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Several years ago, we introduced the concept of a "Balanced Scorecard" for motivating and measuring business unit performance.' The Scorecard, with four perspectives-financial, customer, internal business processes, and learning and growth-provided a balanced picture of current operating performance as well as the drivers of future performance (see Exhibit 1).
Can Business Operate with a Balanced Scorecard?
Some argue that managers cannot operate with multiple measurements of business-unit performance. While they recognize that aggregate financial measures (such as operating income, return on investment, and economic value added) are not perfect by themselves, they claim that financial measures at least are well understood and provide clear, unambiguous, and objective goals on which all organizational participants can focus. Such people feel that multiple measures-some financial and some non-financial-are confusing and lead to ambiguous, often conflicting, signals about what the organization values.
We disagree. Imagine entering the cockpit of a jet airplane and observing that there is only a single instrument. How would you feel about flying on that plane after the following discussion with the pilot:
Q: I'm surprised to see you operating the plane with only a single instrument. What does it measure?
A: Airspeed, I'm really working on airspeed this flight.
Q: That's good. Airspeed certainly seems important. But what about altitude. Wouldn't an altimeter be helpful?
A: I worked on altitude for the last few flights and I've gotten pretty good on altitude. Now I have to concentrate on proper air speed.
Q: But I notice you don't even have a fuel gauge. Wouldn't that be useful?
A: Fuel is important, but I can't concentrate on doing too many things well at the same time. So this flight I want all my attention focused on air speed. Once I get to be excellent at air speed, as well as altitude, I intend to concentrate on fuel consumption on the next set of flights.
Probably no one would choose to be a passenger on this plane after such a conversation. Even if the pilot did an exceptional job on air speed, we would be concerned about colliding with tall mountains or running low on fuel. In reality, no pilot would ever consider flying an airplane through crowded air space with only a single instrument to guide...