A Critical Evaluation Of The Balanced Scorecard Accounting Essay

A Critical Evaluation Of The equilibrate S resultcard Accounting raiseIn 1992, Kaplan and Norton first published a paper ab push through the Balanced ScorecardBSC. It was a huge success and BSC soon became very common all over the world. Before BSC emerged, presidential terms usually use traditional methods of transaction evaluation foc utilise mainly on financial measures such as ROCE, sales and profits. BSC translates an organizations mission and strategy into a comprehensive localise of public presentation measures that provides the framework for a strategic measurement and management system. The scorecard measures organizational accomplishment across quad linked perspectives financial, customer, internal business bear upon, and instruction and emersion (Kaplan and Norton, 1996).In recent years, a number of multi-national organizations befool introduced BSC as part of their management control systems. The purpose of this paper is to give a critical evaluation of the BSC as a execution management puppet in multi-national organizations.The paper is structured as follows the next part gives slightly grounds of multi-national organizations using BSC and the advantages of using it. The second is or so whatever limitations of using BSC and the ground why it is not desirable for some organizations. One specific practice is given for both parts. The last part is the conclusion of this paper.BSC has been widely employ in multi-national organizations in the past 15 years. It obviously has some benefits to these organizations. here(predicate) be some of the advantages of BSC and they are also reasons that make so umpteen a(prenominal) organizations cover BSC.Firstly, each perspective of BSC requires the identification of a number of goals, and suited measures. This means that BSC bed provide strong support to the decision reservation of the organization. In the world which is full of competition, its very meaning(a) for an organization to localise what is nigh important. Each goal and each measure of the BSC is closely tie in to the strategic tar notice of the organization. The organization end make strategic decisions base on the BSC. Multi-national organizations are often very large, they bring simplified and unvoiced steer for the whole organization to keep themselves competitive. Otherwise, the connection between distinguishable surgical incisions will become timid and the organization will finally driblet apart.Secondly, BSC guards against sub-optimisation, so that improvement in unitary corporealm is not achieved at the expense of an varied. Teamwork is a very important part of corporate culture. BSC trustfulnesss distinguishable elements of an organization and that enables managers to consider what different sections functions are. In traditional methods of performance evaluation, managers scarcely focus on financial figures. This tin feces lead to decisions that make iodin department improve its performance on the expense of another. This is quite important to multi-national organizations. A multi-national organization has many departments and one of the managers tasks is to coordinate these departments and make the most use of each department. If one department improve its performance on the expense of another, there will be serious problems for the organization.Thirdly, BSC brings together many of the different elements of a political partys business and strategy into a single report. This can make decision making process much efficient. All of the 4 perspectives of BSC are happen upon elements to the success of an organization. BSC provides a report of the combination of the four perspectives and it can save cartridge holder for managers who are making decisions. It also enables managers to derogate information overload by limiting the number of measures used. Nowadays, organizations seldom get bothered because of lack of information, on the contrary, t hey often take on to deal with more information than what they really need. This happens more often on multi-national organizations. many multi-national organizations strike professionals as consultants and when these consultants provide suggestions, there will usually be an subjoin in the sources of information. This will thereby increase the pressure of dealing with information. BSC can help managers concentrate on further a few key factors, so that they can minimise information overload and make the counterbalance decision at the same time.Fourthly, BSC challenges managers to look at organizations in natural right smarts and to talk to stakeholders about the issues which really matter. It can also beatify employees to work harder. Traditional methods of performance evaluation stress what managers want employees do and then evaluate the result. Theyre about the control of results. BSC, on the other hand, stresses target management. It encourages employees to reach the targ et creatively. Top managers dont come everything themselves. The BSC lets people who know the area best make the best decision and the task for top managers is to combine all these together and set a target for the organization as a whole. Managers dont build to look at the detailed information, they erect need to set targets and make decisions for the organization as a whole. This can be quite important to multi-national organizations because they usually necessitate departments all over the world, its infeasible for top managers to look into every detail in every department and shareholders need the most important information to make decisions. So BSC turns out to be a very good as well asl for multi-national organizations.However, BSC is not commensurate for every organization in the world. It also has some limitations.Firstly, BSC is to complicated for some organizations. Organizations have to increase the number and breadth of performance measures when the conjoin BSC. Many organizations find it complex for evaluating business units performance because BSC has large number of performance measures across several perspectives. (Kraus, K. and Lind, J., 2010) If an organization wants to adopt BSC, it has to establish clear and real cause-and-effect relationships between different measures. Its much easier than done in reality, even Kaplan and Norton admitted it (Kaplan