Question

In 2002, Worldclass Lighting launched an initiative to introduce the balanced scorecard into the Asia Pacific and Greater China regions, in order to provide a new management tool for its lighting business covering four perspectives-financial, customer, process, and learning and growth. The balanced scorecard ran successfully for a period of time until implementation issues surfaced that undermined its benefits, such as unquantifiable measures in target setting and the over-measurement of indicators. In 2009, a plan to terminate the balanced scorecard was presented to the Asia Pacific Chief Executive Officer ("AP CEO"). The AP CEO must now make a decision about whether to continue using the balanced scorecard.

1.What was the value proposition for World Class to continue the balanced scorecard?

2. Assess and evaluate the scorecard in terms of economics of information properties.Using the properties of performance measures, explain which properties wereimplicated in the implementation and failure of the balanced scorecard.

Answer 1

Advantages Of The Balanced Scorecard

1. It gives structure to your strategy.

Unlike financial or HR management, organizations frequently talk about organizational performance (and strategy) in a variety of ways. Thus, there are many different approaches to strategic management. The Balanced Scorecard is a logical, structured way to help the leaders of your organization ensure that all areas of the organization are covered in an easy-to-understand way. It helps keep your goals at the center, uses specific measurements to track progress, and follows initiatives to track actions—a structure those who use the BSC know and love.

2. It makes it easy to communicate your strategy.

A strategy map is designed to clearly communicate a strategic plan. It is a clean, simple visual aid used to align every department or division for the purpose of achieving high-level business goals. When implemented correctly, it:

• Gives employees clear goals to keep in mind while working on measures.
• Helps employees identify key goals.
• Allows employees to better understand the strategic elements that need work.
• Enables employees to see how objectives affect one another.

3. It aligns your departments and divisions.

When implemented correctly, all divisions and departments should align with a common strategy, and the Balanced Scorecard facilitates this process. With the BSC structure, you can link your critical objectives to the objectives of a parent company or enterprise. Additionally you can see how your measures may roll up to the enterprise-level measures, how projects link to enterprise-level projects, and more. The BSC also provides the structure needed when large projects are shared across multiple divisions.

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

Using The Strategy-Focused Organization framework, the BSC allows individuals to align their goals across the organization. For example, an employee setting regular performance goals for an annual personal review can link their goals to those of their division or department (and from the division up through the entire organization). Thus, the BSC allows all of your employees to connect what they’re doing to the betterment of the team and the company as a whole.

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

A lot of organizations build strategic plans and put them on a shelf, never to be seen again. The creation of the BSC is predicated on reviewing your strategy on a regular basis—and you can only do this if your strategy is organized. Regular strategy review meetings on a monthly or quarterly basis, combined with an annual strategy refresh, will ensure you reference your strategy regularly and keep it at the center of your management reporting process. Reviewing your strategy will bring it to life and make it part of the way you manage your organization. Furthermore, you will know where you are at all times in achieving your goals.

Disadvantages Of The Balanced Scorecard

1. It can be an overwhelming framework.

After five books and countless articles, the sheer amount of material on the Balanced Scorecard is a bit mind-boggling. In fact, it’s the largest topic on the Harvard Business Reviewwebsite—and if you tried to read every single case study, you’d get bogged down quickly. Additionally, if you try to jump in with with Norton and Kaplan’s fifth book, you’re likely to get overwhelmed with how to move forward.

2. It can’t be copied precisely from examples.

Following what you just read, your strategy and example strategies you’ve read about will be different. You’ll be tempted to copy an example map, but keep in mind your strategy is entirely unique to you. We highly suggest using templates to get ideas of what other organizations using the BSC have done, but then step away and build something that is unique to you.

3. It requires strong leadership support to be successful.

You may be having trouble with your scorecard because new leadership isn’t convinced that BSC is a viable option—or your existing leadership simply may not like or understand the structure. It’s important to remember that the BSC requires a total overhaul to the way you manage; it is not a project with a defined end date. If you’re asked to build a scorecard and then return to business as usual, be warned that your scorecarding process isn’t likely to work.

4. It can be difficult to keep everyone on the same page.

Many organizations try to manage their scorecard in Excel or PowerPoint and end up throwing it away. We don’t blame them. Managing a BSC in Excel can lead to accuracy problems, version control issues, and various complexities and formatting troubles. Furthermore, while Excel is a free tool, there are a number of hidden costs (like the cost of a manual review process, or the cost associated with data entry errors). When these things happen, leaders are likely to see the Balanced Scorecard as the problem instead of the tool used to manage it.

5. It may appear too rigid for the way you manage.

Sometimes transitioning to a Balanced Scorecard process can cause confusion within an organization. Rather than taking time to adapt, some leaders quickly decide to quit the BSC and return to their old ways. If you find yourself in these shoes—for example, trying to use the exact perspective names that Norton and Kaplan use while people in your organization don’t respond to those terms—you may find the BSC structure more cumbersome than it is worthwhile. Or, if you’re married to your current strategy review schedule despite a shakeup in management or a major change in strategy, that’s a problem. Organizations that get stuck in a prescribed way of handling the BSC based on a book they’ve read or a certification they’ve obtained will likely run into these issues.