In today’s business environment measuring business performance is a matter of life and death within any organisation (compare Ittner and Larcker, 1998). Due to the changing nature of work and increasing competition with changing demands (Neely, 1999) the number of people interested in business performance measurement has recently increased dramatically. But business performance measurement is confronted with a vital choice what system the company should use to quantify the success of the organisation’s strategy. In this context the Balanced Scorecard(Kaplan and Norton, 1992, 1996) is almost used as a synonym for measuring
Business Performance Measurement (BPM). With this in mind, the following dissertation aims at a critical exploration and
assessment of the framework of the Balanced Scorecard (BSC) and it examines if this framework merits its wide popularity experienced and still experiences.
Following a definition of the BSC, the author turns to the elements of the BSC with its key proclamations. Strengths and weaknesses will be outlined by considering different case scenarios. The main attention will be put on the question whether the BSC leads to better business results, as it is publicized, or if its wide use is only an outcome of its effective promotion.
Before the analysis comes to an ending in which it summarises the key points, the author suggests some recommendations for organisations when using the BSC, in order to meet its problem areas. In this context the author’s personal view will be
flowing in.
Table of Contents
Introduction
GENERAL INTRODUCTION INTO THE TOPIC
EVOLUTION: FINANCIAL VS. NON-FINANCIAL MEASURES
TOTAL QUALITY MANAGEMENT
POPULARITY OF THE BALANCED SCORECARD
AIM OF THE DISSERTATION
STRUCTURE OF THE PAPER
Methodology
RESEARCH APPROACH
RESEARCH DESIGN
CONTRIBUTION OF RESEARCHER
DATA COLLECTION
SECONDARY RESEARCH INTO EXISTING LITERATURE ON THE BALANCED SCORECARD
PRIMARY RESEARCH
Part I - Origins of the Balanced Scorecard
1.1 DEVELOPMENT OF THE BALANCED SCORECARD
1.2 KAPLAN AND NORTON’S USE OF “SUCCESS STORIES”
Part II - Key Points of the Balanced Scorecard
2.1 Analysis Balance
2.1.1 Balanced Focus Possible?
2.1.2 BARRIERS FOR BALANCE
2.2 Analysis Cause and Effect
2.2.1 Analysis Strategy Map
2.2.2 CO-VARIATION
2.2.3 Calculating Style
2.2.4 MACRO ENVIRONMENT: BARRIER FOR CAUSE AND EFFECTS
2.2.5 CAUSES RATHER MERELY THE EFFECTS
2.3 Analysis: Customer Value
2.3.1 CRITIQUE
2.3.2 CUSTOMER VALUE EQUAL PROFITABILITY?
2.4 Analysis proposed Perspectives
2.4.1 ADDITIONAL STAKEHOLDERS
2.4.1.1 LACK OF ATTENTION TO THE COMPETITION
2.4.2 QUESTIONABLE LEARNING AND GROWTH PERSPECTIVE
2.4.3 EMPLOYEE PERSPECTIVE
2.5 Analysis Measures
2.5.1 DANGER: OVER-MEASUREMENT
2.5.2 MILESTONES
2.5.3 RISK OF IMITATION
2.6 Analysis Strategy Part
2.6.1 FRAMEWORK STRATEGY
2.6.1.1 IS IT POSSIBLE TO FORMULATE STRATEGIES WITH A FRAMEWORK?
2.6.2 STRATEGIC PLANNING
2.6.3 NON-TAILORED STRATEGY
2.7 ANALYSIS: ADDING VALUE WITH THE BALANCED SCORECARD?
2.7.1 PORTER’S VALUE CHAIN AND THE BALANCED SCORECARD
2.7.2 DIFFERENCES
2.8 ANALYSIS: IMPLEMENTATION OF THE BSC
Part III Recommendations regarding use of BSC
3.1 Situational Analysis
3.1.1 WHEN ARE STRATEGIES GOOD?
3.1.2 DECISION PERIOD
3.2 Strategy Review and Adaptation-Situational Analysis
3.2.1 UPSHOT
3.3 Measuring the right things right
3.4 Vision Formulation
3.5 Communication
3.6 Upshot
3.6 Hoshin Kanri and the Balanced Scorecard
Part IV Why this popularity of the BSC?
Conclusion
FURTHER ISSUES
Research Objectives and Themes
This dissertation aims to provide a critical assessment of the Balanced Scorecard (BSC) framework. It investigates whether the BSC truly delivers superior business results as claimed by its proponents, or if its widespread adoption is primarily driven by effective marketing and promotional rhetoric. The author explores the theoretical foundations of the BSC, examines its practical application in organizations, and identifies critical limitations in how it handles strategic planning and competitive environments.
