Balanced Scorecard vs. Traditional Performance Measures

Attribute	Balanced Scorecard	Traditional Performance Measures
Focus	Both financial and non-financial measures	Primarily financial measures
Perspective	Four perspectives: financial, customer, internal business processes, learning and growth	Usually focused on financial perspective only
Measurement	Uses leading and lagging indicators	Primarily uses lagging indicators
Strategy alignment	Aligns performance measures with strategic objectives	May not always align with strategic objectives
Long-term focus	Encourages long-term performance improvement	May focus more on short-term results

Introduction

When it comes to measuring the performance of an organization, there are various methods that can be used. Two popular approaches are the Balanced Scorecard and Traditional Performance Measures. Both methods have their own set of attributes that make them unique in their own way.

Definition

The Balanced Scorecard is a strategic planning and management system that is used to align business activities to the vision and strategy of the organization. It provides a comprehensive view of the performance of an organization by looking at financial, customer, internal processes, and learning and growth perspectives. On the other hand, Traditional Performance Measures typically focus on financial metrics such as revenue, profit, and return on investment to evaluate the performance of an organization.

Attributes

• Focus: The Balanced Scorecard takes a holistic approach to performance measurement by considering various perspectives such as financial, customer, internal processes, and learning and growth. This allows organizations to have a more balanced view of their performance and identify areas for improvement across different aspects of the business. In contrast, Traditional Performance Measures tend to focus primarily on financial metrics, which may not provide a complete picture of the organization's performance.
• Alignment: The Balanced Scorecard helps organizations align their activities with their strategic objectives by linking performance measures to the overall vision and strategy of the organization. This ensures that everyone in the organization is working towards the same goals and objectives. Traditional Performance Measures, on the other hand, may not always be aligned with the strategic objectives of the organization, leading to a disconnect between performance measurement and organizational goals.
• Flexibility: The Balanced Scorecard allows organizations to customize their performance measures based on their unique strategic objectives and business needs. This flexibility enables organizations to adapt their performance measurement system to changing market conditions and business environments. Traditional Performance Measures, on the other hand, may be more rigid and limited in terms of the metrics that can be used to evaluate performance.
• Communication: The Balanced Scorecard facilitates communication and collaboration across different levels of the organization by providing a common framework for discussing performance. This helps to ensure that everyone in the organization is on the same page when it comes to understanding performance expectations and goals. Traditional Performance Measures may not always promote effective communication and collaboration, as they may be limited to financial metrics that are not easily understood by all employees.
• Long-term focus: The Balanced Scorecard encourages organizations to take a long-term view of performance by considering both financial and non-financial metrics that are critical to the success of the organization. This helps organizations to focus on building capabilities and resources that will drive sustainable growth and competitive advantage. Traditional Performance Measures, on the other hand, may be more focused on short-term financial results, which can lead to decisions that prioritize short-term gains over long-term success.

Conclusion

Both the Balanced Scorecard and Traditional Performance Measures have their own set of attributes that make them valuable tools for measuring the performance of an organization. While the Balanced Scorecard provides a more comprehensive and balanced view of performance, Traditional Performance Measures may be more focused on financial metrics. Organizations should carefully consider their strategic objectives and business needs when choosing a performance measurement system that best suits their goals and objectives.