Accounting/Finance?

Question

Does anyone know what the strengths, or weaknesses, of the Balanced Scorecard?

Answer 1

The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.

Strengths
So what kind of results can you expect when a management team introduces the process of the balanced scorecard? First, people will become motivated and focused on the continuous improvement of their company's critical success factors. Second, personal and team achievements will become recognized and rewarded - creating an exciting, winning, work environment. Teamwork will improve and employee retention will rise. Finally, and most important is the company-wide euphoria as "bottom line" results improve and financial pressures no longer create a stressful and defensive work environment.
This approach is potentially all-encompassing, combining financial and nonfinancial goals and measures. It can encompass the performance of entire companies or business units, not just individual investments or projects. Balanced scorecard is future-oriented, not a rearview mirror on performance.

Weaknesses
This method is potentially so broad that it may divert resources from those few areas that really are vital to shareholder return. It doesn't readily weigh the relative importance of the different metrics it uses.
Although nearly everyone applauds the broad view that the balanced scorecard encourages and its proactive, forward-looking thrust, some critics say the scorecard is often misused. "Most of the time, the balanced scorecard will help you identify the wrong things to measure," Schneiderman says. That can waste a lot of corporate resources, he adds. There's a danger that use of the balanced scorecard can divert management attention away from the most important goals, which are financial, says Ray Trotta, co-founder of iValue LLC, an IT valuation consultancy in Barrington, Ill. "We like the way the Street does things; they talk about dollars and cents," he says. "The balanced scorecard talks about customer relationships, internal processes, learning and growth. I mean, those things are good, but where's the money?"

Critics say the balanced scorecard is too arbitrary and doesn’t deliver on its promise. “After spending more than a year at it, the balanced scorecard was dropped like a hot potato”, said one reviewer. “It is virtually incomprehensible to staff, encourages the worst kind of navel gazing… Even the paid consultants couldn’t explain [it] in terms the average legislator could understand. This is really bad stuff.”
(Refer to the last link for the rest of this article)

Answer 2

strengths
- lead all the employees to a common goal
- everybody knows the impact that his work has on others. so less conflicts.
- a good performance measure
- help continuous growth

Weaknesses
- difficulty in the implementation process
- misunderstanding can lead to errors
- sometimes the works done out of the scope may not get counted in measuring performance