Although the past may be helpful in predicting the
future, financial accounting metrics are lagging indicators
that can provide insights into the effectiveness of
previous strategies and decisions yet limit managers’
abilities to anticipate future events—especially when
the future is fraught with uncertainty and change. In
contrast, nonfinancial metrics, such as customer satisfaction
and organizational innovation, are considered leading
indicators that are better predictors of future
operational results. The BSC combines nonfinancial
and financial measures in the internal corporate reporting
process so that managers can assess the efficacy of
strategic plans and actions.