What Is Balanced Scorecard

Introduction

Since the last decades, the performance management has become a legislative requirement for the private and public sectors. Companies are looking all the way to find the tool that a can measure the performance effectively. Balanced Scorecard (BSC) is the most common tool using by most of large companies nowadays to measure their performance. Companies that start with a performance measurement system face difficulties along the way of the implementation.

In 1992, researchers Kaplan and Norton published an article about the Balanced Scorecard where this approach provides a clear description as to what companies should measure in order to balance their financial perspectives. During that time, Balanced Scorecard was a new approach

In deep, it is more than a measuring device. It provides an enterprise view of an organisation's overall performance by integrating financial measures with other key performance indicators around organisational growth, customer perspectives, internal business process, development, learning, and innovation.

In 1996, Kaplan and Norton mentioned in their article that balanced scorecard retains traditional financial measures where it tells the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, employees, suppliers, processes, technology and

Delegation of the project to middle management and defining the project as performance measurement is described as one of the most common causes of failure to the Balanced Scorecard, by missing focus and alignment to implement the strategy. This is a process that can only be led from the top.

 Too few individuals involved. The senior leadership team doesn’t work together to build and support the implementation of the Balanced Scorecard, including objectives, measures and targets. As the result, there can not be the shared commitment which is required to align the organisation.

 Keeping the scorecard at the top. To be effective, the implementation of Balanced Scorecard must include strategy and action which eventually must be shared with every member of the organisation. If there is no deployment system that breaks high level goals down to the sub-process level where actual improvement activities reside, significant process improvements throughout the organisation fail to generate bottom line results.

 Overly long development process. If the implementation takes too long, it can happen that during the implementation process the strategy has changed. As a result, some of indicators have become obsolete and requires new indicators. Measuring the wrong indicators can distract an organisation from its