Before I move to my second point I need to expand on the advantages of groups. The BSC forces the creation of a group, the advantages of groups are well defined by Mullins, Laurie J (1993) as, membership of groups provides; individuals with opportunities to express initiative and creativity, companionship and support from colleagues and protection from external pressures and threats. Groups also have the combined efforts of individuals to provide joint expertise that will give a synergetic effect to solve the increasingly complex problems that face the modern organisation today. From these advantages the effectiveness of a group can be well above that of separate individuals and if the group is supported and sustained by top level management it could prove to be the most powerful tool available to a business.
The BSC requires a business to research itself and is not a set performance measure for all organisations, “It requires creative strategic thinking and difficult decisions by a large team of people to develop an effective balanced scorecard system…it requires some assembly”, Rohm, Howard et al (1998). This statement typifies how most organisations are not able to fully and successfully implement the BSC, as problems arising from groups and tasks seem overwhelming and are seen as a “failing” notion. A working example of the BSC can be found in appendix 2.
The BSC suggests that we view the organization from four perspectives: the learning and growth perspective, the business process perspective, the customer perspective and the financial perspective. On these perspectives the decision makers will develop metrics, collect data and analyze them to get the desired result. Each perspective hones in on what is the most important factor to the organisation under analysis. For example, the learning and growth perspective will show managers where training is most needed and where it has been most successful (See appendices 3 and 4 for examples on successful and unsuccessful training). The business process metrics allow the managers to know how well their business is running and whether its products and services conform to customer requirements. The customer perspective metrics will show how well customer requirements are being met, this has increasingly, in the last few years, been a more crucial metric.
As the BSC has to be “assembled” the performance outcomes are tailored to the business and presented in a format that only the organiastion will understand. It requires the business to prepare metrics so they can be based alongside the strategic plan, which provides the criteria for metrics which are most desired to be watched by management. Decision makers then examine the measured processes and strategies to guide the company and provide feedback.
Ultimately the BSC through its results is able to help managers with the continuous improvement of their organisation. Quality could be argue d as one of the most important factors in the manufacture of a product or the delivery of a service. Appendix 5 outlines how issues in quality can be so complex but can be essential to the success of a firm i.e. good brand image and loyalty, good customer relations.
So the BSC’s advantages and disadvantages has now been outlined but to fully evaluate the usefulness of the BSC we need to look at alternative performance measures and look at their merits and drawbacks. There are many other main performance measures of which to compare to the BSC. It is known however that BSC incorporates most of them into its process anyhow as it is a development under the wider heading of management process. To credit just a few other management processes, there is the Activity-based-costing method (ABC), the six SIGMA management approach, project management and business process improvement (BPI). Each of these methodologies are linked by the fact that they each only encompass a small part of what is the entirety of BSC. The ABC method contributes highly to the financial perspective of the BSC and it provides valuable information on where funds are being spent in an organisation's business activities and processes. This is valuable because a business needs to know whether it’s converting its capital into profit effectively, it can also use the ROCE ratio, profit/capital x 100, Vause, Bob (2001). The six SIGMA approach is a quality improvement methodology structured to reduce product or service failure rates to a low level. This approach is therefore a quality improvement approach that is appropriate for manufacturing or basic service organizations where large numbers of repetitive processes are done, thus not every type of firm can use it whereas with the BSC they can. To compare project management and BPI there is a grid in appendix 6. The comparisons shown are for several different features. It is evident from this comparison that BPI and the BSC are quite different in most respects from project management as they have different purposes and meet different needs.
The last influential point that could stop the effectiveness of any management or measurement process is how the workforce reacts to change. Change is feared by the workforce, as is accounted for by Mullins (1999), for a number of reasons. It is how the fear is harnessed and controlled through training and communication is the key.
The BSC, being a strategic management system, can serve as the "front end" for a performance-based budget. Its performance measures and strategic plans can provide rational guidance for resource allocation which some organizations have gone so far as to develop flexible strategic organizations and financial management systems that allow continuous reallocation of funds, without the need for repeating efforts in budgeting.
To conclude, the BSC is an extremely valuable performance measurement tool as, once implemented, it can provide a whole range of advantages such as aligning everyone in the business behind a single strategy, better budgeting and planning, identifying most needed change and best strategies and practices and enables more opportunities for innovation and creativity. Some disadvantages to BSC are, it is a very labour intensive project, management could misinterpret results or gain the wrong results if metrics are badly prepared and it is a very complex project which may be feared by some employees. However the question which will remain in the minds of all upper level managers wishing to implement BSC is, “Will the initial outlay of cost and time be worth the benefits which BSC brings?” If the management of the implementation of the BSC is properly controlled and planned and with the appropriate training given to employees there is no reason why the BSC could be the most influential tool in the success of any business.