and Norton, 1996). This process of establishing relationships may take years to complete. Therefore, many organizations find it hard to adopt BSC. And some organizations which do adopt BSC just simplify it by bring d deliver measures and some even focus on financial measures moreover, just ex shot what they do in traditional methods.Secondly, BSC may result in employees compensable attention to the areas measured. Since BSC outlines what the organizations strategy and all the areas that will be measured, employees will down paying attention to these areas so that they can get high reenforcement through good performance in these areas. Theyll ignore areas that wont be assessed because they wont get reward from these areas. And this can become a weak point of the organization. The use of BSC requires a change in the orientation of the employees. Managers have to think about customers, internal business process and culture and growth as well as financial perspective, which means managers have to know more than just financial figures. Other employees, at the same time, are also forced to look at the organizations goal instead of their own production or sales goals. This requires that all of the employees must have a higher education than they had in traditional methods.Thirdly, BSC may be too restrictive and also may not be able to grip with a fast changing business environment. The grocery is changing apace nowadays and it takes time to construct a BSC system in the organization. chief(prenominal) elements for an organization change everyday. And new eleme nts arise everyday. Its quite possible that one element is very important when the organizations decides to adopt BSC and becomes not important at all when BSC is finally established.Fourthly, some organizations may face capital market place pressure. Most organizations, especially multi-national organizations, raise fund from the capital market. Capital market influence managers decisions a lot. Managers know what they say and do may necessitate the phone line price and they know that usually analysts are only kindle in financial measures. This leads to organizations focus on income and revenues because this is what theyre measured on outwardly (Kraus, K. and Lind, J., 2010).Finally, BSC may have a high cost. BSC requires an organization to think from and set target in financial perspective, customer perspective, business process and learning and growth perspective. This require not only deep understanding of the general strategy of the organization, but also the separation of the strategy into different departments. The organization needs to set proper goals and measures for each department. And employees need to learn about BSC to make sure the system will work. Information of each department and each perspective of the BSC needs to be collected. Establishing BSC consumes a lot of time and resources. Even established, BSC can cost a lot. It needs continuous prayer of information. And there is a learning and growth perspective in BSC, which can be quite expensive. So many organizations may abandon BSC just because of the high cost.Lets take Coca-Cola, the famous multi-national company based in America, as an example. Coca-Cola Beverage Company in Sweden (CCBS) adopts BSC in the company. CCBS took the advice of Kaplan and Norton. It clear-cut to measure its performance from financial perspective, customers, internal business process, and learning and growth. The top managers had a three-day concourse to discuss about it. They set a long-term target fo r the company (about 3 years). They also described the market conditions at that time. Then they decided an overall target for the company and set measures for different systems and programs.The top managers assay to keep each perspective of the BSC equilibrise. In cast to do that, CCBS used a step-by-step way. First of all, the managers set some financial measures connect to the overall strategy, set financial targets on these measures and then reached these targets in a proper way. The second step was to repeat the same process in the customers perspective. The question was how our customers will respond if we plan to reach our financial target. The triad step was to identify the internal business process. The managers asked themselves some questions do we have enough creativity? Are we willing to change ourselves in order to make the company change in a proper way? After this process, CCBS was able to make sure that each perspective was balanced and all the measures would le ad the company to the same direction. But they did think that it was prerequisite to repeat these steps several times before they became totally balanced.CCBS didnt localise emphasis on business plans or budgets. It didnt see BSC as something can be unchanged. On the contrary, it considered every problem in a changeable way and made modifications every year. This may be the main reason that made BSC adoption in CCBS such a success.Some other subsidiaries of Coca-Cola are also establishing BSC in recent years. However, Coca-Cola didnt ask all of its subsidiaries to adopt BSC as a tool of performance measurement. Different companies may have different conditions and different management. Since all the laws and economic environment in different countries are distinct and the adoption of BSC requires good management, BSC may not be fit for some companies.Take companies in China as an example. The stock market in China is not as mature as it is in European countries. Many investors in the stock market dont have enough economic background and they usually rely on analysts. However, analysts only care about financial figures. This leads to some companies consider BSC as useless. And in some companies which do use BSC, managers often ignore the real core of BSC. They usually use BSC to measure performance of employees and decide their wages only and they dont realize that BSC is actually about the companys overall strategy. So BSC is not suitable for most companies in China right now. BSC adoption needs a more mature market and managers who really understand what BSC is.In conclusion, BSC has many benefits and it can help organizations become more competitive. But it also has some limitations and it doesnt work in some countries and in some businesses. It is not suitable for every organization.