Last Updated on March 12, 2024 by Lukas Rieder
Robert Kaplan and David Norton developed the Balanced Scorecard (BSC) primarily because they recognized that purely money-related reporting tells us very little about an organization’s development and future chances for success.
Balanced Scorecard and Management Control
Financial reporting only shows the tip of the iceberg. Just as more than 90% of an iceberg is invisible underwater, so also the majority of the key drivers of success are invisible with only financial reporting, such as
-
- the number of customers and their ordering behavior,
- the ability to enforce prices, the ability to deliver,
- customer satisfaction and word of mouth propaganda,
- the skills and abilities of employees,
- the efficiency of processes in all areas and the cooperation between the areas, and
- coordination and managerial behavior.
The iceberg as a symbol for the BSC: The most important things are invisible on the surface.
An organization’s achievements made in the “underwater area” of the iceberg are the cause of the financial success it achieves. These drivers of success must be planned and controlled first and foremost.
The successes are created with internal operational work. The BSC is intended to establish a connection between planning intentions and the results achieved in operational implementation. This should make it possible to assess in which target areas the company has developed and how well it has done so. Looking ahead, the BSC should also show which results to focus on during implementation.
The implementation of a BSC is thus largely in line with the concept of management control, as the concept states that management control should plan, steer and measure the implementation of guidelines, strategies and operational goals (see definition).
The following posts explain how the management control system can provide BSC-relevant data.