Disadvantages Of The Balanced Scorecard

The Balanced Scorecard (BSC) is a widely considered management tool which aims to promote the successful implementation of corporate strategies (Figge et al, 2002). This essay will firstly introduce the origins, evolution and development status of the BSC in brief, then will discuss the content and approach of the BSC, and a critical evaluation of its advantages and disadvantages in application will be conducted at last.

According to Kaplan and Norton (1992) the Balanced Scorecard (BSC) is created throughout a year-long research project which focuses on companies at the forefront of the performance measurement after recognizing that the traditional financial performance measures reflecting results of historical actions cannot meet the demands

Traditional strategic management systems depend on short-term financial measures to manage the performance of corporation, and lead to inconsistency between long-term management strategies and short-term actions. In order to solve the defects of the traditional management system, companies employ the BSC to add management indicators from non-financial aspects and adjust the management processes. By weakening the impact of short-term financial measures, organizations can focus on long-term strategy and achieve consistency in long-term objectives and short-term actions. The balanced scorecard provides managers with a framework that can convert the strategic objectives of a company to a coherent steps of performance measures (Kaplan and Norton, 1993). Therefore, the BSC becomes both measuring system and management system after constant

The first process is translating the vision, which means all senior executives build a consensus based on the long-term objective and strategy of the organization that lead the employees to achieve goals. In this way, any short-term target is ignored and will not disperse manpower and resources to achieve long-term goals. In addition, the second process is communicating and linking, requires managers to link their strategy to each department and individual to ensure the goal consistency in the organization. This is different from traditional process in which departments and individuals are evaluated by the short-term financial performance. In addition, business planning is the third process, managers can integrate all the business plans and allocate resources and determine priorities based on the long-term strategic objectives by using the BSC. Finally, feedback and learning is the last process which improve the capacity of strategic learning of companies. The budgeted targets can be measured while reviewing past processes and the short-term performance can be monitored from customers, internal processes and learning and innovations.

Any system cannot be perfect and should contain both advantages and disadvantages, the following part of this essay will focus on the advantages and disadvantages of the Balanced