The Balanced Scorecard is a management system that clarifies the strategy and vision of an organization, translating them into action that can be tracked. In simple terms, it’s a way of understanding how well the department or entire organization is doing – an alternate, or preferred, way to measure successful strategy implementation that goes beyond financials.

Initially, the balanced scorecard (BSC) turns strategy into something tangible, so that it can be measured. But the real success of a BSC lies in its prioritization of measurements that are most meaningful to the organization. It is this prioritization that makes the BSC approach a true management system, going beyond a mere measurement system.

As organizations adopted the Balanced Scorecard in the 1990s, however, one issue emerged universally: how to measure the IT department’s contribution to the Balanced Scorecard, and ultimately to the bottom line. Today, the BSC for IT is one of several IT frameworks you can implement.

History of the Balanced Scorecard

In the early 1990s, two professors at Harvard Business School found that the vast majority of companies managed their business based solely on financial measurements. Robert Kaplan and David Norton recognized a significant shortcoming: while finance is imperative to business health, it only reports what has already happened. Finances can’t define where a business will head.

Together, Kaplan and Norton wanted to develop a way to manage strategy performance – and strategy isn’t something that easily translates to numbers and metrics. They built the Balanced Scorecard as the solution to this problem. The main objective of the BSC is to translate corporate strategy and mission into tangible objects that can be measured, and prioritizing which measurements are most meaningful.

The Balanced Scorecard defined four perspective that help managers plan, implement, and achieve the business strategy:

• Financial Perspective: tracking financial requirements and performance
• Internal Business Process Perspective: measuring critical-to-customer process requirements
• Customer Perspective: measuring the satisfaction and performance requirements of customers, as it applies to both the organization and what it delivers (products or services)
• Knowledge, Education, and Growth Perspective: measuring how the organization educates employees, gains and captures knowledges, and uses this information to grow and stay competitive

The vital part of maintaining a BSC is that all four arenas must be evaluated consistently. To delay examination or ignore a metric altogether will lead to an unbalanced business situation with inevitable and significant negative impact.

Whether they anticipated this sea change, Kaplan and Norton’s Balanced Scorecard highlights a change in business management that is nearly the standard today, 25 years later. Not only did they see that finance couldn’t predict the future, but now, businesses focus on service delivery and customer satisfaction almost more than the financial bottom line.

IT and the BSC

Anyone in the industry knows that IT is changing drastically. A necessary component of any company in the 21st century, IT is no longer solely the bearer of hardware and software support. In fact, enterprises understand that IT is just as relevant to service delivery as any other business function within an organization, like marketing and finance. IT is also starting to support intelligent software development and implementation.

Perhaps the biggest shift, however, is that IT has increasingly become the product. Whether your company is selling an app or an enterprise system, technology fuels it. Even if your company’s product is sustainably sourced bedsheets or print-to-order artwork, your company must have top-of-the-line technology to support it, from customer service to order management to logistics.

With the original scorecard system, IT was difficult to measure with the pre-existing measurements, perhaps due to its place as “only” a utility. But since IT is a business partner, no longer a mere utility, it must be managed strategically and forecast accurately.

The tricky part is this: IT often resides in its own business silo, away from other “vital” business partners, the industry typically relies on its own unique, IT-centric metrics to track performance. IT has often also been reactive in their work, responding to outages or help desk issues once they arise; as such, IT teams aren’t traditionally poised to think or act strategically.

A strong performance in the IT department may not translate to a positive performance to other parts of the enterprise.