The Unbalanced Scorecard: A Social & Environmental Critique


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Since its publication in the Harvard Business Review in early 1992, the Balanced Scorecard (BSC: Kaplan and Norton, 1992) has become the best-known and most widely implemented multi-dimensional performance measurement (MDPM) model throughout the world. Its advocacy of a balanced and integrated performance measurement system (PMS) using four perspectives on organisational performance is recognised as representing a significant step forward from the old uni-dimensional focus on financial performance measures of primary interest to shareholders. Its recognition of employees and customers as vital to organisational success has broadened the range of stakeholders catered for in performance measurement and management systems (PMMSs). In many organisations it has led to the use of non-financial performance measures to supplement traditional financial measures, that are themselves frequently being supplemented or supplanted by new financial metrics such as EVA and SVA (Cooper et al, 2001).

Kaplan and Norton (2001b) argue that such new financial metrics are fully compatible with the BSC and that each enhances the other. However, neither new financial metrics nor the BSC itself cater for the needs of all significant organisational stakeholders. Two notable omissions are the environment and social matters, which are currently enjoying a resurgence of public interest. In this paper our objective is to make a case for re-balancing the BSC by incorporating social and environmental aspects of organisational performance that are of widespread concern. In doing so we will question the causal chain inherent in BSC strategy maps (Kaplan & Norton, 2000, 2001a, b & c), concluding that it is flawed in such a way as to enable the inclusion of social and environmental aspects in a BSC.

In the rest of the paper we first discuss the BSC and outline the recently introduced concept of “strategy mapping” (Kaplan & Norton, 2000, 2001a, b & c). An institutional theory approach is then used to analyse the problems of balance and integration when three stakeholders are recognised in a PMS. We then consider a wider set of organisational stakeholders and identify environmental and social aspects as the principal omissions from the BSC. The linear causal chain that is claimed to link the four perspectives of the BSC is next argued to be an over-simplification of reality, that has implications for the possibility of including social and environmental aspects into a BSC. Following a brief discussion of Kaplan and Norton’s (2001c) cursory attempt to cater for such aspects, we make a proposal for amending the BSC so as to adequately cater for social and environmental aspects of organisational performance. Brief
conclusions and suggestions for further work follow.

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