ACC6005 Essay: Critical Evaluation of Balanced Scorecard Techniques

This essay critically evaluates the Balanced Scorecard (BSC) as a modern business management accounting technique. It explores the BSC's role in strategic planning, performance measurement, and organizational profitability, highlighting its four key perspectives: financial, customer, internal processes, and learning and growth. The essay discusses the advantages of using the BSC, such as aligning strategy with overall mission, improving decision-making, and facilitating communication. It also addresses the arguments against its use, including implementation challenges and criticisms regarding its suitability for all industries. The analysis includes real-world examples and emphasizes the importance of the BSC in helping organizations achieve their goals by providing a comprehensive view of performance and driving continuous improvement. The essay also considers the evolving nature of management accounting and how the BSC fits into the broader context of financial reporting.

Running head: STRATEGIC MANAGEMENT ACCOUNTING
Strategic Management Accounting
Name of the Student
Name of the University
Authors Note
Course ID

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Introduction:
To effect the plans of a company, the place of emphasis has regularly been finance
where cost of production, selling and distribution, wages and repairs have been stressed.
Kaplan, Robert and Anthony (2015) have cited that the focus on finance is not sufficient.
Despite the fact that the fiscal strength of the business is necessary, there are additional
interconnected aspects that are essential for success. Strategic plans are intended at attaining
the organization goals that must take into account the customer satisfaction, quality of
product, sales mix together with other drivers engaged towards achievement of business
goals. In accordance with this, a tool to tailor for improved processes of an organization
competences which would include the term value by recognizing the applicable key drivers
namely the consumers, operational and financial plans, innovations etc. is known as balanced
scorecard.
The consequence of the extensive attention is to provide room for measurement that
would specify the strategies of organization, application and execution which improves the
business objectives and yield development in the position. To measure the fiscal viewpoint,
variables such as cash flow, growth in sales, market share and return on equity are
considered. The perspective of customers is also measured by taking into the account the time
taken to satisfy the customer needs, contribution to an organization value creation and quality
of goods or services (Keyes 2016). The objective of this study, is to evaluate the use of
balanced scorecard as the part of modern day business management accounting techniques.
The essay examines the contribution of balanced scorecard in improving the organization
profitability as the related issues and challenges involved in using it.

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Effective Use of Balanced Scorecard:
The concept of balanced scorecard is treated as the tool of possible effective
performance evaluation tool and it is used in helping the organization in actually
implementing their strategy. Policies are better understood as procedures that is precisely
planned to attain the goals of the organization. As opinion by scholars, the balanced scorecard
is regarded as the framework for strategic performance management which enables the
company to achieve and measure the distribution of their plan. (Kenny, Graham, and Michael
(2015) further describe the balanced scorecard as the important tool of management
accounting that links the strategy with the budget. Budget allows the basis of judgement with
which performance is evaluated. As a management accounting tool balanced scorecard is
associated with strategic plans to attain the set objectives. This is in agreement with the
position of literature findings that focusing on the vitality of strategic plans to improve the
operational usage of balanced scorecard in assessing the performance and probably achieving
the progressive growth in profitability.
According to the Kliger, (2016) management accountant plays a dynamic role in
essentially designing the progress reports on the strategy application of using the scorecard.
Authors have defined the balanced scorecard in interpreting the company’s mission and
policy into the set of performance processes to assess the short and long term performance.
Non-financial pointers such as superiority of product and contentment of customers whereas
the monetary pointers of performance are growth and effectiveness.
As stated by (Lin 2015) due to the intense competition, companies gradually want
management accountants to be engaged in designing and implementing the strategy. As the
operative member of the strategic team, management accountants should know the economic
environment of their business, participants and consumers. Arguably studies have equally
explained that management accountants should have the wider view of policies and

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application of scorecard. Management accountants should have the strong understanding of
the outside environment of business, internal issues of business particularly issues namely the
human resources processes and distribution. This would help the management accountant to
work with the administrators so that it can prepare the scorecard which would represent the
realities of the business.
The actual use of balanced scorecard was measurement of performance. When using
the balanced scorecard to evaluate the performance, company’s emphases on the four
performance metrics namely, financial, consumer, internal procedure and growth metrics. By
gauging the four metrics, balanced scorecard it helps companies to track the necessary
aspects of strategy along with attaining continuous progress in partnership and teamwork
(Martello et al. 2016). The balanced score card is regarded as the useful financial metrics that
ultimately evaluates the company’s performance. Measuring the financial metrics is termed
as significant in ascertaining whether the strategy of the firm is supporting the general
mission of a company.
Advantages of Using Balanced Scorecard:
For private and for-profit firms, fiscal metrics emphasises on certain estimated
outcome oriented measures. The balanced scorecard measures the perceptions of customers
of an organization because customer offer direct profits for sales and their insight of an
organization is critical to improve and withstand the sales.
As per the findings of Perkins et al. (2014), several companies are using the balanced
scorecard as the management accounting tool. In such establishments, the balanced scorecard
turns out to be the base for strategic management system. The use of balanced scorecard
offers the managers with the deep insight in every organization and therefore assist them in
undertaking informed decision regarding the long and short run objectives of financial as well

