Limitations of the balanced scorecard Essay
Limitations of the balanced scorecard
As any other management innovation the balanced scorecard faces certain challenges as it attempt to break away from traditional approaches of management. For one it is difficult to implement a balanced scorecard system in large organizations such as Intel as it requires solvating for support from fellow mangers. Additionally, commitment and cooperation from project managers is fundamental to the success of comprehensive balanced scorecard. This process is both times consuming and tedious.
More to that, resistance from managers due to and fear of the unknown is also a challenge to implementing a balance scorecard, thus, top-level managers may be reluctant to give adequate funding to implement a balanced scorecard management system. However despite the challenges associate with implementing balanced scorecards the benefits derived are worth the effort of trying. A balanced scorecard can transform strategic objectives to flow logical resources of performances.
This will ensure that the organization efforts are aligned with mission statements and the employees’ investors and customers’ needs are catered for. The first requirement in designing a balanced scorecard is detailing the objectives of the company depending on what is desired at the given moment. .( Bain & Company, 2002, Stewart, 2000) These objectives should be in view of the how the customers see Intel, what Intel focuses to excel at, how the company may continue to be innovative in creating value, and how the company intends to change the shareholder perspective of the company (Dickinson, 2003).
The second step in designing the balanced scorecard is to describe the strategy that Intel wants to implement say better manage the intangible assets of the company or ensure that quality products are supplied to customers in time and in right quantities. The other step is to align the internal processes of the organization with strategy. In this case, we will be looking at what the company can excel in or what it is good at and capitalize in it while pulling efforts to low performing processes. The next step will be to assign duties to every individual job.
Positive impacts of BSC According to the survey conducted by Bain Consulting Company, companies that implement a balanced scorecard in their management system reported higher assets turnover, reduction in indebtedness, elevated margins as well as high inventory turnover (Oorschot, 2002, Norton, 2001). Since balanced scorecards clarify organizations strategies to individuals in the organization, employees at Intel will be more inclined and committed to achieving the goals hence translating to higher profit margins for Intel.
Moreover, Intel will be in a position to track financial loopholes within the organization and develop measures to seal the loopholes. This in turn will lead to reduced debts and better allocations of funds. Scorecards provide immediate feedback to managers who measure the performance outcome against visions and missions set. By adopting a balanced scorecard, Intel will be in a position to improve its strategies periodically following occasional review that balance scorecards provider.
Implementing a balanced scorecard at Intel will ensure that attention is equally accorded to other issues, save financial ones, such as human issues, and provide metrics that force the company to act for the greater good of the company. In the end, success for the company is guaranteed. The balance scorecard institute puts the major consideration of designing and implementing a balance scorecard into perspective by saying, “A major consideration in performance improvement involves the creation and use of performance measures or indicators.
Performance measures or indicators are measurable characteristics of products, services, processes, and operations the company uses to track and improve performance. The measures or indicators should be selected to best represent the factors that lead to improved customer, operational, and financial performance. A comprehensive set of measures or indicators tied to customer and/or company performance requirements represents a clear basis for aligning all activities with the company’s goals.
Through the analysis of data from the tracking processes, the measures or indicators themselves may be evaluated and changed to better support such goals. ” (Arveson, 1998) Balanced scorecards are performance management tools and Intel Company could benefit from measuring the performance of the company now and in future. Unlike before, where it was not possible to gauge the health of the business, and thereby not know the future standing of the business, implementing a balanced scorecard will ensure that indicators point out whether the company is headed for and develop mitigation efforts to prevent this.
Another benefit of a balanced score cared is that its use is compatible with other existing management systems. EVA, SVA, EFQM, IAM and Business excellence model, can be linked to balanced scorecards. If the management feels uneasy to drop all the other financial measures. Normally balanced scorecard is at the center of the management systems since it s easy to use mechanism.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 17 May 2017