Advantages and Critique of Balanced Scorecard in Management Accounting

This report discusses the suitability of adopting balanced scorecard in a company, its advantages, and critique. It also includes the translation of vision and strategy through four perspectives of balanced scorecard. Despite the significant problems associated with time lag and non-consideration of technological aspects, with continuous monitoring and updating of performance objectives, the implication of balanced scorecard will prove to be fruitful in the long-term.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of Student:
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Table of Contents
Introduction......................................................................................................................................2
Advantages of using balanced scorecard.........................................................................................2
Critique of Balanced Scorecard.......................................................................................................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

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Introduction
Balanced Scorecard was originally developed by “Dr. Robert Kaplan of Harvard
University and Dr. David Norton” for measuring organisational performance by defining the
performance measure in a more balanced manner. Traditional approach companies only relied on
performance evaluation based on short-term success. However, the balanced scorecard was able
to introduce the various non-financial strategy measures which can be duly implemented in the
mix for a long-term growth and success of any organisation. The main discussions of the report
emphasise on the suitability of adopting balanced scorecard in a company (Balanced Scorecard
Institute 2015).
Advantages of using balanced scorecard
The main characteristic nature of implementation of balanced scorecard is identified with
the inclusion of both financial and non-financial performance measures to establish a complete
overview of company’s performance. Over the years, balanced scorecard has improved as a
measuring system and strategy management system. The implementation of balanced scorecard
in any private firm will act as a good starting point for performance measurement system.
Specifically, the application of BSC will be able to translate the organisation’s mission and
strategy for providing a more strategic measurement and management system. In addition to this,
the business will be able to focus on long-term strategies. The long-term strategies will be
attained with the combination of leading and lagging indicators associated to four fundamental
perspectives of balanced scorecard. Henceforth, organisations will be able to use the four
perspectives such as “customer perspective, internal business perspective, innovation and
learning perspective and financial perspective” (Soler and Guerrero 2014).
The customer perspective will be conducive in knowing about the customer’s expectation
and measuring them with performance targets and several management initiatives. It is also
important in knowing what initiative the management must take in order to satisfy its customers’
needs. This is particularly important in the present business scenario and directly points to the
suitability of balanced scorecard among private companies for long-term success which will add
to the better understanding of budgeting system elements. In addition to this, the internal

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business perspective will help the company in identifying the present strengths and measure the
same against company’s objectives, targets and initiatives taken to attain the same. The various
types of implications on innovation and learning perspective can be identified with initiative
taken for continuous improvement and creating value to attain the long-term goals. Lastly, the
balanced scorecard helps in transformation of the vision by consideration of financial
perspectives which is important to get an overview of how the shareholders consider the image
of the company. This will bring further enhancement in getting a better understanding of budget
followed at present.
Figure: Translation of vision and strategy through four perspectives of balanced scorecard
(Source: Eprints.kingston.ac.uk. 2018)
Based on several types of secondary excerpts, it has been noted that several private
companies have benefited from this approach by getting a more clarity on vision and gaining
consensus on the present activities. It is further important for communicating the goals and
linking the same with the wards to performance measures. Some of the other benefits of this

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approach is seen with business planning which is conducive in aligning the strategy initiatives
and allocating the resources accordingly based on established milestones. It is worth mentioning
that by applying the technique of balanced scorecard the client company will be greatly benefited
in articulating the shared vision, facilitating strategy review and learning process along with
supplying strategic feedback. The process of feedback will have a major role in understanding
the budgeted financial goals and make the necessary adjustments based on that.
Figure: The four processes of balanced scorecard
(Source: Friedag and Schmidt 2014)
Critique of Balanced Scorecard
Despite of the several positive sides of balanced scorecard, it is also important to
acknowledge some of the flaws in the model so that these may be avoided. The balanced
scorecard approach assumes that all the four processes will take place at the same time, however
in real scenario there may be considerable amount of time lag in understanding the customer
perspectives, internal business process along with several other criteria is suggested under this
model. The strategy decision-makers in the company should be particularly aware of the time
dimension of considering the four perspectives and keep track of significant milestones which

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are achieved and which are to be achieved. The balanced scorecard also ignores the
technological advancements. Henceforth, ignoring the acknowledgement of technological
innovations into the balanced scorecard will pose serious problem in future (Norton 2014).
Conclusion
The discussions on the suitability of balanced scorecard suggests several private
companies have benefited from this approach by getting a more clarity on vision and gaining
consensus on the present activities. Despite of the significant problems associated to time lag and
non-consideration of technological aspects, with continuous monitoring and updating of
performance objectives the implication of balanced scorecard will prove to be fruitful in the
long-term.

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References
Balanced Scorecard Institute (2015) Balanced Scorecard Basics, Balanced Scorecard Institute.
Eprints.kingston.ac.uk. (2018). [online] Available at:
http://eprints.kingston.ac.uk/30288/1/Khansalar-E-30288.pdf [Accessed 24 May 2018].
Friedag, H. R. and Schmidt, W. (2014) ‘Balanced Scorecard’, Haufe Lexware, p. Abbott, P.
(2003). The 2003 Top U.K . Consulting F. doi: 10.1016/j.rcc.2004.01.007.
Norton, D. P. (2014) ‘Balanced Scorecard’, Harvard Business School Publishing, (May), pp. 1–
8. doi: 10.1007/978-3-8348-0686-4.
Soler, R. and Guerrero, M. (2014) ‘Balanced Scorecard’, Revista ciencia UNEMI, 1(10), pp. 75–
81. Available at: http://www.managementgoeroes.nl/management-modellen/balanced-scorecard/.