Confluence of disciplines

 

Balanced Scorecard has a polyvalent role, being used as a management tool in various systems

 

Strategic management

As a strategic management tool, the BSC is used in both strategy formulation and organisational alignment. In the strategy formulation context, the BSC contributes by structuring information and visualising the dynamics of strategy through one of its secondary tools, the Strategy Map.

 

Operations management

At operational level, the BSC is used as a performance measurement tool, providing not only information on whether or not business targets were achieved but also clarifying the impact on corporate strategy. This way, the BSC is a source of business intelligence, used in various organisational decision making processes, such as its initiative generation and prioritisation.

 

Human resource management

A complete BSC implementation cascades the corporate scorecard at divisional level, team level and finally at individual level. Personal scorecards have a double function. On one hand they define the personal contribution to strategy implementation. On the other hand, by assigning and monitoring personal targets, they could be used in the performance assessment process. Thus, the BSC is also used as a performance management tool and consequently integrated in the human resources and compensation strategy.

 

Marketing communications

Perhaps one of the most value added roles that the BSC could have is as an internal communication tool. In this role, the BSC communicates both strategic and operational information in a structured, standardised format, filling one of the most important gaps in today’s organisational environment – communication and alignment. The BSC tells the story of the strategy and how everyone in the organisation contributes to it (Kaplan and Norton, 1996). The BSC is also used in external communication, in supplier management and other general communication with customers and shareholders.

 

Knowledge management

Another important role that the BSC fills in a knowledge management context is of measuring intangible assets. There is a considerable amount of literature analysing the BSC in parallel with intellectual capital (Bontis et al.l 1999, Sveiby, 2004). Thus, a BSC is one of the tools that is used to bring forth intellectual capital and manage intangible resources (Mouritsen, Larsen and Bukh, 2005).

 

Financial management

In a financial management context the BSC is used to inform budgeting and for evaluating potential expenditures for their impact (Andon et al., 2005). Traditional budgeting emphasises financial performance over the pursuit of strategy, however by using the BSC, organisations are able to align budgeting to strategy.

Although the BSC is used in various ways, academic articles and case studies focus mainly on the measurement and control roles of the BSC. The literature is virtually polluted with idealistic scenarios and implementation case studies that present the BSC in this light. The assumption is that, influenced by this current of opinion, implementations focused on the strategy and measurement side of the BSC, giving too little consideration to the other roles the BSC could fulfill in organisations.

 

References

  • Andon, P., Baxter, J. & Mahama, H. (2005), The Balanced Scorecard: slogans, seduction and state of play. Australian Accounting Review, Vol. 15, No. 1, pp. 29-38.
  • Bontis, N., Gragonetti, N., Jacobsen, K. & Ross, G. (1999), The knowledge toolbox: A review of the tools available to measure and manage intangible resources, European Management Journal, Vol. 17, No.4, pp. 391-402.
  • Kaplan, R., S. & Norton, D., P. (1996), Using the balanced scorecard as a strategic management system, Harvard Business Review, Vol. 74, No. 1, pp. 75-85.
  • Mouritsen, J., Larsen, H.,T. & Bulk, P., N. (2005), Dealing with the knowledge economy: intellectual capital versus balanced scorecard, Journal of Intellectual Capital,Vol. 6, No.1, pp. 8-27.
  • Sveiby, K., E. (2004), Methods for Measuring Intangible Assets, online resource available at: http://www.sveiby.com/articles/IntangibleMethods.htm (accessed 14 August 2010).

BSC concept : Definition

 

Certified KPI Professional training

smartKPIs Premium

Performance Management Books