Pitfalls of BSC impementation
Many business owners consider Balanced Scorecard as a treatment for all problems and obstacles. However, use of balanced scorecard is only then effective when a company has a comprehensive strategy. Sure thing, balance scorecard helps correctly formulate this strategy but it doesn’t substitute strategic vision. Development of a company strategy is perhaps the most important step in implementation of balanced scorecard. Of course, other implementation stages are equally important but if one begins doing something wrong from the very beginning there are no reasons to expect positive results. The same applies to balanced scorecard implementation. Without a proper and realistic strategy it is impossible to achieve any positive results.
What is strategy?
Strategic vision of the company is often confused with some short-term financial goals. Of course, the ultimate goal of gaining commercial business is making money. But this is achieved through improvements in internal and external environment. That’s why balanced scorecard became so popular because it combined indicators representing financial and nonfinancial aspects of running business.
It is equally important to choose the right measures, i.e. indicators that represent co performance as well as aspects influencing it. In other words it is imperative to find the right things to measure. If the company management evaluates secondary indicators they lose focus of major things. For instance, company management can concentrate on customer relationships totally forget and about innovation, learning and education of personnel. So, company employees we’ll be actively working with existing and potential customers without having relevant offers and necessary skills to turn customers into regular ones.
Key BSC mistakes
In large companies different departments may have different goals. One of the most common mistakes is strategic goals of departments conflict with the company strategic goals. Balanced Scorecard makes it possible to build strategy tree or strategy maps with cause and effect relationships between different perspectives and different goals. Visual representation of strategic goals contributes to understanding of company strategic vision for employees at all levels. It is equally important for top manager and a front line manager to understand what company strategic goals are. For example, top management may have one concept of strategic vision, head of department has his own opinion, while ordinary managers interpret strategic goals in their own way.
Thus, before making a decision to implement balanced scorecard company management should consider all pros and cons, and find out whether or not the company is ready to use this system.
