Balanced Scorecard Disadvantages

Written by Serena Berger
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One reason that many companies tend to rely on financial constraints to guide company policy is that they provide answers to planning dilemmas that seem objective. In gathering and processing information on customer satisfaction, business processes, and company growth, it is likely that some measures will not be objective. For example, you may decide that it is best to use a survey to gather customer satisfaction information. The responses to the survey questions will vary across respondents, and some responses will be completely subjective. This data should not be disregarded, but you must come up with an appropriate method to analyze it.

As you will be collecting and studying multiple metrics, your management team must decide on how to prioritize them. If you used financial measures, it would be easier because you would devote the most resources to the greatest source of profit. Some measures may be in terms of time--for example, how long it took your staff to learn a new system--and others will be in numbers, such as products generated by new equipment. These are not directly comparable, yet you will need to compare them to decide which should be a higher priority.

It is true that it can be costly to implement a balanced scorecard. While you may have automated the task of collecting information on financial transactions in order to allow you to generate reports quickly, you will probably need to devote additional funds in order to put processes in place that will measure internal performance and customer satisfaction. Additionally, it may take considerable effort from your team to develop a list of appropriate metrics.

The Difficulties of Rolling Out a Balanced Scorecard

Perhaps the greatest disadvantage that you will face in implementing a balanced scorecard is the resistance from some employees who do not yet see the big picture. Rolling out a balanced scorecard for an entire company will require commitment from management at all levels, particularly at the top of your company's organizational structure. Many are likely to resist going along with the system because they may perceive its use as an implication that they have somehow underperformed in the past, and some may simply see additional administrative work. Sending them to a brief conference about the possibilities for growth may be the best way to increase their enthusiasm, as well as the skills they will need to make the most of this financial planning solution.

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