Balanced Scorecard concept effectiveness measurement
Theoretical issues
The question on how to measure the success of a management concept does not have the only answer. Basically all the company’s activities have improvement of industrial results and Increase in cost of the company as the long term purposes. But when it is referring to Balanced Scorecard concept it needs some unique measurement indicators and units. Authors of the concept usually report about numbers of examples (world’s famous companies) which had increased their costs and profits thanks to BSC. But those common assessments might be considered groundless while more careful cause and effect analysis proceeded. There are a lot of examples presenting minor aspects to cause a deep satisfaction of realizing some strategy. It also needs to be noticed there are no convincing proofs of many other management and administrative tools (for example management of a portfolio, accounting of costs and so on). R. Kaplan honestly does not consider BSC theory ideal. There is no very important part of concept that referring to theory’s effectiveness measurement. That is why further researches are needed to be preceded.
Practical results of management using BSC concept
While business theorists are looking for any holes in the concept, practitioners are already receiving odds by using Balanced Scorecard as well as facing some problems in this concept.
Advantages
During practice the following advantages of the concept were found and proved:
- Multi-aspect and practical methods allow gaining of stable linking between operational and strategic management;
- The four perspectives (Financial perspective, Customer perspective, Innovation and learning perspective and Internal processes perspective – read more in the article “What is Balanced Scorecard concept: the four perspectives”) make it possible to create overall scheme to direct the strategy from above down through all the hierarchy levels;
- The problems appeared while realizing the strategy can now be solved faster and more effectively. BSC tool called “Strategy map” improves the performance of discussions aimed to solve problems. The question of determination of measure units for indicators allows better understanding of problems reasons and finding the right decisions;
- Balanced Scorecard concept makes it possible to create stable linking process and communications all over the company’s staff. Communications help to solve any appeared problems in groups as well as directing to staff’s persistent educational goals;
- The concept’s integration process into common monitoring systems works perfectly. Also there are no problems with BSC co-ordinations with the management methods aimed to increase the cost f business;
- Others.
Disadvanteges
There also were several problems managers faced with, while using BSC concept. Here is the list of them:
- The manager’s attention focuses on value – based management and some “soft” factors are sometimes being ignored;
- Unambiguity of sheaves like “the purpose – means” and “a strategic map” is not provided;
- Several problems with measurement are still not solved;
- Concept does not provide the methods of the resolution of conflicts.
Summary
The short summary of results of BSC practical usage might sound this way: Balanced Scorecard concept is a tool which allows full-scale to co-ordinate strategy with operational management. Also the system makes it possible for decisions on how to distribute company’s resources to become quite objective.
