A balanced scorecard is a module of strategic planning and management implemented by an organization. It is basically a tool used to measure if the executions are in sync with the vision, policy and strategy of the company. This tool can be used by different organizations. Though the balanced scorecard method proves to be productive in attaining a balanced review, it still has some disadvantages.
Required:
Explain FOUR (4) disadvantages of balanced scorecard. (8 marks)
View Solution
- Conflicting measures
Some measures in the scorecard such as research funding and cost reduction may naturally conflict. It is often difficult to determine the balance which will achieve the best results. - Selecting measures
Not only do appropriate measures have to be devised but the number of measures used must be agreed. Care must be taken that the impact of the results is not lost in a sea of information. - Interpretation
Even a financially-trained manager may have difficulty in putting the figures into an overall perspective. - Management commitment
The scorecard can only be effective if senior managers commit to it. If they revert to focusing solely on the financial measures they are used to, then the value of introducing additional measures will be reduced. - Does Not Provide Recommendations
Balanced scorecard gives you an extensive overview of the company. It will give you facts about your company’s execution and performance. But it will not give you recommendations on how to amend strategies and policies to overcome discrepancies. Therefore, for attainment of a complete analysis of a company’s performance, a more magnanimous strategy will be required. - Resistance from Employees
Resistance towards balanced scorecard can be from either a top management officer or even from other officers. This is because a few of them might take the implementation of this system as an indicator that their performances are not appreciated. It could also be taken as an additional burden of administrative work. Therefore, it is very important that the implementation of this method in a company should be announced to everyone effectively. - Not Fully Efficient
Balanced scorecard system proves to be completely efficient if integrated with an accounting system. However, if you are relying on balanced scorecard method for complete evaluation of your company’s performance, it will not be completely efficient. - Takes Time
It takes time to adapt to balanced scorecard strategic system. So this will require a lot of motivation from the management to be able to successfully complete the process. - High Implementation Costs
The initial cost of the implementation of the balanced scorecard could be high. Considering you would have already some automation to create a database of the financial transactions, to implement balanced scorecard you will have to give in additional funds and also spend some time and money in training your employees about the metrics of the tool.