The Balanced Scorecard (BSC) As a Global Programme, It’s Origin, and Both It’s Intended and Unintended Effects on Organisations Society.

ACCFIN5036: Management, Accounting, and Control

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In recent past, scholars, researchers and other stakeholders have highly criticised financial measures of accounting systems. This is partly because they focus on revealing a firm’s past actions and not revealing anything about a firm’s future (Norreklit, 2000). As a consequence, importance of strategic management systems such as the balanced scorecard (BSC) that include both financial and non-financial measures have increasingly been acknowledged. In addition, some scholars such as Rafiq et al. (2020) put forth that BSC is not just a strategic measurement tool but a strategic control tool which when well implemented aligns departments and individual goals to an organization strategy. Against this backdrop, this essay will discuss BSC as a global programme, how and why it came about, and both intended and unintended effects of the BSC on organisations society.

Balanced scorecard as a global programme

Georglev (2017) concedes that the BSC is globally successful in the area of business and consultation services and that is why it is accepted worldwide in non-profit organizations, non-governmental organizations, and in all types of businesses. Cooper, Ezzamel and Qu (2017) collaborate that a research by Cranfield University found out that 75% of the firms that have a performance measurement process (46% of firms studied) implement BSC as their main tool of performance measurement. Additionally, about 60% of big American firms and 53 % of firms globally use BSC, and it is one of the six most implemented management tools in the world (Rigby & Bilodaou, 2011).

Furthermore, Rafiq et al. (2020) explicate that BSC as a strategic management tool is implemented globally by many companies to create a platform for control and to include vital perspectives needed for organization success. The authors add that BSC success has been noted in several countries such as the US, UK, Spain, China, and other developed economies. In addition, 50 % of US and UK entities are implementing BSC while organizations from Canada, Jordan, and China that are using BSC are 75%, 35%, and 25% respectively (Rafiq et al., 2020).  Moreover, Cooper, Ezzamel and Qu (2017) postulate that BSC is included into management accounting curriculum, and has evolved into a service offered by management accounting entities and management consulting companies around worldwide.

How and why the balanced scorecard has come about

The BSC came about to kind of try to solve concerns that were raised by business managers and scholars who maintained that traditional financial measures were ineffective because they gave an understanding of an organization past performance but not its present and future. Consequently, a performance management tool that would take into account both financial and non-financial measures ‘found a fertile soil to germinate’ (Lesáková and Dubcová, 2016).

Furthermore, Cooper, Ezzamel and Qu (2017) identified four episodes that demonstrate how and why the BSC has become a performance management tool that is applied globally. These episodes are;

Assembling a local scorecard

Cooper, Ezzamel and Qu (2017) explain that an experiment at Analog Devices is accepted as Kaplan’s and Norton’s BSC inspiration. Schneiderman, a former ADI’s executive, illustrate how the idea that later evolved to BSC came about (Schneiderman, 2012). The invention of a scorecard at ADI resulted from the company’s 5 year strategic planning process and its Total Quality Management practices. ADI scorecard attempted to be a temporary solution to settle struggle (which was considered political by the company’s employees) between financially oriented COO and quality-committed CEO by combining financial and nonfinancial measures of the company in one diagram. This struggle between the two top ADI executives made Schneiderman to suggest a one page scorecard (the Quality Corporate Performance Product) as a compromise between the two executives. This Quality Corporate Performance Product was renamed a Corporate Scorecard in 1987 by Schneiderman and went through several trials at ADI but remained unchanged until 1992 (Schneiderman, 2012). All in all, the scorecard was brought about by ‘political struggle’ at ADI.

Consultants and building networks,

A network was created in order to make the scorecard move beyond being regarded as an experiment at ADI. According to Kaplan (1994b) Kaplan became aware of what was going on at ADI when he was approached by Schneiderman in 1989, and the ADI case was first presented at Harvard Business School in 1990 and later presented in other places (Schneiderman 2012).

Development of BSC to a widespread theory lied on seizing the interest of other top management teams with similar concerns. As such, a network was needed and to build it, Kaplan and Norton developed a more general story of the scorecard and renamed it as BSC. This was the framing process whereby the four perspectives of the BSC were formulated, that is, financials, customer, innovation, and internal processes.

Senior top management staff from a dozen firms met throughout 1990 at Nolan-Norton research study and after being informed about ADI scorecard, several companies agreed to try the scorecard in their companies where it proved successful in most of those companies (Kaplan 1994a). As such, the research study of the 1990 provided development of a network of actors who would aid in spreading scorecard adoption benefits

Framing and generalizing BSC,

According to Cooper, Ezzamel and Qu (2017) development of BSC’s four perspectives framed the boundary of BSC which were claimed by Kaplan and Norton represented the important elements needed to run a successful entity. Such framing denotes that the four perspectives links the BSC to organization success, and claim that any other perspective is not relevant. These elements generalize the BSC and helped it to evolve from being a local tool to a pervasive technology (Cooper, Ezzamel & Qu, 2017).

Strategic agency and controlling networks

During the process of BSC development there were various actors, such as Kaplan and Norton, the BSCol, Palladium, and software companies and it was upon Kaplan and Norton to show how other actors interests were connected with theirs and the BSC (Cooper, Ezzamel & Qu, 2017). This entailed controlling networks that would ensure that Kaplan and Norton maintained the vision of the BSC. In tandem, the BSCol played a kind of a missionary role which ensured that other members of the network such as software companies, trainers, and other consulting companies supported Kaplan and Norton’s ideas of the BSC. This strategic agency, networking and control of networking explain how and why the BSC became a global performance management tool.

