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Scorecards have their genesis in the work of Robert Kaplan and David Norton. In 1992, they published a paper in Harvard Business Review about a way to monitor the health of a business using Balanced Scorecard, discussing perspectives and metrics that could be used to for companies to measure their relative success. They argued that companies could not successfully manage items they could not measure, so measurement became critical. In 1996 Kaplan and Norton published The Balanced Scorecard: Translating Strategy into Action, a book that more fully laid out the Balanced Scorecard concept. Kaplan and Norton argued that companies spend far too much time focused on financials, and that financials are often a trailing indicator of the health of the business. Since it takes companies some time to close out a particular quarter, it might be mid-to-late April before a business realizes just how bad the previous quarter was, and by then some of the data is almost four months old. Kaplan and Norton argued that while examining financial data is important, it must be only one part of a broader picture. In other words, the financial perspective must be balanced against other, equally important, areas. A Balanced Scorecard is aimed at an overall view of the entire enterprise and looks at four areas, called perspectives. These four perspectives are: Financial Customer Internal Process Learning and Growth The financial perspective covers the standard financial goals of an organization and is of interest to those both inside and outside the organization. For most companies, the focus is on business owners or shareholders. Nonprofit organizations focus on those funding the organization through donations or other payments. KPIs often found in the financial perspective are relatively easy to identify: gross revenue, profit, earnings per share, and so forth. The customer perspective focuses on such areas as targeting and then acquiring customers, retaining those customers, and growing business at existing customers. Businesses want to develop lifelong customers and provide comprehensive solutions. Some of the KPIs in this area might be collected through focus groups and customer surveys.
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