Others

 

The Balanced Scorecard has always attracted criticism from a variety of sources. One of the most vehement Balanced Scorecard criticisms was addressed by the Danish researcher Hanne Norreklit, for which the site dedicates one of its sections. Other scholars, however, acknowledged too, the weaknesses in the Balanced Scorecard theory, construction and reasoning.

 

According with Wisniewski and Olafsson (2004), the initial Balanced Scorecard was specifically designed to address the performance measurement needs of the private sector as it doesn’t perfectly fit in the public sector context. Regarding the BSC use in the public context, Johnsen (2001) in (Wisniewski and Olafsson, 2004) considers that the public management context has received less attention regarding the use of the BSC.

 

Rillo (2004) acknowledges that the Balanced Scorecard has several inconsistencies that need to be taken into account.

 

One of them is that the cause and effect relations are not time-wise connected. Olve et al (1998) cited in Rillo (2004) have demonstrated that in several Swedish companies that have implemented the BSC methodology, the cause and effect relation are not proven.

 

Norreklit (2000) has also intensively criticized this aspect, as not consistently proven. She argued that problems arise from the fact that the time dimension is not part of the Balanced scorecard as in many situations a time lag exist between cause and effect.

 

Akkermand and Oorschot, citing Platts and Kim (2002) point to the fact that looking at different measures simultaneously, in most of the cases is not enough. Among the other deficiencies in Balanced Scorecard methodology outlined by Akkermand and Oorschot (2002) are the lack of any mechanism for performance measures validation, the insufficient links between strategy and operations and the fact that it is too internally focused.  However some of the issues  have been already addressed and remedied by the subsequent developments of the BSC methodology.

 

Another issue identified by Rillo (2004) is that Balanced Scorecard does not take into account several important interest groups, but only shareholders and consumers. This issue is also being addressed by Nelly (2002) who considers that important groups such as suppliers, partners of competitors were let outside of the framework.

 

A third inconsistency addressed by Rillo(2004) is the fact that the authors of the BSC framework didn’t test the framework in all organizational types. Most of the organizations against which the initial methodology was tested were large and complex organizations. Thus in the case of small and medium size enterprises Rillo (2004) argues that finish researchers have proven that individual approaches to implementation of BSC projects have led to more consistent are rational results.

 

Anand et al (2005) further ads to the Balanced Scorecard critique, the fact that it is difficult to achieve a balance between financial and non financial measures, due to implementation problems.  Same authors citing Strack and Villis (2002) argue that the process of key performance indicators (KPIs) selection in the Balanced scorecard is not systemic and does not lend itself to sensitivity analysis and scenario analysis.

 

Mayer (2002) ads to these the fact that BSC methodology doesn’t provide guidance on how to combine the dissimilar measures into an overall appraisal of performance. 

 

Overall the Balanced Scorecard is considered to be not an easy to develop and deploy tool. This is mostly to the fact that the Balanced Scorecard needs significant adaptation and modifications to the unique business requirements of each enterprise (Noel and Lund, 2002)

 

References

  • Wisniewski, M. & Olafsson, S. (2004), Developing balanced scorecards in local authorities: a comparison of experience, International Journal of Productivity and Performance Management, Vol. 53, No. 7, pp. 602-610.
  • Rillo, M. (2004), Limitations of the Balanced Scorecard, Publicat in lucrarile 2nd International Conference on Business Administration, University of Tartu, College of Parnu.
  • Neely, A., Adams, C. & Kennerley, M. (2002), Performance Prism: the scorecard for measuring and managing business success, Financial Times Prentice Hall.
  • Norreklit, H. (2000), The balance on the balanced scorecard – a critical analysis of some of its assumptions, Management Accounting Research, Vol. 11, pp. 65-83.
  • Akkermans, H. & van Oorschot, K. (2002), Developing a Balanced Scorecard with System Dynamics, Confernece proceedings, Eindhoven University of Technology, Department of Technology Management, available at: http://www.systemdynamics.org/conferences/2002/proceed/papers/Akkerma1.pdf.
  • Anand, M., Sahay, B., S. & Saha, S. (2005), Balanced Scorecard in Indian Companies, Vikalpa, Vol. 30, Iss. 2, pp. 11-25.
  • Meyer, M. (2002), Rethinking Performance Measurement – beyond the Balanced Scorecard, Cambridge University Press.
  • Noell, C. & Lund, M. (2002), The Balanced Scorecard (BSC) for Danish Farms – vague framework or functional instrument?, Farm Management – Proceedings of the NJF Seminar. 

BSC concept : Criticism

 

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