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as operational performance. The balanced scorecard enables the management accountants to
transform the strategy into the real performance measurement by aligning policy with the
overall organization mission and vision and monitoring the activities of organization to
endorse, sustenance and improve the attainment of policy. The balanced scorecard is useful
for the strategic managers to organize with the wide variety of organization procedure
particularly appraising performance, setting goal, allocating resources and employee learning.
According to the findings of Shen et al. (2016), learning and growth viewpoint is
predominantly vital for the strategic management to recognize, enhance the performance of
intellectual capital. Increasing the intellectual capital is regarded critical to advance the
inventive designs, assembly, distribution and enhancing the market worth of a company
further than the value of its physical asset.
In the modern age of small scale organization balanced scorecard is useful in boosting
their chances of survival. As per the researchers 68% of the small companies with less than
five employees and 48% of workforces fail inside the first five years of commencement
(Tjader 2014). The main external resources for the use of balanced scorecard is the rapid
changes in the external market environment with deep competition and varying macro-
economic circumstances particularly recessions.
According to the argument put forward by Hoque et al. (2014) the use of balanced
scorecard can help an organization in avoiding the failures by recognizing the internal and
external factors that contributes to the failure of the business. As a matter of fact, the
balanced scorecard helps the small firms in measuring and addressing the internal factors of
failures and linking them with the internal business process to learn the growth perspective.
The managers should have the strong understanding of the external commercial setting,
internal business environment and issues particularly the operations of human resources and

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distributions. This would assist the management accountants in working with the managers in
preparing the scorecard that would represent the realities of the business.
The use of balanced scorecard in company’s strategy is completely embraces the
business. In the modern age of business balanced scorecard is useful for the management
accountants in communicating the strategy of the business by highlighting the stages of cause
and effect relationship (Hansen, Erik and Stefan, 2016). Balanced scorecard serves as the
motivator for the management accountants to undertake the actions which would result in
improving the financial rather than managers emphasising considerably on the innovation and
quality as the end. When the financial and non-financial performance measures are
effectively linked then the application of strategy is made easy.
Hladchenko (2015) have affirmed that the balanced score card allows the
management accountant to screen the performance and administer the strategy. The
characteristic benefit of using the scorecard is to promote the casual thinking by spurring the
managers to remain dependent on the empirical evidence instead of having faith alone on the
testing the validity and strengthening the numerous connections.
The balanced scorecard has been implemented in majority of the industry segments
and industry dimensions. This ranges from the engineering to service industries or from large
to small administrations and from public to private sector (Gibbons, Robert and Kaplan
2015). Originally, the application of balanced scorecard was more appropriate for the
organizations that uses the intangible assets to create the value. Nevertheless, continued the
revision of concept to increase its application.
According to the study conducted by Cooper et al. (2017) on the application of
balanced scorecard in Foster’s Brewing Group which is now acquired by SABMiller PLC.
Foster’s Brewing Group was witnessing the drop in performance. The CEO of the company

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undertook the decision of adopting the balanced scorecard as the management accounting
instrument to obtain and improve the capital by retaining the old markets whereas capturing
new market. Investing in the intellectual capital would improve the invention of product and
its features in order to sustain the value of brewing firms with its competitive advantage. The
use of the balanced scorecard overturned the falling performance by enhancing the market
worth of Foster’s Brewing Group.
In another example conducted by Dudin, and Evgenia (2015), it is studied that the use
of balanced scorecard in the major public infrastructure project that had multiple
shareholders. The project was the expansion of the Heathrow Airport Terminal. The balanced
scorecard was applied due to its suppleness allowed project managers to recognize, customize
and review the metrics of performance as per the objective of project. By using the balanced
scorecard, the company was successful in raising critical issues regarding its application in
the business organization.
A varied set of accounting techniques has been introduced since 1990 that also
balanced scorecard, economic value added and target costing which is claimed as strategic
management accounting tool and value creation (Akkermans et al. 2018). The balanced
scorecard has been incorporated in numerous teachings of management accounting and has
turned out to be a service that are offered by the professional’s management accounting
bodies and several management accounting consulting firms.
The historical account of the balanced scorecard is noteworthy in representing how
the things can be different. There is no such thing that is inevitable regarding the future of
management accounting innovations. The management accounting innovations can have the
future that is different from the suggested assumption of liner extrapolation of the past.

