The BSC is a performance measurement framework, with similar principles as Management by Objectives, which was publicized by Robert S. Kaplan and David P. Norton in the early 1990s. Having realized the shortcomings of traditional management control systems, Kaplan and Norton designed the BSC as a result of a one year research project with 12 companies. Since its introduction, the Balanced Scorecard has been awarded a prize by the American Accounting Association as the “best theoretical contribution in 1997” and its industry and academic attention has placed it alongside approaches such as Activity based costing and Total Quality Management.

The BSC is a framework or what can be best characterized as a “strategic management system” that claims to incorporate all quantitative and abstract measures of true importance to the enterprise. According to Kaplan and Norton, 1996, “The Balanced Scorecard provides managers with the instrumentation they need to navigate to future competitive success”.

The earliest Balanced Scorecards comprised simple tables broken into four sections - typically these 'perspectives' were labeled "Financial", "Customer", "Internal Business Processes", and "Learning & Growth". Designing the Balanced Scorecard required selecting five or six good measures for each perspective. Many writers have since suggested alternative headings for these perspectives, and also suggested using either additional or fewer perspectives: these suggestions being triggered by a recognition that different but equivalent headings will yield alternative sets of measures. The major design challenge faced with this type of Balanced Scorecard is justifying the choice of measures made - "of all the measures you could have chosen why did you choose these...?" is a common question asked (and using this type of design process, hard to answer). 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. Although less common, these early style Balanced Scorecards are still designed and used today.

The early style 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.

In the mid 1990s an improved design method emerged. In the new method, selection of measures was based on a set of 'strategic objectives' plotted on a 'strategic linkage model' or 'strategy map'. With this modified approach, the strategic objectives are typically distributed across a similar set of 'perspectives' as is found in the earlier designs, but the design question becomes slightly more abstract. Managers have to identify the five or six goals they have within each of the perspectives, and then demonstrate some inter-linking between them by plotting causal links on the diagram. Having reached some consensus about the objectives and how they inter-relate, the Balanced Scorecard's measures are chosen by picking suitable measures for each objective. This type of approach provides greater contextual justification for the measures chosen, and is generally easier for managers to work through. This style of Balanced Scorecard has been the most common type for the last ten years or so.

Several design issues still remain with this modified approach to Balanced Scorecard design, but it has been much more successful than the design approach it supercedes.

Since the late 1990s, various alternatives to the Balanced Scorecard have emerged - examples being The Performance Prism, Results Based Management and Third Generation Balanced Scorecard for example. These tools seek to solve some of the remaining design issues - in particular issues relating to the design of sets of Balanced Scorecards to use across an organization, and in setting targets for the measures selected.

Many books and articles on Balanced Scorecard topics confuse the design process elements and the Balanced Scorecard itself: in particular, it is common for people to refer to a 'strategic linkage model' or 'strategy map' as being a Balanced Scorecard.

Balanced Scorecard is a performance management tool: although it helps focus managers' attention on strategic issues and the management of the implementation of strategy, it is important to remember that Balanced Scorecard itself has no role in the formation of strategy. Balanced Scorecard can comfortably co-exist with strategic planning systems and other tools.