The Balanced Scorecard (BSC) is a strategic management framework that measures organizational performance across four perspectives instead of relying on financial results alone.
Robert Kaplan and David Norton introduced it in a 1992 Harvard Business Review article after studying why financial metrics alone failed to predict future performance. In a Six Sigma context, the Balanced Scorecard answers the strategic question of what to improve, while DMAIC answers the operational question of how to improve it.
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Meaning of Balanced Scorecard
A Balanced Scorecard is a strategic performance management framework that tracks an organization’s progress across four perspectives: financial, customer, internal process, and learning and growth. It translates strategic goals into specific, measurable targets in each area, giving leaders a more complete view of performance than financial metrics alone provide.
Developed by Robert Kaplan and David Norton in 1992, it remains one of the most widely used strategic management tools, and it is frequently paired with Six Sigma’s DMAIC framework to connect high-level strategy with operational improvement projects.
Key Takeaways
- The Balanced Scorecard measures organizational performance across four perspectives: financial, customer, internal process, and learning and growth.
- Robert Kaplan and David Norton introduced the framework in a 1992 Harvard Business Review article, building on a 1990 research project studying 12 companies, including Apple, HP, and Analog Devices.
- The Balanced Scorecard was created to address a specific problem: financial metrics are lagging indicators that report what already happened and fail to predict future performance.
- Kaplan and Norton later extended the framework with the strategy map, which shows the cause-and-effect relationships between objectives across the four perspectives.
- In a Six Sigma context, the Balanced Scorecard identifies which strategic objectives and KPIs matter most. DMAIC then provides the operational method for closing the gap between current performance and the target.
- A 2010 industry estimate found that Balanced Scorecard adoption reached roughly 53% of companies globally by 2008, making it one of the most widely used strategic management tools of the past three decades.
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What Is a Balanced Scorecard?
A Balanced Scorecard is a tool that translates an organization’s strategy into a specific, measurable set of targets across four distinct areas of performance. Instead of evaluating success through revenue and profit alone, a Balanced Scorecard asks how well the organization is serving customers, how efficiently its internal processes run, and how well it is investing in its people and capabilities for the future.
The framework exists to solve a specific problem. Financial results are lagging indicators. They tell leaders what already happened last quarter or last year, but they offer little insight into whether the organization is positioned to perform well next quarter or next year. Kaplan and Norton built the Balanced Scorecard specifically to surface the leading indicators that predict future financial performance, not just report past results.
Where the Balanced Scorecard Came From
Robert Kaplan, a Harvard Business School professor, and David Norton, a management consultant, began studying this problem through a 1990 research project sponsored by KPMG’s Nolan Norton Institute. The project examined performance measurement across roughly a dozen companies, including Apple, Hewlett-Packard, and Analog Devices, all of which had intangible assets, like innovation and customer relationships, that mattered as much to their success as their financial statements did.
Kaplan and Norton published their findings in the Harvard Business Review in 1992 in an article titled “The Balanced Scorecard—Measures That Drive Performance.” The article introduced the four-perspective framework that remains the foundation of the Balanced Scorecard today.
They expanded the concept across several subsequent books, including The Balanced Scorecard: Translating Strategy Into Action (1996) and Strategy Maps (2004), which added the visual tool used to show how objectives in each perspective causally connect to one another.
By 2008, industry research estimated that roughly 53% of companies worldwide used some form of the Balanced Scorecard as part of their regular strategic management process, making it one of the most widely adopted management frameworks of the past three decades.
The Four Perspectives of the Balanced Scorecard
The Balanced Scorecard organizes strategic objectives and their corresponding metrics into four perspectives. Each perspective answers a different strategic question.
Financial Perspective
This perspective asks: how do we look to our shareholders? It includes traditional financial measures like revenue growth, profitability, and return on investment. While the Balanced Scorecard was created specifically to move beyond financial measures alone, it does not discard them. Financial performance remains the ultimate measure of whether the other three perspectives are translating into business results.
Customer Perspective
This perspective asks: how do customers see us? It includes measures of customer satisfaction, retention, market share, and the specific value proposition the organization delivers to its target customers. Strong performance in the customer perspective is what ultimately drives the financial results in the perspective above it.
Internal Process Perspective
This perspective asks: what must we excel at internally? It includes measures of the efficiency, quality, and cycle time of the operational processes that create the products or services customers receive. This is the perspective where Six Sigma and Lean tools do the most direct work, since DMAIC projects and process improvement initiatives are aimed precisely at improving internal process performance.
