Desventajas Balanced Scorecard

The Balanced Scorecard is a method of organizational performance measurement that allows managers to look at the performance of an organization from four important perspectives:

·       Customer Perspective (How do customers see us?)

·       Internal Capabilities Perspective (What must we excel at?)

·       Innovation and Learning Perspective (Can we continue to improve and create value?)

·       Financial Perspective (How do our owners/shareholders see us?)

Before discussing the Desventajas Balanced Scorecard, let’s discuss the Advantages to understand the concept clearly:

·       Taking these four different perspectives as a whole ensures that senior management is taking a balanced view about the performance of the organization.

·       The short, medium and long-term views are managed in an ongoing, cohesive manner.

·       Top level strategy and middle management level actions are clearly connected and appropriately focused.

·       The organization’s performance reporting system (and the organization itself) is much more likely to be focusing on the things necessary to stay competitive in the long term and realize value for its stakeholders.

Now we have seen that Balanced Scorecard has so many likely benefits but it also has some Desventajas  as well. Desventajas Balanced Scorecard:

·       The "Balanced Scorecard" approach is not a quick fix; it takes considerable thought to develop an appropriate scorecard.

·       Whilst communication can commence within a short time, the complete implementation should be staged.

For example, Kaplan and Norton divide the business's life cycle into three stages: growth, maturity and decline. They further identified three possible strategic financial themes: Revenue Growth and Mix, Cost Reduction / Productivity Improvement, and Asset Utilization. Examples of measures that appear relevant to the company can then be displayed in the following 3 x 3 matrix that can be adapted to the company's specific stages of business cycle and financial strategies. The drivers in the financial perspective should be customized to the industry, the competitive environment and the strategy of the business unit being considered.

Finally, in addition to increasing returns, most organizations are concerned with the risk of these returns. Therefore, when it is strategically important, these organizations will want to incorporate explicit risk management objectives into their financial perspective. As a conclusion, it is important to remember that eventually, all objectives and measures in the other scorecard perspectives should be linked to achieving one or more objectives in the financial perspective.

This perspective aims at identifying the customer and market segments in which the business units will choose to compete. The managers should then determine the best measures of the business unit's performance for these targeted segments. In this perspective, managers must first determine core measures that will describe the successful outcomes of a well-formulated and implemented strategy. According to Kaplan and Norton, these core measures include customer satisfaction, retention, new customer acquisition, customer profitability, and market and account share in each specific segment. However, these measures present some of the Desventajas Balanced Scorecard the financial measures: they reflect past performance and are the equivalent of driving by looking in the rear view mirror of your car.

Let’s see in some more details the potential problems and Desventajas Balanced Scorecard:

The creation of a balanced scorecard involves a considerable amount of time on the part of everyone whose performance will be measured. Defining corporate strategy can involve a substantial amount of time, but the activity that consumes the most time is very likely the selection of appropriate measures for the four perspectives. This is simply due to the fact that there are a large number of potential goals and targets and even more ways to measure them. People are likely to disagree about which objectives to measure and how to measure those objectives, and it will take time before consensus is achieved.

The time factor involved in designing a Balanced Scorecard can be considerable and one factor leading to that is that the process must involve a lot of people in the organization. Therefore, people have to want to participate so it will go more smother. Their commitment is important not only in building the balanced scorecard but especially in implementing and using it. Although a balanced scorecard may be well designed, lack of participation and commitment on the part of staff will make the scorecard useless.

Finally, there is always a chance that too many measures will be selected. This is a problem because it is very difficult to track a large number of measures. Furthermore, some of the measures selected may be objective, such as employee turnover rates, and other measures may be subjective, such as employee morale or quality time spent with customers. The subjective measures, by definition, involve somebody's judgment and, therefore, are more prone to error. Consequently, there is a question whether subjective measures should be used and if so how can they be made more reliable.