Phase 2: Qualitative Study
2.11 CRITICISM OF THE BALANCED SCORECARD
While the BSC model has been praised for the value it has added to management philosophies, there are certain criticisms of the model. For example, Sharma (2009, p.14) suggested that the BSC is not an easy tool to implement because of its subjectivity. According to this author, the
“measures that need to be taken in consideration are contingent upon the kind of environment, industry and the business in which the organisation is engaged”. This author further suggests that “the BSC has tried to bridge the gap that exists in most management systems, which is the lack of a systematic process to implement and obtain feedback about the organisation’s strategy”.
Butler, Letza and Neale (1997) also described the BSC model as being too general. Butler et al. (1997) suggested that the BSC may not fit the organisational culture or jargon and that the BSC may also ignore corporate missions. According to Butler et al. (1997, p.253), this may
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occur “in situations where employees accept the company mission and where it may be better to build metrics on that mission instead of importing an unfamiliar concept from outside the company”.
2.11.1 Top-Down Approach
The Balanced Scorecard is often perceived as a Top-Down Approach. For example, Kanji and e Sá (2002, p.17) found that the “interactions between the criteria are not clear, and that there is an increased focus on customers and not on other stakeholders”. There is also no formal implementation or communication process regarding the Balanced Scorecard (Kanji & e Sá, 2002). Kanji and e Sá (2002, p.26) believed that the “BSC does not adequately explain the factors that lead to enhanced organisational performance, and the way they interrelate to each other”. These authors suggested “building a framework that incorporates the important success components and using a model to describe its entrenched relationship”.
Cokins (2005) and Tayler (2010) both suggested that manager and leadership involvement in the selection of measures will increase the impact of the BSC. According to Cokins (2005, p.67), leadership involvement in scorecard implementation generates “buy-in and ownership of the scorecard and key performance indicators”. Tayler (2010, p.1095) similarly found that
“managers who are involved in selecting strategic initiatives perceive those initiatives as having been more successful than managers who are not involved in the initiative-selection process”.
According to Witcher and Chau (2008, p.111), for the “strategic balanced scorecard to work in a company setting” and to develop “strategically linked priorities for use in daily management”, executives have to focus the rest of the organisation “on those very few change objectives that strategically matter most”. Witcher and Chua (2008, p.111) suggested that “strategically linked objectives should take the form of handed down targets, but should be developed in the context of the actual work being done in daily management”. The BSC, according to these authors, puts stress on the measurement principle which, while it may work for the strategic aspect of the BSC scorecard, does not work at operation level as it is “more important to develop measures within the context of the means for the progression of a related objective”. These
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authors cites “Tesco’s performance management scorecard the Steering Wheel” as an example of where there is “no necessary vision-linked focus”. Instead, according to these authors, “the purpose of the steering wheel is to condition how people work, rather than directly try to influence what people should achieve”.
2.11.2 Lack of Communication and Implementation Issues
Lohman, Fortuin and Wouters (2004, p.275) also found that the balanced scorecard “did not provide an opportunity to develop, communicate and implement strategy in a corporate setting”. They suggested that although “BSC has been adopted widely by different industries, there was no formal implementation methodology” (Lohman et al., 2004, p.275). These authors believed that the “lack of formal implemented methodology and subjective measures often leads to focusing on short-term financial measures”.
Another concern regarding the BSC was whether its implementation was practically feasible for organisations. Although the BSC benefited organisations, it was not so easy to implement.
For example, Sharma (2009, p.14) suggested that the BSC “involved a lot of subjectivity and is much more complex compared to the other tools”. According to the author, “the measures that need to be taken into consideration are contingent upon the kind of environment, industry and the business the organisation is in”.
2.11.3 Assumed Interrelationships between the Four Perspectives
One of the main criticisms of the BSC is its claim to possess strong casual interrelationships between the four perspectives. However, Norreklit (2000, p.73) believed that such connection may not be established. According to this author, when an organisation tries to satisfy very loyal clients, these organisations generate no profit for the organisation as these “customers possess abnormally high quality expectations and make very small purchases”. Typically, according to this author, “there are individual clients of higher age and moderate budget who demand high quality service”. Laitinen (1996) similarly highlighted the four BSC perspectives and their interrelationships problematic. Laitinen (1996, p.16-17) suggested “that the measures, in practical applications, appear to be only loosely connected to each other”. According to this
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author, the BSC does not provide any indication about which “company-internal factors should be developed to achieve success in the market place and in financial terms”.
While the BSC has had success in many companies, there are instances where its success has been limited. For example, at Arran Ltd, the BSC was first introduced as a “performance measurement tool for the Retail Division” (Cobbold, 2001, p.2). According to this author, the measures chosen in the BSC were based on the “information needs of the division’s senior managers”. The BSC, according to this author was initially successful and “met the firm’s expectations and the initiative was considered as a success”. However, “the need for a more organised performance management system drove wider changes in management style and behaviour that was generally and persistently beneficial to the organisation” (Cobbold, 2001, p.2). The result, according to this author was that “as the system was developed to include other components of the organisation, the appropriateness of the Retail Division design and software system was diminished i.e. these other BSC needed more appropriate Balanced Scorecard designs and more flexible reporting systems”.