Putting Balance Scorecard to Work- Critical Analysis Essay Example
The implementation of Balanced Scorecard as a management tool is discussed by Kaplan and Norton in this article. They explain how it provides executives with a comprehensive framework to translate the strategic objectives of a company into a coherent set of performance measures. The authors believe that by solely relying on financial returns, managers will overlook the overall strategic view of the company.
The article states that the Balanced Scorecard cannot be applied universally to all businesses as different market conditions, product strategies, and competition levels necessitate different scorecards. Kaplan and Norton advise that company visions should align with their strategies and be supported by realistic performance measurements from the four perspectives in the Balanced Scorecard. These four perspectives include Financial, which measures elements such as ROCE, cash flow, and revenue growth, to determine a company's survival, success,
...or growth.
Rockwater, an underwater engineering and construction organization, utilized the Balanced Scorecard methodology to convert their vision and strategic plans into a series of performance metrics that would be able to adapt to the dynamic competitive and customer landscape.
In instances where BSC does not have a well-defined strategy to employ, the authors suggest implementing the following measures.
The implementation of a balanced scorecard with financial and nonfinancial measures provides a holistic approach to understanding how performance is created within a firm and can indicate future strategies. The Balance Scorecard can also serve as input for the creation of organization strategy maps, with emphasis on internal learning and growth to foster financial profitability and stakeholder value. However, the balanced scorecard's perspectives may not fully represent the interests of all stakeholders, with limite
attention given to suppliers, competitors, government, local communities, and the environment.
The significance of these factors extends beyond performance management and strategic objectives of the company. Additionally, the Balanced Scorecard model lacks a time dimension, making it challenging to establish a cause and effect relationship among various perspectives. However, BSC serves as a top-down reflection of a company's mission and strategy. The corporate level Balance scorecard offers performance measurement inputs at the business unit level and development of "personal scorecard" at individual project levels.
The alignment of operational performance with the long-term strategy of the firm is achieved through this approach.
The utilization of collection and creditor-based ratios as key financial measures may vary depending on the company, such as in the case of an FMCG company. Meanwhile, the balanced scorecard is noted for its effectiveness in facilitating change according to the author.
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