When it was first introduced the balanced scorecard was organized into a four-box model with objectives, measures, targets and initiatives.

This initial four box model has now been split into a strategy map and a balanced scorecard. The balanced scorecard creators Robert Kaplan and David Norton make it clear that a strategy map should be at the heart of any modern Balanced Scorecard system.

• Balanced scorecard system – includes strategy maps, measures, targets and initiatives
• Strategy map – is a one-page visualization of the strategic objectives of a company in a cause and effect diagram (showing outcome objectives and enablers)
• Balanced scorecard – a list of measures (KPIs) and targets linked to the objectives on a strategy map

While strategy maps can be useful on their own to describe the strategic intent of a company, a balanced scorecard should be based on a strategy map.
 
A strategy map places the four perspectives in relation to each other to show that the objectives support each other.

A strategy map therefore highlights that delivering the right performance in the one perspective (eg financial success) can only be achieved by delivering the objectives in the other perspectives (eg delivering what customers want). 

Instead of objectives in separate (and often siloed or even competing) perspectives, companies create a map of interlinked objectives.

For example:

• The objectives in the learning and growth perspective (eg developing the right competencies) underpin the objectives in the internal process perspective (eg delivering high quality business processes).
• The objectives in the internal process perspective (eg delivering high quality business processes) underpin the objectives in the customer perspectives (eg gaining market share and repeat business).
• Delivering the customer objectives should then lead to the achievement of the financial objectives in the financial perspective.

Strategy maps therefore outline what an organisations wants to accomplish (financial and customer objectives) and how it plans to accomplish it (internal process and learning and growth objectives).

This cause-and-effect logic is one of the most important elements of best-practice balanced scorecards. It allows companies to create a truly integrated set of strategic objectives on a single page.

Once the strategy map with its objectives has been created, measures (key performance indicators - KPIs) and targets can be defined for each of the objectives (which can then be reported in a balanced scorecard). KPIs allow organisations to monitor progress and targets provide the yardsticks of success.

Finally, initiatives have to be defined for each strategic objective to ensure everyone is clear about what needs to be done to achieve the strategic objectives.

The ICAEW Library & Information Service provides full text access to leading business, finance and management journals and a selection of key business and reference eBooks.

Further reading on strategy maps is available through the resources below.