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Arguments Against the Use of Balanced Scorecard:
Management accountant managers may encounter problems while implementing the
balanced scorecard. With higher rates of application failure and huge amount of variations in
both the interpretation and practice of the balanced scorecard, it reflects a serious limitation
in the concept and practice (Busco, Cristiano, and Paolo 2015). At the theoretical level,
scholars have criticized balanced scorecard for the untruthfulness of the concept that it is a
management of Analog devices which was earlier developed by the engineering and
manufacturing firms. In its criticism academics, theorizes that balanced scorecard is better
suited for the engineering firms and less for other types of industry particularly the service
industry. For example, the internal process might not be relevant for a consulting firm’s still
the balanced scorecard proclaims that all the four performance metrics are noteworthy.
Valmohammadi, Changiz and Mohsen (2015) have expressed their disagreement that
practitioner-oriented literature propositions that balanced scorecard enhances the strategy
responsiveness, communications and attainments. Although not sceptical of the affirmative
results, researchers link them with the other factors namely the increased amount of attention
to the strategy that influences the balanced scorecard instead of balanced scorecard itself.
Conversing regarding the case of negative effect of removal of balanced scorecard on sales,
gross profit and net profit, arguably it is noticed that application of balanced scorecard is time
consuming for the employees and consumed the time which they would have used to carry
out the assigned responsibilities.
The balanced scorecard is viewed as the methodology of strategy design instead of
performance measurement procedure. The reason for this is that the performance
measurement process should be more than balanced and linked with cause-effect strategy
(Zheng 2018). A performance measurement methodology must help the management

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accountants in designing and applying the use of performance measures to identify the crucial
strategies which initially appeared immeasurable.
As stated by Kenny, Graham and Michael (2015) in spite of the wide use of balanced
scorecard, the tool has been beneficial in improving the performance of the organization and
attaining strategy however the academics have been sceptical regarding the relationship
between the BSC and the outcomes of the business. A leading criticism asserts the
widespread by Akkermans et al. (2018) explains that wider use of balanced scorecard does
not reflect the tool is beneficial for organizations. The inflexibility of the balanced scorecard
ultimately limits its application.
Hoque (2014) criticizes balanced scorecard for its lack of theoretical stability which
presents interpretive space to the company to apply the balanced scorecard as per their
business purposes and needs. Thus, for firms that are functioning in the highly dynamic
environments needs regular changes or modifications to the strategies and establishing
performance with the obligations turns out to be difficult and challenging.
(Keyes (2016) have criticized that balanced scorecard develops and defines the
performance measures. It is criticized that balanced scorecard transforms the strategy into the
tangible performance measures by arguing that balanced scorecard does not adequately
defines key performance indicators. Perkins et al. (2014) observed rigidity in the concepts of
balanced scorecard as the management accounting tool. Balanced scorecard enables a
company to transform the strategy in the tangible performance measures however it limits the
performance to rigidity. Furthermore, there is a danger where a management accountant may
neglect the success indicators and only take interest in their desired measures. In order to
implement the actual cause and effective thinking, structures should be removed. Open

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exploration and analysis of how the performance of a company can actually effect the entire
organization as a whole should be examined.
Conclusion:
Inside two decades of inception of balanced scorecard, the use of balanced scorecard
has become widespread across all the industrial sectors. This ranges from the manufacturing
to service sectors including the public and private projects as well. The most common use of
balanced scorecard in the modern day of business management accounting is strategic
management and performance measurement. The advantage of using balanced scorecard
includes overcoming the inadequacies of the traditional based management accounting tools,
providing holistic outlook of performance and offering a deeper insight into the business
operations.
In spite of the extensive use and benefits, balanced scorecard also has serious
limitations both in terms of concept and practice. The evidences included that large number
organizations that have applied the concept of balanced scorecard have experienced failures
in attaining the desired objectives or have faced serious problems while applying the concept.
In actual practice, balanced scorecard emphasis on resources to attain its goals resulting
under-use of a firm’s potential to go beyond the target. The limitations obstruct the efficiency
of balanced scorecard and contributes to some company’s desires of abandoning the use of
balanced scorecard entirely.

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