Editing Balanced scorecard (section)

=== First generation ===

The first generation of balanced scorecard designs used a "four perspective" approach to identify what measures to use to track the implementation of strategy. The original four "perspectives" proposed<ref name=Kaplan_Norton_1992/> were:
* '''Financial''': encourages the identification of a few relevant high-level financial measures. In particular, designers were encouraged to choose measures that helped inform the answer to the question "How do we look to shareholders?". Examples: cash flow, sales growth, operating income, return on equity.<ref name=simons_1994>{{cite book|last=Simons|first=Robert L.|title=Levers of Control: How Managers Use Innovative Control Systems to Drive Strategic Renewal: How Managers Use Control Systems to Drive Strategic Renewal|date=1 December 1994|publisher=Harvard Business School Press|location=Boston, MA.|isbn=978-0-87584-559-3|url=https://archive.org/details/leversofcontrolh00simo}}</ref>
* '''Customer''': encourages the identification of measures that answer the question "What is important to our customers and stakeholders?". Examples: percent of sales from new products, on time delivery, share of important customers’ purchases, ranking by important customers.
* '''Internal business processes''': encourages the identification of measures that answer the question "What must we excel at?". Examples: cycle time, unit cost, yield, new product introductions.
* '''Learning and growth''': encourages the identification of measures that answer the question "How can we continue to improve, create value and [[innovation|innovate]]?". Examples: time to develop new generation of products, life cycle to product maturity, time to market versus competition.

The idea was that managers used these perspective headings to prompt the selection of a small number of measures that informed on that aspect of the organization's strategic performance.<ref name=Kaplan_Norton_1992/> The perspective headings show that Kaplan and Norton were thinking about the needs of non-divisional commercial organizations in their initial design. These categories were not so relevant to public sector or non-profit organizations,<ref name=Moulin_PSS /> or units within complex organizations (which might have high degrees of internal specialization), and much of the early literature on balanced scorecard focused on suggestions of alternative 'perspectives' that might have more relevance to these groups(e.g. Butler et al. (1997),<ref name=Butler_1997 /> Ahn (2001),<ref name=Ahn_2001 /> Elefalke (2001),<ref name=Elefalke_2001 /> Brignall (2002),<ref name=Brignall_2002 /> Irwin (2002),<ref name=Irwin_2002 /> Flamholtz (2003),<ref name=Flamholtz_2003 /> Radnor et al. (2003)<ref name=Radnor_2003 />).

These suggestions were notably triggered by a recognition that different but equivalent headings would yield alternative sets of measures, and this represents the major design challenge faced with this type of balanced scorecard design: justifying the choice of measures made. "Of all the measures you could have chosen, why did you choose these?" These issues contribute to dis-satisfaction with early balanced scorecard designs, since if users are not confident that the measures within the balanced scorecard are well chosen, they will have less confidence in the information it provides.<ref name=Kellermans_2013>{{cite journal|last=Kellermans|first=Walter J.|author2=Floyd F. W. |author3=Veiga S. W. |author4=Matherne C. |title=Strategic Alignment: A missing link in the relationship between strategic consensus and organisational performance|journal=Strategic Organization|year=2013|volume=11|issue=3|pages=304–328 |doi=10.1177/1476127013481155|s2cid=11720578}}</ref>

Although less common, these early-style balanced scorecards are still designed and used today.<ref name=2GC_Survey />

In short, first generation balanced scorecards are hard to design in a way that builds confidence that they are well designed. Because of this, many are abandoned soon after completion.<ref name=Epstein_Manzoni_1997 />