Developed about twenty years ago by D. Norton and R. Kaplan, balanced scorecards use perspectives to provide an organization with some basis for evaluating whether or not it is accomplishing the desired results. Perspectives are performance dimensions that an organization uses to communicate and evaluate strategy across the organization. Four basic perspectives are traditionally used to evaluate an organization’s performance. These are Financial/Stewardship and Customer Perspectives, which are about evaluating the desired results for the shareholder and customer, and Internal Business Processes, and Learning and Growth/Capacity Building which are about the capabilities the organization needs to develop or improve to deliver the desired results. Each strategic theme cuts across these perspectives. When the themes are decomposed to more actionable components known as the strategic objectives, then there will be objectives in each perspective.
Through the development of strategy maps, strategic objectives are linked in a cause-effect relationship to tell a story or hypothesis on how an organization creates value for the customer and captures value for the shareholder. These maps, if well developed, provide useful insights to management on the competences that need to be developed or improved to continuously create and deliver value to stakeholders. Identifying and selecting performance measures and targets for each objective on the strategy maps enables an organisation to assess whether or not the hypothesis is truly creating and delivering value once implemented.
The implementation of the hypothesis is through strategic initiatives. These are the projects or programs that translate strategic objectives into day-to-day tasks.