Question

When reviewing what the company plans on accomplishing when implementing its strategy, how does the Balanced Score Card help? What are its strengths? Weaknesses? Explain. Can this be used as a tool to facilitate strategic planning? Explain.

Answer 1

A Balanced scorecard is a strategic model developed to enable the company to translate its vision, mission and strategy into reality. It evaluates the strategy of the company on 4 perspectives- financial, customer, internal business process, learning and growth.

A BSC helps in formulating the business strategy by focusing on what is essential and critical for the business’ performance. The different perspectives of the BSC help to give a holistic snapshot of the current and future aspirations of business. The financial perspective covers the target financials of the organization focusing on revenue and profits. The customer perspective gives an insight about how the business is catering to its customers, what is the service level of the company and what is the rate of customer satisfaction. The internal process perspective evaluates the current processes of the company and helps in drafting strategy about how well it can perform in future. The learning and growth perspective focuses on the intangible drivers of business i.e. human capital, organization capital and information capital.

The advantages of balanced scorecard are:

• It gives the most comprehensive evaluation of the company’s performance
• It facilitates communication across the business
• It aligns the overall organization towards the business strategy
• It aligns all processes of business with the business strategy, thus facilitating strategic planning

The disadvantages of balanced scorecard are:

• The analysis of BSC is limited to its 4 perspectives
• It is an evaluation tool but does not suggest ways of improvement
• For some organizations, it can be a vague concept

The BSC is used to translate the vision, mission and strategy of business into reality. So, it definitely facilitates strategic planning. The BSC helps in execution of the strategic business plan. It also monitors the progress of strategy and its coordination with the external and internal stakeholders.