Question

1. Explain major differences of a balanced scorecard (BSC) compared to more traditional (financial) performance management techniques.

Describe …

1. The characteristics of a good BSC
2. BSC as a tool for strategy
3. Pitfalls of implementing a BSC
4. Effectiveness of BSC approaches as performance management system

[25 marks]

Answer 1

the Balanced scorecard takes future and present innovations and attempts to incorporate them into the perspective of the internal business process, traditional measurement systems focus on delivering existing products and services to present customers without any future processes incorporation.

A)

1. A good BSC should have the capability of creating clear picture of the overall company objective, its target and a strategic map that are all linked together in such a way that conflicts are reduced to its barest minimum.
2. IT acts as a communication tool that reflects a company strategy to all members of the organization. This it does by cleverly translating strategy into coherently developed feasible targets.
3. it has the ability to highlight some potential suboptimal decisions that may be taken by managers when both financial and non financial factors are not considered in designing and implementing performance measure techniques. A good BSC should have a predictive ability to tell when a short-term decision is likely to hurt potential growth. .
4. With a well designed and developed BSC, the number of measures that management need to monitor would be reduced to great extent . This would free responsible officers or employees of a company to focus on other management functions like; planning, staffing, risk management, coordinating, effective human resource management, etc. Proliferation of performance measure or key performance indicators (KPIs) should be avoided when possible and this is where a good BSC should play an important role. Many management dashboards and ERP systems have the capability of streamlining the KPIs in such a way that managers have spare time that would be channelled to value adding activities like building sustainable effective business models and implementing organizational change.
5. It should be functionally and operationally flexible. The aim of a balanced scorecard is to a efficiently link company’s strategy with its organizational culture will be defeated if managers and other employees see the design and implementation of the BSC as being too rigid.

B )The balanced scorecard (BSC) is a strategic planning and management system that organizations use to:

1. Communicate what they are trying to accomplish.
2. Align the day-to-day work that everyone is doing with strategy.
3. Prioritize projects, products, and services.
4. Measure and monitor progress towards strategic targets.

C )

• Poorly Defined Metrics. Metrics need to be relevant and clear. ...
• Lack of Efficient Data Collection and Reporting. ...
• Lack of a Formal Review Structure. ...
• No Process Improvement Methodology. ...
• Too Much Internal Focus.

D) The Balanced Scorecard can be used to guide the design of performance reports and dashboards. This ensures that the management reporting focuses on the most important strategic issues and helps companies monitor the execution of their plan.