Wednesday, October 30, 2013

IS BALANCED SCORECARD REALLY THAT BENEFICIAL?

The Balanced Scorecard looks like a very comprehensive framework for an organization to achieve long term success. As I began to read the about this system I was convinced that a lot of organizations would be using it and achieving success while doing so. My assumption was correct, some external research showed that 44% of organizations in North America and 35% of the large US firms use the Balanced Scorecard [1]. I came across a lot of success stories on www.balancedscorecard.org , two of them that really interested me were:
1) National Marrow Donor Program (NMDP) : They are an NGO that help patients receive bone marrow when in need. They have a registry that matched the volunteers and patients bone marrow. They realized that they need to double their efforts to meet the needs of the patients by 2015. The way they did this was by using the balanced scorecard.[2]
                                                      Figure-1: Scorecard for NMDP [2]

The above figure is a demonstration of their strategy plan as to how they would achieve 10,000 transplants by the year 2015.

2) The Kenya Red Cross: This case just shows how widespread is the usage of the Balanced scorecard. The Kenya Red Cross uses it to add more value to what they do. They were able to set performance metrics and targets for the first time.[2] 
                      Figure-2: Scorecard for Kenya Red Cross [2]
Above was their strategy map to guide them through their daily activities and achieve their targets. 

But does the scorecard work for all types of enterprises? To see how the Balanced Scorecard worked for small to medium sized enterprises (SME) I came across a great case study. 

SAQ Company Limited:  SAQ is a retail trading company in Thailand and has the third largest market share in air purifiers in Thailand. It is a medium sized organization. It decided to use the balanced scorecard to achieve it's long term strategy objectives. It failed, they decided not to use it after 2 years. 
The major reason for failing was, being a small organization their goals kept changing and the management did not know how to link the new goals to the previous ones.[1]

As is pointed out in the article " Your Strategy needs a Strategy" organizations need a strategy to develop the Balanced Scorecard. SAQ operated in a very dynamic environment and can be classified as falling in the "SHAPING" bucket. The key factor for a "shaping" enterprise is to be flexible. SAQ was very inflexible in the way it used the balanced scorecard and hence it failed to utilize it efficiently.. 

The important question this case raises is weather the Balanced Scorecard can be used by smaller companies in the same way as the larger organizations. Should there be a new scorecard developed specially for startups? 

REFERENCES:
1. Rompho, Nopadol. "Why the Balanced Scorecard Fails in SME's: A Case Study."International Journal of Business and MAnagement (2011): n. pag. Print.
2."Balanced Scorecard Examples & Success Stories." Balanced Scorecard Examples & Success Stories. N.p., n.d. Web. 30 Oct. 2013. 


 

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