Balanced Scorecard by Robert S Kaplan and David P Norton, published by HBR Press

Re-reading this book reminded me how easy it is for management teachers to think that they know and can explain a subject while in fact they are leaving out some key principles and nuances. Thus it pays for each of us to go back from time to time and study again the principle source, to see if knowledge can be reinvigorated and enhanced. This is particularly true of the Balanced Scorecard where the authors have produced updated versions, clarifying and building on their original methodology.

These were the insights that were either clarified or reinforced on my second reading:

- The financial metrics should be reviewed as the business life-cycle stage changes over time.
- The original framework was Financial, Customer, Learning and Growth (not just ‘People’ as is often seen) and Internal Business Processes.
- Later thinking is that there should be more flexibility depending on strategic goals, for instance innovation can be a separate dimension if - as is likely for growth companies - this is seen as central to achievement of long-term goals.
- From this it is clear that the scorecard should evolve and be developed by top management as the strategy of the company changes over time.

Kaplan and Norton seem to have a refreshing view that they did not get it right first time and have refined their ideas, as well as encouraging others to develop them further. Just recently some further work by Hannabarger, Buchanan and Economy - with the rather populist title of ‘Balanced Scorecard for Dummies’ - was welcomed by Kaplan as a ‘fourth generation’ development; it provided a split between tactical and strategic aspects, and more drilling down to day-to-day operations.

In the current climate there is more criticism than ever of businesses that are too financial and short-term in focus; therefore the message and discipline of the Balanced Scorecard is even more important than it was at the time of the original book in the mid nineties. Even if you do not use the label, the principles are essential knowledge for those running the modern business.