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Meaningfulness of the Four Perspectives

In addition, this article also questions the meaningfulness or significance of the
so-called “four perspectives” proposed by Kaplan and Norton, in terms of their
“construct validity.” This is not just an academic quibble. The significance is
that if the factors used in a strategic management system, such as a Balanced
Scorecard, are invalid, managers can focus upon the wrong things and this, in
turn, can potentially be damaging to companies, investors, and in turn, optimal
societal resource allocation. And, as Marshall Meyer points out, the balance
scorecard is often used in compensation decisions70. If it is incorrect, it can lead
to unintended dysfunctional results.

There has been recognition of problems with the four perspectives employed in
Kaplan and Norton’s version of the BSC for a very long time. For example,
Marshall Meyer stated: “Although the scorecard was conceived as a means of
communicating the firm’s strategy rather than as a template for performance
measurement, today the scorecard dominates discussion of performance
measurement….”71 In addition, Turner pointed out that the perspective of
“innovations and learning” in Nolan and Norton’s original version does not
capture sufficient information about an organization’s human resources. He
proposed using “Human Resource Accounting” to bring true “balance” to the
Balanced Scorecard.72

“Look: The ‘BSC Emperor’ Has no Clothes”!

In addition, I have often met people whose organizations applied the Balanced
Scorecard approach, and have never encountered anyone who reports a
successful application. Instead what I hear is a version of the following
comment made to me some time ago:

70 Marshall Meyer, Rethinking Performance Measurement: Beyond the Balanced Scorecard,”
Cambridge University Press, 2002, p. 42.
71 Marshall Meyer, Rethinking Performance Measurement, p.42.
72 Turner, G. (2000) Using human resource accounting to bring balance to the balanced scorecard.
Journal of Human Resource Costing and Accounting, Vol. 5, No. 2, Autumn, 31-34.

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