Learning and Growth Perspective
This perspective asks: can we continue to improve and create value? It includes measures of employee skill development, training, organizational culture, and the systems and technology investments that build future capability. Kaplan and Norton considered this the foundational perspective: weak performance here eventually limits what is achievable in the other three.
The core insight behind the four-perspective structure is that financial results lag behind the leading indicators in the other three categories. An organization that only measures financial outcomes finds out about a problem after it has already affected the bottom line. A Balanced Scorecard surfaces the warning signs earlier, in customer satisfaction trends, process performance, or employee engagement, well before they show up in quarterly earnings.
Also Read: What Is a Klout Score?
The Strategy Map: Connecting the Four Perspectives
Kaplan and Norton later introduced the strategy map, a visual tool that shows the cause-and-effect relationships running through the four perspectives.
A strategy map typically reads from bottom to top: investments in the Learning and Growth perspective (employee skills, technology, culture) enable improvements in the Internal Process perspective (faster cycle times, higher quality), which drive better outcomes in the Customer perspective (satisfaction, retention), which ultimately produce the results tracked in the Financial perspective (revenue, profitability).
This causal chain is the real power of the Balanced Scorecard. It is not simply four separate scorecards measuring four separate things. It is a single, connected model of how strategy actually creates value, with each perspective serving as a leading indicator for the one above it.
Balanced Scorecard vs. Six Sigma: How They Work Together
The Balanced Scorecard and Six Sigma are not competing frameworks. They operate at different levels and answer different questions, which makes them effective complements rather than alternatives.
The Balanced Scorecard is a strategic management system. It operates at the organizational level and asks a broad question: across financial, customer, process, and growth dimensions, where is the organization falling short of its strategic targets? It does not, by itself, tell a team how to close that gap.
Six Sigma, through its DMAIC framework, is a project-level improvement methodology. It operates at the process level and asks a narrow, specific question: what is the root cause of a defect or inefficiency in this particular process, and how do we eliminate it using statistical tools and structured analysis?
The following table summarizes the distinction:
| Dimension | Balanced Scorecard | Six Sigma (DMAIC) |
| Level of focus | Organization-wide strategy | Specific process or project |
| Core question | Where are we falling short of strategic targets? | What is the root cause of this defect or inefficiency? |
| Scope | Financial, customer, internal process, learning and growth | Process performance, defect rates, cycle time |
| Tools | Strategy maps, scorecards, KPI dashboards | DMAIC, FMEA, control charts, hypothesis testing |
| Time horizon | Ongoing strategic management, reviewed quarterly or annually | Project-based, typically 3 to 6 months |
| Output | Strategic clarity and aligned organizational priorities | A specific, measured process improvement |
How the Two Frameworks Connect in Practice
Many organizations use the Balanced Scorecard to identify which strategic objectives matter most, and then launch Six Sigma DMAIC projects specifically targeted at the metrics that are underperforming in the Internal Process perspective.
In the Define phase of a DMAIC project, the team often references the Balanced Scorecard directly to confirm that the problem being addressed connects to a real strategic priority, not just a locally interesting process issue. A production line bottleneck identified in the Balanced Scorecard’s Internal Process perspective becomes the project charter’s problem statement.
In the Measure phase, the Balanced Scorecard’s existing KPI dashboards often provide ready-made baseline data, since the organization is likely already tracking cycle time, defect rate, or customer satisfaction as part of its regular scorecard reporting.
In the Control phase, the improved process metric becomes a permanent addition to the Balanced Scorecard’s Internal Process perspective, ensuring the gain achieved by the DMAIC project is monitored at the leadership level going forward, not just by the project team.
This connection matters because it solves a real organizational problem: Six Sigma practitioners sometimes struggle to show how an individual project ties back to strategic priorities, while Balanced Scorecard owners sometimes struggle to translate strategic targets into the operational changes needed to hit them. Used together, the Balanced Scorecard identifies where to focus, and DMAIC delivers the structured method for getting there.
Also Read: Z-score
Benefits of Using a Balanced Scorecard
The Balanced Scorecard offers several specific, well-documented advantages over relying on financial metrics alone.
Surfaces leading indicators, not just lagging ones. Customer satisfaction trends, process cycle times, and employee engagement scores typically shift before financial results do. A Balanced Scorecard gives leaders an early warning system that pure financial reporting cannot provide.
Forces explicit alignment between strategy and metrics. Each objective on the scorecard is tied directly to a strategic priority, which prevents departments from optimizing for metrics that look good locally but do not actually support the organization’s stated direction.
