What are some of the advantages and disadvantages of a balanced scorecard?

Finally, Balanced Scorecard  may have a high cost. Balanced Scorecard requires an organization to think from and set target in financial perspective, customer perspective, business process and learning and growth perspective. This require not only deep understanding of the overall strategy of the organization, but also the separation of the strategy into different departments. The organization needs to set proper goals and measures for each department. And employees need to learn about BSC to make sure the system will work. Information of each department and each perspective of the BSC needs to be collected. Establishing BSC consumes a lot of time and resources. Even established, BSC can cost a lot. It needs continuous collection of information. And there is a learning and growth perspective in BSC, which can be quite expensive. So many organizations may abandon BSC just because of the high cost.

The balanced scorecard (BSC) can be an effective way to organize and manage an organization's business activities, by ensuring balance across major areas of focus. But while many organizations have embraced the balanced scorecard as a strategic planning technique, others have found that it comes with certain drawbacks.

Cost and Time

1. While the balanced scorecard (BSC) has been used effectively by many companies that are vocal advocates for its use as a strategic planning tool, they are also quick to admit that it can be a costly and time-consuming tool. Correct use of the tool requires a thorough understanding of the process and, unless someone in the organization has experience with it, may involve the use of an outside consultant to help with the process.Those involved in the strategic planning process and the use of the balanced scorecard to manage processes and track results all need to have knowledge of how the scorecard works. For maximum effectiveness, the entire organization should understand the theory behind the use of the balanced scorecard, the importance of achieving balance across the various measures, and how the tool can be used for process improvement. That is no small feat and can be challenging for small organizations to accomplish.

Incomplete Information

1. The usefulness of the balanced scorecard approach is dependent on the value of the information that is driving the process--garbage in, garbage out. While the tool can work, it will only work if both the right elements have been selected for review and if the information used to evaluate progress is complete, accurate and relevant to the area being addressed. For instance, in evaluating the effectiveness of training efforts, the number of people being trained is not as relevant as the training they received.

Employee Resistance

1. While there are many people who are strong supporters of the balanced scorecard and its use in strategic planning and process management, not all are believers. Some employees--and even managers--may feel that it is just "the flavor of the month," and resist its implementation. This is particularly true if implementation requires employees to go through training activities or invest additional time to learn about the balanced scorecard and its use. Companies that are effective in the application of the balanced scorecard need to have the support of everyone in the organization to achieve maximum success.

   Businesses use the balanced scorecard to connect the big picture to the little details. In showing how daily activities relate to organizational goals, managers can see how the company is performing. Looking beyond short-term metrics like sales and production statistics, the scorecard measures results in financial and nonfinancial terms. Advantages and disadvantages of a balanced scorecard depend on how a company implements and executes the management system.

   How to Explain Balanced Scorecard Strategic Advantage Profile

   The balanced scorecard views a business from four perspectives. Companies set objectives and targets for each perspective. Then, they pursue those objectives through initiatives, measuring their progress in terms of key performance indicators.

   • Financial: Companies traditionally measure performance in terms of sales, profit and return on investment. The most relevant of these based on a company’s goals may be included in a company’s balanced scorecard. For example, if growing the top line is a priority, then the scorecard may include monthly sales.
     
     
   • Customer: Viewing the company from a customer’s perspective can help a business retain its customers, which is important since it costs less to service existing customers than it does to acquire new customers. Measuring factors like the number of customer-service calls and whether customers are satisfied after the calls can help a company retain customers.
     
     
   • Internal Processes: Measuring how well a company produces, sells and services its products can help it earn more profits because efficiency determines profitability. The balanced scorecard helps businesses determine where they have implemented systems and processes as well as how efficiently they are working.
     
     
   • Organizational Capacity: The balanced scorecard helps companies determine whether they have the right people, the proper technology and the appropriate culture for achieving their goals.

   Benefits of Balanced Scorecard Management

   A company’s success often involves more than just selling products. It also must earn profits and invest in the company wisely to sustain growth.

   The balanced scorecard helps companies form strategies designed for more than selling products by making managers consider factors like external customers and internal efficiencies. They can explain their goals and strategies as well.

   Then, managers can assign projects and tasks that align with the company’s strategies. Employees see how their work helps the company achieve its goals.

   Disadvantages of the Balanced Scorecard

   So much has been written about the balanced scorecard, and so many companies have used it that businesses may not know how to implement it within their organization. The nuances that make it succeed at one company but not another make it difficult for one business to copy the example of another.

   It also requires support from top management because middle managers and employees may hesitate to implement it if they have difficulty doing so. Apprising managers and employees of progress can be challenging as well because many metrics must be captured, and presenting them in a single presentation accurately and informatively is not easy.

   Implementing the Balanced Scorecard

   Companies often must make extensive changes when implementing the balanced scorecard. Its effectiveness hinges on the people who deploy it and the systems they use to do so.

   • Accurate Data: Enterprise resource-planning software and similar data-capturing systems should be properly configured so that they provide data that is accurate and relevant, with minimal manual entry and review.
     
     
   • Attention to Measurement: Managers and employees may have always thought they were doing well based on traditional measures like hours worked, units produced and products sold. However, they must be willing to look for and accept new measurements that may make their performance look worse, like the number of hours it takes to produce a unit and the costs of each unit sold.
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   1. The KPI Institute: Benefits of Using a Balanced Scorecard Approach
   2. CIO.com: What Is the Balanced Scorecard? A Framework for Organizational Success
   3. Balanced Scorecard Institute: Balanced Scorecard Basics
   4. ClearPoint Strategy: A Thorough List Of Balanced Scorecard Advantages & Disadvantages

   Jim Molis has more than 20 years of experience writing for and about businesses. He has been a business reporter for the Columbus (Ga.) Ledger-Enquirer, a managing editor of the Atlanta Business Chronicle and an editor of the Jacksonville Business Journal. He also has written for management consultants, professional services firms and numerous publications as a freelancer.

   What are some of the advantages of a balanced scorecard?

   Balanced Scorecard Advantages.

   It gives structure to your strategy. ... .

   It makes it easy to communicate your strategy. ... .

   It aligns your departments and divisions. ... .

   It helps your employees see how their individual goals link to the organizational strategy. ... .

   It keeps your strategy front and center of your reporting process..

   What is the biggest problem with using the balanced scorecard?

   There is really nothing wrong with the concept of Balanced Scorecard. The main problem is that it does not provide practical guidance for deployment, and some executives view it as a "quick fix" that can easily be installed in their organizations.

   What are the challenges of the balanced scorecard?

   The following are the challenges identified in implementing a balanced scorecard: linkages between non financial and financial measures must be obtained and this usually creates a necessity for change. There may not be improvement on all the measures all the time.

   What are the disadvantages of HR scorecard?

   Action. The term “HR scorecard” can be a misnomer because it suggests that measurement is the only expectation. Another disadvantage to HR scorecards is that their usefulness can be limited by both HR staff and the company's leadership.