Weaknesses or Disadvantages of the Balanced Scorecard

Weaknesses or Disadvantages of the Balanced Scorecard

Rodov and Leliaert mention 3 weaknesses of the Balanced Scorecard:
1. The system (once designed) is quite rigid and static
2. The system is extremely company specific.
3. The system does not provide firms the possibility to make an external comparison.
Rodov, I and Philippe Leliaert. (2002). “FiMIAM: Financial Method of Intangible Assets Measurements”. Journal of Intellectual Capital, vol. 3, issue:3.
Do you agree? Why (not). Any other ones that should be added?

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Robert Twiddy
Management Consultant, United Kingdom

3 Weaknesses of the Balanced Scorecard

In my opinion, the system is not rigid and static, you design it for who you are dealing, depending on the priorities of the organisation you are doing it for.
It is not company specific, it has been done for NGOs, charities and government, plus I have done for just an IT organisation.

Chilipi Mogasha
Consultant, Botswana

3 Weaknesses in the Balanced Scorecard?

I can not disagree more!. It is totally flexible, you can adapt almost every aspect of it, it is designed for the specific company (not company specific!) and as for benchmarking? Surely the BSC does not impede benchmarking in any way? I think you will need to be a bit more specific!

Satya Narayan
Strategy Consultant, India

Weaknesses of Balanced Scorecard

I also do not agree with Rodov and Leliaert. The system is not at all rigid, static or company specific. Most of the times the problems lie not with the system or tool but the way its implemented. BSC is one of the best tools for:
- Implementing strategies
- Communicating strategies
- Ensuring alignment; focusing on key components,
- Making everyone part of organizational goals
- So on and so forth.
However its important to understand the concept, come up with proper KPIs, implement it with proper change management techniques addressing issues, concerns etc.

Omondi, Kenya

Weaknesses of Balanced Scorecard

Like all tools, if applied well, it delivers. If applied wrongly it frustrates. It all depends on implementation and of course the buy-in from the team.

Patrick Siggen, Switzerland

Weaknesses of Balanced Scorecard

I disagree with this comment and consider this tool very flexible. I personally used it to follow implementation and management of a secure IS development life cycle initiative in my firm and it works fine!

luiz
Manager, Brazil

Balanced Scorecard Weaknesses

In fact Anneke I understand what you are saying and agree with you. The BSC is at the same time an easy tool to work with, and flexible, but for that reason company-specific.

Libardo Ortegon Camacho
Economista, Colombia

Weaknesses of Balanced Scorecard

I have been using BSC specially to identify strategy imperatives and it has worked quite well.
Some professionals add another perspective: that of corporate social responsibility.

Anneke Zwart
Student (University), Netherlands

Weaknesses of the Balanced Scorecard

I agree with the comments above, and of course the balanced scorecard has a lot of advantages. The balanced Scorecard translates a firms' strategy in specific measures that fit into the firms' objectives; in fact this is beneficial since it increases the uniformity toward the overall objective of the firm. However, one can also say it overlooks further objectives by only focusing on these objectives set by the firm. Employees may work very hard to achieve the objectives set by the firm, thereby not looking to further objectives. A static situation is thus caused by the fact that workers are very focused on the goals set by the firm thereby restricting the chance to go beyond these goals.
Concerning rigidity, Voelpel et al (2006) briefly explain the rigidity of the Balanced Scorecard. The Balanced Scorecard can be seen as rigid by failing to integrate additional perspectives that should be integrated.
I hope I have given some more clarity about the weaknesses of the balanced scorecard.
See also: Voelpel et al. (2006). "The tyranny of the Balanced Scorecard in the innovation economy". Journal of Intellectual Capital. And Human Resource Management: A Critical Approach, by Geoffrey Wood.

Satya Narayan
Strategy Consultant, India

Weaknesses of the Balanced Scorecard

In case a company has the potential to achieve more than what it has set in 'objectives', then the 'objectives' that were set need to be reviewed.
BSC doesn't day one needs to achieve only 100% of the goals, one can always achieve more than that. If a company can achieve more than its goals, such goals may be strechted / reviewed.
But once one sets goals, one need to focus on achieving them and the BSC does exactly the same. So why blame the BSC if your goals needs review?

Jaap de Jonge
Editor, Netherlands

Vulnerability of the Balanced Scorecard

@Satya Narayan and others: surely the BSC can be accommodated to many types of business. In that respect it's a 'flexible' tool.
Also we are not here to blame the BSC or make it seem like a useless management method which it isn't.
On the other hand, any management method has it's 'pros' and 'cons'.
In my opinion, Anneke is quite right to warn for the vulnerability of the BSC that is the consequence of formulating targets, KPI's etc: you run the risk that people and groups of people are going to focus (only) on those aspects of their jobs that are being measured, neglecting other important things that ARE not measured or CAN NOT be measured.
This risk is realistic and you can see it happening in numerous companies and organizations everyday.
I think it's good to be aware of (and prepared for) this unwanted side-effect of the BSC and most other performance measurement/management tools.

Gandhi Heryanto
Management Consultant, Indonesia

3 Weaknesses of the Balanced Scorecard

I do not agree because the BSC system is centered on strategies, rather than control.
Some insightful managers used it to clarify, communicate and manage strategies. Apparently, the BSC has been transformed from a measurement system into a core management system.

Moderated AI
Netherlands

Weaknesses of the Balanced Scorecard

COMPLEXITY: The BSC can become overly complex, making it difficult to implement and manage effectively. For instance, if an organization sets up an extensive BSC with numerous metrics and objectives across various perspectives (financial, customer, internal processes, learning and growth), it may overwhelm employees and managers, leading to confusion and reduced effectiveness in execution.
OVEREMPHASIS ON METRICS: Organizations may sometimes focus too much on meeting the numerical targets set by the BSC, losing sight of the broader strategic goals. An example could be a company aiming to increase its customer satisfaction score by a certain percentage without considering whether this improvement aligns with the overall strategic direction or customer needs.
LACK OF CAUSALITY: The BSC may not always establish clear causal relationships between the measures, making it challenging to determine which actions directly contribute to strategic objectives. For instance, an increase in employee training hours (learning and growth perspective) may not necessarily lead to improved customer satisfaction or financial performance without additional contextual factors.
RESISTANCE TO CHANGE: Implementing the BSC often requires significant organizational change, which may face resistance from employees accustomed to traditional performance evaluation methods. For example, employees may resist new performance metrics that they perceive as unfair or that they feel they have little control over, leading to decreased engagement and effectiveness.
SUBJECTIVITY: Some measures in the BSC, such as those related to customer satisfaction or employee morale, may rely on subjective assessments, making them prone to biases and inaccuracies. For instance, a customer satisfaction metric based on surveys may yield different results depending on the interpretation of the survey questions or the respondent's mood at the time of response.
STATIC NATURE: The BSC is often designed based on the organization's current strategy, but it may not adapt well to changes in strategy or environmental factors. For instance, if a company's industry undergoes rapid technological disruption, its existing BSC metrics may become outdated and irrelevant, requiring frequent updates to remain aligned with the new strategic direction.
COSTS: Implementing and maintaining a BSC system can be expensive, especially for smaller organizations with limited resources. For example, costs may include investing in software tools for data collection and analysis, hiring consultants to design and implement the framework, and training employees to understand and use the BSC effectively.

These weaknesses highlight the importance of carefully designing and implementing the Balanced Scorecard framework while considering the specific needs and circumstances of the organization.

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