Application of Balanced Scorecard in Portfolio Management

Abstract

In this article the application of Balanced Scorecard (BSC) will be investigated in relation to Portfolio Management. BSC is a strategic planning tool, which addresses the strategic objectives and often measures them in form of Key Performance Indicators which is evaluated, reported and incorporated into a strategic feedback-loop. Each executed project within a portfolio should be aligned with the strategic objectives in the organisation. To ensure the linkage between each project and the strategic objectives, balanced scorecard can be applied and provide the portfolio management with a set of initiatives and measures, which would indicate if the outcomes from a given project provides the expected returns or growth to the portfolio and organisation. To facilitate the merge between strategic management and portfolio management the article will present an argumentation of why BSC benefits portfolio management, including an individual definition of the fields, the direct linkages and a reasoning based on theory. This will be followed by how the application of BSC in portfolio management should be initiated and an identification of the strength and weaknesses together with the limitations and risks. Lastly an annotated bibliography will be conducted, to inspire further reading to enhance the understanding of the tool and core literature.

References

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