- Critical evaluation of the Balanced Scorecard framework and its efficacy.
- Examination of the relationship between BSC, strategic planning, and firm performance.
- Analysis of the limitations of "cause and effect" logic in the BSC.
- Comparison of the BSC with alternative strategic tools such as Hoshin Kanri and Porter’s Value Chain.
- Recommendations for organizations to improve the implementation and practical utility of the BSC.
Excerpt from the Book
1.2 KAPLAN AND NORTON’S USE OF “SUCCESS STORIES”
Since their first publication managers have to be content with field reports and articles which attempt to outline some of its advantages and disadvantages (compare Mooraj, Oyon and Hostettler, 1999). This supposes that the academia is enhanced by the authors’ claim that the BSC has been developed in interaction with practical business situations and that it has proved applicable in many companies. However, these “success stories” (e.g. Mobil North, Cigna Property and Rockwater) have only limited value. They are highly complex examples and based on empiricism.
Also Kaplan and Norton said that “[…] the companies capitalized on capabilities and assets – tangible and intangible – that existed already within their organizations” (2001, p.10). Each scorecard is unique; care must be taken in generalizing the findings.
Be that as it may, the reference on such “success stories” shows that the gap which has been built between the empirical world and the theory developed in the BSC is wide and it seems that there is a lack of large scale empirical testing of the whole concept (compare: Marr and Schiuma, 2003).
Summary of Chapters
Introduction: Provides a broad overview of the challenges in business performance measurement and establishes the rationale for a critical review of current measurement tools.
Methodology: Outlines the research approach, describing how the author combined qualitative secondary research with practical insights to evaluate the BSC.
Part I - Origins of the Balanced Scorecard: Details the historical development of the BSC and investigates how the inventors used case studies to promote the framework.
Part II - Key Points of the Balanced Scorecard: Critically analyzes the core components of the BSC, including its balance, cause-and-effect assumptions, and its applicability in various organizational settings.
Part III Recommendations regarding use of BSC: Offers practical suggestions for companies to overcome common implementation hurdles and better align the BSC with actual business strategy.
Part IV Why this popularity of the BSC?: Explores the reasons behind the global success of the BSC, attributing it more to marketing and rhetorical influence than to inherent theoretical superiority.
Keywords
Balanced Scorecard, BSC, Business Performance Management, Strategic Planning, Performance Measurement, Strategy Map, Hoshin Kanri, Corporate Strategy, Management Tools, Intangible Assets, Customer Value, Strategic Implementation, Porter's Value Chain, Organizational Effectiveness, Management Rhetoric.
Frequently Asked Questions
What is the core focus of this dissertation?
The paper provides a critical critique of the Balanced Scorecard (BSC) framework, questioning its theoretical validity and practical effectiveness in driving sustainable business performance.
What are the central thematic fields addressed?
The study covers business performance measurement, the role of strategic planning in management, the influence of organizational culture, and the critical analysis of management "fads" and marketing rhetoric.
What is the primary goal of this research?
The primary goal is to determine if the BSC is a truly robust strategic tool or if its success is due to promotional marketing, and to provide recommendations for more effective strategic management.
Which scientific methods were employed?
The author utilized a qualitative research approach, performing an in-depth analysis of existing academic and professional literature, supported by personal observations from implementing a BSC in a franchise company.
What is treated in the main body of the paper?
The main body examines the origins of the BSC, the logic of "cause and effect" and strategy maps, the limitations of measuring customer value, and the significant challenges of implementing the framework in complex organizations.
Which keywords characterize this work?
The core keywords include Balanced Scorecard, Business Performance Management, Strategic Planning, Strategy Map, and Hoshin Kanri.
How does this dissertation compare the BSC with Hoshin Kanri?
The author contrasts the two, noting that while the BSC is often viewed as a top-down performance reporting tool, Hoshin Kanri focuses more deeply on participative, process-based improvement and organizational culture.
Why does the author suggest that BSC implementations often fail?
The author argues that many failures stem from an over-reliance on the BSC's "simple" appearance, neglecting the necessary hard work of deep strategic analysis and failing to account for the competitive, dynamic external environment.
What is the author's stance on the "Strategy Map" concept?
The author is skeptical, viewing it as a simplistic, one-directional tool that fails to capture the complexity of real-world business dynamics, risks, and competitor reactions.
- Quote paper
- Philippe-Artus Hoerle (Author), 2005, The Balanced Scorecard. A Critique, Munich, GRIN Verlag, https://www.grin.com/document/134684
