FEATURES OF A GOOD, FUNCTIONAL AND OPERATIONAL BALANCED SCORECARD (BSC)

Features of good balanced scorecard are those rudimental ingredients that make it what it is- a BALANCED SCORECARD. In order for a balanced scorecard (BSC) to achieve its goal of translating a company’s strategy into objectives all the way down to a set of high quality measureable targets, it must have some features. These qualities of a good, operational and functional balanced scorecard must not only be present in the design of a balance scorecard but also in the implementation of the BSC.

  1. BSC creates an image of a company’s story in the mind of all internal stakeholders of the company by clearly articulating the sequence of cause-and-effect relationships. A good BSC should have the capability of creating clear picture of the overall company objective, its target and a strategic map that are all linked together in such a way that conflicts are reduced to its barest minimum.
  2. BSC acts as a communication tool that conveys a company strategy to all members of the organization. This it does by cleverly translating strategy into coherently developed feasible targets. The BSC should be the compass that shows managers and other employees what direction of action should be followed when faced with a somewhat unfamiliar situation. To make it more efficient, grassroots development of balanced scorecard should be encouraged.
  3. One of the greatest features of a BSC is that it has the ability to highlight some potential suboptimal decisions that may be taken by managers when both financial and non financial factors are not considered in designing and implementing performance measure techniques. A good BSC should have a predictive ability to tell when a short-term decision is likely to hurt potential growth. Managers tend to be overly short term minded when there is no tool in place to checkmate their investment decisions.
  4. With a well designed and developed BSC, the number of measures that management need to monitor is greatly reduced. This would free responsible officers or employees of a company to focus on other management functions like; planning, staffing, risk management, coordinating, effective human resource management, etc. Proliferation of performance measure or key performance indicators (KPIs) should be avoided when possible and this is where a good BSC should play an important role. Many management dashboards and ERP systems have the capability of streamlining the KPIs in such a way that managers have spare time that would be channelled to value adding activities like building sustainable effective business models and implementing organizational change.
  5. A BSC should be both functionally and operationally flexible. The aim of a balanced scorecard which is to a efficiently link company’s strategy with its organizational culture will be defeated if managers and other employees see the design and implementation of the BSC as being too rigid. The BSC perspective where this feature of flexibility is most prominent is the innovation, learning and growth perspective. Here, managers flex their muscles in terms of managing relatively complex situation. This is fun for managers and should not be silenced by any management tool- not even the almighty balanced scorecard.

It must have been clear to you at this point that there are two major objectives of a balanced scorecard. One of such objective is to communicate strategy across width and breadth of a company. The other major aim of a balanced scorecard system is to align employees’ work ethics with the organization’s strategy. This implies that BSC is not used in isolation of other management accounting tools like the activity based costing technique, Just-in time, Total quality management, etc.

For a BSC to be successful, its design, deployment and implementation must be supported by all. One way of ensuring this is to link the reward system of the company to it. The reason why employees will cooperate with the implementation of BSC can be explained expectancy valence theory. The features of good balanced scorecard (BSC) as discussed in this article are vital ingredients that ensure the success of implementing a balanced scorecard system.

Leave a Reply

Your email address will not be published. Required fields are marked *