Balanced scorecard

What is a balanced scorecard?

A balanced scorecard is a measurement system that tracks performance from four perspectives: financial, customer, internal process, and learning and growth. Robert Kaplan and David Norton introduced it in Harvard Business Review in 1992 as a counterweight to steering by financial results alone. Financial results look backward. The customer, process and learning measures give an earlier read on whether next year's results are on track.

Why it matters to a revenue leader

A sponsor reads the financial line first, and a revenue leader who reports only bookings and margin is reporting the past. A scorecard gives the board a view of the drivers behind next year's number, such as agreement renewals, technician capacity and new-seller ramp. In a PE-backed services company, it also keeps the commercial team from hitting a quarter by trading away the customer relationships that the exit depends on.

A testing and inspection company with 22 sellers hits its revenue plan for two straight quarters. Its scorecard also shows the agreement renewal rate falling from 91 percent to 84 percent and new-seller ramp stretching from six months to nine. Leadership treats those two lines as the early warning and acts before revenue turns.