Improves cross-functional communication. Because the scorecard spans financial, customer, process, and people dimensions, it gives leaders across different functions a shared, common vocabulary for discussing performance, rather than each department reporting in isolation using its own preferred metrics.
Supports more balanced decision-making. A leadership team that only watches financial results can make short-term decisions that damage customer relationships or underinvest in employee development. The four-perspective structure makes those tradeoffs visible before they cause lasting damage.
Creates a foundation for connecting strategy to execution. Through the strategy map and, in many organizations, through Six Sigma DMAIC projects targeting specific scorecard metrics, the Balanced Scorecard becomes the bridge between high-level strategic intent and the operational work needed to achieve it.
Frequently Asked Questions: Balanced Scorecard
Q: What is a Balanced Scorecard in simple terms?
A: A Balanced Scorecard is a strategic management tool that measures organizational performance across four areas instead of financial results alone: financial, customer, internal process, and learning and growth. It translates an organization’s strategy into specific, measurable targets in each area, giving leaders an earlier and more complete picture of performance than financial reporting alone provides.
Q: Who created the Balanced Scorecard?
A: Robert Kaplan, a Harvard Business School professor, and David Norton, a management consultant, introduced the Balanced Scorecard in a 1992 Harvard Business Review article titled “The Balanced Scorecard—Measures That Drive Performance.” It was based on a 1990 research project studying performance measurement across roughly a dozen companies, including Apple, Hewlett-Packard, and Analog Devices.
Q: What are the four perspectives of the Balanced Scorecard?
A: The four perspectives are: financial (how do we look to shareholders), customer (how do customers see us), internal process (what must we excel at internally), and learning and growth (can we continue to improve and create value). Each perspective is a leading indicator for the one above it, with learning and growth ultimately driving internal process performance, which drives customer outcomes, which drive financial results.
Q: What is the difference between a Balanced Scorecard and Six Sigma?
A: The Balanced Scorecard is a strategic management system that measures organization-wide performance across four perspectives and identifies where the organization is falling short of its targets. Six Sigma, through its DMAIC framework, is a project-level improvement methodology focused on finding and eliminating the root cause of a specific process defect or inefficiency. The Balanced Scorecard identifies what to improve at the strategic level; DMAIC provides the method for improving it at the operational level.
Q: How does the Balanced Scorecard connect to a Six Sigma DMAIC project?
A: Many organizations use Balanced Scorecard metrics to identify and justify Six Sigma DMAIC projects. In the Define phase, a project’s problem statement often references an underperforming Balanced Scorecard metric in the Internal Process perspective. In the Measure phase, existing scorecard KPI data often provides ready baseline data. In the Control phase, the improved metric becomes a permanent addition to the organization’s ongoing scorecard tracking.
Q: What is a strategy map and how does it relate to the Balanced Scorecard?
A: A strategy map is a visual tool, introduced by Kaplan and Norton in their 2004 book of the same name, that shows the cause-and-effect relationships between objectives across the four Balanced Scorecard perspectives. It typically reads from bottom to top: investments in learning and growth enable better internal processes, which drive better customer outcomes, which produce stronger financial results. The strategy map turns the four separate perspectives into a single connected model of how the organization’s strategy creates value.
Q: How widely is the Balanced Scorecard used today?
A: Industry research estimated that Balanced Scorecard adoption reached approximately 53% of companies globally by 2008, and it remains one of the most widely studied and applied strategic management frameworks in the decades since. It continues to be commonly paired with operational improvement methodologies, including Lean Six Sigma, to connect strategic priorities with execution.
Balanced Scorecard Training in Six Sigma
Understanding how the Balanced Scorecard connects to Six Sigma is valuable for practitioners working on project selection and for leaders trying to ensure their improvement initiatives map to real strategic priorities. A Six Sigma Black Belt who understands how their project’s KPI ties to the organization’s Balanced Scorecard can make a far stronger business case for project sponsorship and resourcing.
At Six Sigma Development Solutions Inc, our Green Belt and Black Belt training programs cover project selection and strategic alignment as part of the DMAIC Define phase curriculum, helping practitioners connect their improvement work to the metrics leadership actually tracks.
We offer Six Sigma training in three formats:
- Onsite training — Delivered at your organization, using your actual strategic priorities and Balanced Scorecard metrics as project selection criteria.
- Live virtual training — Instructor-led sessions delivered online with real-time interaction and practical exercises.
- Online training — Self-paced certification programs at Green Belt and Black Belt levels.
Explore our Six Sigma training programs or contact our team to find the right program for your goals.
