the key to align resources, people, and priorities with desired strategic outcomes.