Strategic Business Management

7

THE PROMISE AND PERILS OF THE BALANCED SCORECARD

The balanced scorecard, the methodology developed by Drs. Robert S. Kaplan and David Norton, recognises the shortcomings of executive managements’ excessive emphasis on after the fact, short-term financial results. It resolves this myopia and improves organisational performance by shifting attention from financial measures and managing non-financial operational measures to customers, internal processes, and employee innovation, learning and growth. These influencing measures are reported during the period when reactions can occur sooner, which in turn, leads to better financial results.

The balanced scorecard is one of the underpinnings needed to complete the full vision of the performance management framework. Will the adoption rate of the balanced scorecard find the same difficulty crossing the chasms encountered by activity-based cost management (ABC/M) systems in the 1990s? It took many failures in ABC/M system implementations before organisations learned what ABC/M is and how to shape, size and level the detail of ABC/M systems before organisations began to get them ready for use. Are balanced scorecard implementations going to experience the same difficulty?

WHAT IS A BALANCED SCORECARD?

An early indication of trouble is the confusion about what a balanced scorecard is and more confusion about what its purpose is. There is little consensus. If you ask executives whether they are using a balanced scorecard, many say they are. ...