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4th Generation Balanced Scorecards

By
Allan Rodrigues - The Business Farm Pty Ltd.
The original balanced score card was designed by Kaplan & Norton in the early nineties  as a technique to drive performance management to achieve the firms strategic objectives by monitoring activities and measures across four perspectives namely learning, internal business processes, the customer and finance.  The underlying logic of the BSC was that these four perspectives would provide a snapshot of the leading and lagging indicators of performance to align people (learning agenda)  - processes - customers (value proposition) and financial measures with the mission and strategic objectives of the firm.

Balanced scorecards have been through several generational changes over the years chronicled in part by Olve (1999), Shulver (2000) and in some depth by Cobbold and Lawrie (2002).  A short synopsis of the  history of the generational changes in scorecarding is provided below:

Kaplan Norton's original scorecards (Cobbold and Lawrie, 2002) morphed into their 2nd generation with the use of 'Strategy Mapping'  a technique designed by Kaplan Norton to map key strategic themes which were concurrently made hugely popular by the IT industry. 

The third generation of scorecards incorporated the use of 'Destinations Statements'. Destination Statements allowed scorecards to cascade down to the lowest reaches of management.

Standard 3G  Balanced Scorecards tend to be fairly sophisticated in their own right, depending on the type of organisation and the processes and measures needed. Many of them use overarching measures like Economic Value Added and a few other similar value-added measures/techniques

The 4th Generation Balanced Scorecards (4G Balanced Scorecards) has been designed by Allan Rodrigues of The Business Farm to take current scorecard techniques to the next level, linking scorecards to Value Advisory Services and the value of the company, and to map the firm's footprint on the environment and the community.

4G Balanced Scorecards are designed to

  1. Provide a 'Value Advisory Service', that links the performance outcomes of the scorecard (in the customer and finance perspectives), to the earnings valuation of the company. 4G scorecards accordingly measure the 'value gap' between the current value of the company, and the projected earnings value (or share price) of the company. They then identify the necessary requirements at each perspective of the scorecard to achieve the company's projected value and destination;
  2. These scorecards measure the impact of the firms current strategies on the community and the environment (including climate change). This is particularly important as a number of market based firms are required to report activities instead of achievements when they speak of their environmental and ecological footprints.
  3. 4G scorecards also address typical problems that have bedevilled earlier scorecards by using measuring and managing such areas as IT portfolio management and brand value management.  

Allan Rodrigues of The Business Farm has designed a methodology called The Business Compass' to capture the processes measures and learning of the fourth generational scorecard.

The business compass described on a separate page on this website is a 4G BSC that is based on separate scorecards measuring share value, environmental sustainability and community footprints and impact measures. 

Allan is contactable on allan.rodrigues@thebusinessfarm.com.au