Sustainable Microfinance - Balanced Scorecard's added value for ...

Kaplan and international strategy consultant David Norton proposed the first
generation of the BSC as a framework to provide structure for related sets of
organizational performance measures. The framework uses strategic and financial
measures to assess the outcome of a chosen strategy by combining quantitative and
qualitative measures (Lynch, 2009), enabling a company to align its smaller-scale
operational activities with the larger-scale objectives in terms of vision and strategy
(Kaplan and Norton, 1992; 1993; 1996c; 2004).
Its designers have claimed that it addresses many of the shortcomings of the more
traditional accounting approaches to organizational performance measurement
(Kaplan and Norton, 1996a). They argue that performance measures should move
beyond the normal financial ratio data such as return on capital employed and
earnings per share. They claim that these functional measures leave out the process
of strategy implementation, while the process is what really matters: ‘Processes have
replaced (or are replacing) departments and functions’ (Kaplan and Norton, 1996a).
The following three main types of process are identified (Lynch, 2009):
Management - how the leader runs the organization, how decisions are made and
implemented; Business - how products are designed, orders fulfilled, customers’
satisfaction achieved and so on; Work - how work is operationalized, purchased,
stored manufactured and so on.
3.2.2 Structure
The framework consists of four predefined and interrelated perspectives, which need
to appear on every scorecard (see figure 3.1). Within the general framework specific
measures can be selected, recognizing that every strategy is unique. Hence, while
the BSC specifies the categories of measures to be used, it also has the flexibility to
customize its design to user requirements through the selection of individual
measures within each category. Due to these characteristics the BSC has become a
very popular model and is one of the most widely used recent innovations in
management accounting (Cobbald and Lawrie, 2002, p. 4). The traditional four key
strategic perspectives are (Kaplan and Norton, 1996a, pp. 30-1):
• Financial - how a company wishes to be viewed by its shareholders;
• Customer - how a company wishes to be viewed by its customers;
Elmar Hoogendoorn 30
Sustainable Microfinance