Disadvantages Of Balance Scorecard Accounting Essay
Robert Kaplan and Norton came up with balance scorecard in 1990s.The balanced scorecard consists strategically oriented set of ends which are grouped into four different positions which includes fiscal, internal procedures, client, larning and growing. It is known to be a model for public presentation measuring that added strategic non-financial public presentation steps to traditional fiscal prosodies to give directors and executives a more ‘balanced ‘ position of organisational public presentation.
( Balance scorecard insititute )
The BSC is a theoretical account that integrates fiscal and non-financial strategic steps. Bing a high profile theoretical account BSC has attracted attending from practicians and faculty members. BSC relies on the scheme construct developed by Porter where he argues sing the kernel of explicating a competitory scheme lies in associating a company to the assorted competitory forces in the industry. Kaplan and Norton emphasize that non-financial strategic aims should non dwell of an random aggregation of steps but they should consist balanced representation of both fiscal and non-financial information. ( The Economist )
Advantages of balanced scorecard
Improved creativeness along with unannounced Ideas.
It besides helps aline cardinal public presentation steps with scheme at different degrees of an administration and provides the direction a comprehensive image of the concern operations.
Balanced scorecard facilitates effectual communicating and apprehension of concern ends and schemes of an administration.
Transformation of scheme into action.
This construct provides strategic feedback and acquisition.
Reduced time-frame and improved competitory advantage
Improved determination, procedures and better solutions.
Enterprises are often measured and evaluated against the industry criterions. ( Balance scorecard Australia )
The empirical survey conducted by Sun blare, Granlund and Brown ( 2010 ) concluded that the balance scorecard is eligible to make a balance in multiple aims and the survey highlighted to hold balanced both in footings of procedure and results.
In instance of Philips Medical Systems North American ( PMSNA ) the company used balanced scorecard in order to upturn answerability for consequences. Through the execution of world-wide scorecard system Philips has realized its important benefits and has besides succeeded in concentrating the company on diverse set of concern steps. ( SCRC articles )
Disadvantages of balance scorecard
It is merely considered as a list of prosodies which does non supply bottom line mark with clear recommendations.
The tonss obtained are non based on any fiscal or economic theory in other words the procedure is subjective.
Critics have besides claimed that the positive feedback from the balance scorecard users may be due to the placebo consequence as there is are no ascertained surveies related to the usage of balance scorecard to improved determination devising or better fiscal public presentation of companies.
Resistance towards equilibrate scorecard from employees or even higher degree directors.
It is clip devouring to accommodate to equilibrate scorecard strategic system.
High execution cost is involved at the initial phase. ( Vector survey )
Criticisms and options of BSC
Many options have emerged to equilibrate scorecard such as public presentation prism, consequences Based Management and Applied Information Economics. In 2000, the Federal CIO Council commissioned a survey to compare the two methods AIE and BSC by funding surveies in side-by-side undertakings in two different bureaus. The Dept. of Veterans Affairs used AIE and the US Dept. of Agriculture used Balanced Scorecards. The consequence in study revealed that while AIE was much more sophisticated, AIE really took somewhat less clip to use. AIE was besides more likely to bring forth findings that were newsworthy to the organisation, while the users of balance scorecard felt it merely documented their inputs and presented no other specific penetration.
Neely ( 2002 ) argued that the most ambitious job of balance scorecard is that it lacks legion of import involvement groups in its construction such as providers, co-operation spouses and close neighbors. Neely besides recommends that it would be executable to utilize a public presentation prism method as a possible beginning for adding new involvement groups to the model of balance scorecard whereas Simons references that it might be reasonable to add a elaborate characteristic where specific undertaking force or a certain individual will be assigned in every administration who is straight responsible for roll uping information about external chances and menaces.
Pandey ( 2005 ) after critically analyzing the balance scorecard argued that he had no uncertainty sing the public presentation betterment procedure being a critical portion of strategic planning but he raised a inquiry that whether the balance scorecard linked with the scheme leads to break public presentation and communicating as claimed by the advocates.
In 2008 Othman suggested that there must be a nexus in the balance scorecard and scenario planning mentioning to the strategic planning that is robust to different external conditions and this will guarantee that balance scorecard is non merely representation of present state of affairs. Kaplan, Norton and Rugelsjeon ( 2010 ) answered to the unfavorable judgment sing the external orientation. They answered how the administrations can be saved from failures of confederation jobs and the writers claimed that the confederations can be better managed through balanced scorecard due to its strategic orientation. ( World applied science diary )
Many international research studies have revealed that the balance scorecard construct is a extremely widespread tool around the universe. Despite legion success narratives at that place have been besides several unfavorable judgments and instances where the execution failed. The 2005 study conducted by Brains and company shows that 57 % of the universe & A ; acirc ; ˆ™s houses use balanced scorecard as their public presentation direction system. A study conducted by the 2GC in 2011 the study consequences show that the primary function of the Balanced scorecard is still strategic direction. The figure of participants who view the Balanced Scorecard as a really or highly valuable direction tool consist of 75 % . From the above statistics we can reason that broad figure of administrations utilizing balance scorecard to better their organizational public presentation. ( 2GC active direction )
It can be concluded that balance scorecard is an effectual public presentation tool but the suggested betterments have to be undertaken in order to increase positive consequences.
Some of the recommendations can be given in order to better the balance scorecard public presentation measuring:
The focal point should be future oriented non simply consist of the past and current state of affairs prevailing in the administration.
Common steps of balance scorecard should be adopted by all SBU & A ; acirc ; ˆ™s in order to guarantee uniformity in public presentation rating.
Supportive civilization should be predominating in the administration in order to guarantee successful execution of balance scorecard.
Balance scorecard should non merely be utilised for high public presentation but besides organizational invention and merchandise development.
Responsiveness to different external state of affairss in the concern environment.