The Balanced Scorecard: Kaplan and Norton’s Method for Linking Strategy to Action [Guru Advice #006]

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Robert S. Kaplan and David P. Norton introduced the Balanced Scorecard as a way to address a gap they saw in traditional management. Many leaders focused heavily on financial metrics, such as profit margins or stock prices, and ignored other signals that contribute to long-term success. Kaplan and Norton believed that a more balanced approach—incorporating customer satisfaction, internal processes, and the organisation’s capacity to learn—could offer a fuller picture of how a company truly performs.

They arranged these measures into four distinct perspectives: Financial, Customer, Internal Processes, and Learning and Growth. Each perspective comes with specific goals and indicators, all connected to the core strategy. Kaplan and Norton argued that when you track only financial results, you risk boosting short-term gains while missing out on building a robust, adaptable operation. By looking at customer feedback, operational efficiency, and employee skill development, leaders can keep an eye on the broader health of the business.