Intended and unintended effects of the balanced scorecard on organisations society

Intended effects

Madsen and Stenheim (2014) explicate that there are two broad categories of intended effects of BSC, that is, advantages at organizational strategy level and advantages at strategic alignment level. In the first category, past empirical studies have found out that BSC has been successful in managing an organization’s long-term strategy. In similar lines, Kaplan and Norton (1996b), posit that BSC focus on significance of strategy as a foundation for future action where all the organization’s resources should be focused. This implies that the whole organization play part in fulfilment of strategic objectives by disposition of indicators, goals, and initiatives, as per laid down perspectives. This view is shared by Lueg (2015) who adds that BSC gives structure to an organization’s strategy because it is a logical structured approach that aids the management to make certain that all vital areas of an organization are addressed in an easy to comprehend manner. In tandem, BSC helps keep an organization’s objectives at the fore front, uses particular measurements to follow progress, and observes initiatives to assess actions (Basuony, 2014).

In this regard, it is vital to put forth that the BSC helps employees assess how their individual goal are linked to the organizational strategy. For instance, an individual formulating performance goals for annual assessment can conjoin those goals to the goals of their department which can then be conjoin from the department to the whole organization. As such, BSC enables employees to link their actions to the improvement of the team and the entire organization (Quesado, Guzmán & Rodrigues, 2018).

On the other hand, as for advantages at the strategic alignment level, Hristov, Chirico, and Appolloni (2019) postulate that the BSC is theoretically presented as a programme that allows linkage of mission and strategy to measures of performance and strategically aligned efforts. As such, the authors concede that BSC is very important to managers as it allows a link of an organization’s mission and strategy, which as a consequence can boost employees’ morale. Additionally, the BSC aids to improve communication between top executives and other employees because communication among employees and organization’s departments is easier when all are on the same page. To put it in another way, the BSC makes it easier to talk about organization’s strategy and progress. In this sense, Basuony (2014) points that BSC enables organizations to set up a culture of high performance that advance alignment of main indicators to strategic objectives of the organization in all organizational levels. In this line, BSC enhances top-down communication of the organization’s objectives and how they are aligned to the strategy. Furthermore, according to Hristov, Chirico, and Appolloni (2019) strategic alignment, facilitated by the BSC, enhances understanding of organizational capabilities, objectives of team members and linkage between decisions, actions, and organization’s strategic objectives, that enables redefinition of associations with customers or clients and the remaking of underlying business processes.

Unintended effects

Awadallah and Allam (2015) admit that despite the BSC being globally recognised as a performance management programme that improves performance of most organizations that implement it well, it has some few unintended effects which include. First, Awadallah and Allam (2015) point out that while the BSC has been used successfully by many organizations, the same organizations also acknowledge that BSC is costly and time-consuming.  This is because the correct implementation of the BSC demands a complete understanding of it and, in most cases organizations lack someone among their employees with that experience and are consequently forced to contract outside consultant to aid in the implementation process. In addition, all those involved in strategic planning and usage of BSC are required to have complete knowledge of BSC, and for best results, the whole organization ought to understand BSC theory, need to achieve balance of the measures, and how it can be implemented for process improvement. All this can be very costly and time consuming especially for small organizations.

Second, while there are many supporters of the BSC and its use in strategic planning and process management, a significant number of people are not (Georglev, 2017). As such, some employees may feel that it is only ‘a temporary flavour’ and thus resist its use. This is especially the case if its use demands training or more time to learn about the BSC. This view is in consonance with Hristov, Chirico, and Appolloni (2019) submission that resistance towards BSC may be from either top management executive or from junior employees because some might take the implementation of BSC as a sign that their organization does not appreciate their performances, or it can be misunderstood as additional administrative work. As such, it is vital that the implementation of BSC in an organization be communicated to everyone effectively.

Third, after several books and huge number of articles written about BSC that continues to grow, the amount of BSC literature is quite overwhelming. More so, attempting to read every single BSC case study would likely put you off to say the least. As a consequence, reading BSC literature and trying to comprehend all its empirical studies often gets one overburdened with how to proceed (Zizlavsky, 2014). Relatedly, BSC demands managers and other employees to report information, and this entails logging data. Many do not like this process because it is tedious and can distract undertaking tasks required to accomplish objectives.  Fourth, one of the main criticism levelled against the BSC is that its perspectives encourages focusing on internal aspects of an organization (Lueg, 2015). Some critics have pointed that BSC is not capable to answer the questions concerning an organization’s competitors, and does not determine significant changes in in external conditions.  In addition, there are some important stakeholders, for example, the suppliers, that are not included in the BSC who may be important to some organizations (Awadallah & Allam (2015). This concern is equally raised by Malagueño, Lopez-Valeiras and Gomez-Conde (2018) who posit that BSC may give an organization a wider internal understanding but inadequate external picture. As an exception, BSC do consider customers but ignores other external indicators such as competitors and changes to external business environment. Consequently, this may result to overemphasising on internal performance and inadequate awareness of external indicators that have an impact on an organization performance.

Conclusion and further research

In conclusion, this essay has established that the BSC is a strategic management system that has been successfully implemented in various types of organizations around the globe. In addition, using four episodes as described by Cooper, Ezzamel and Qu (2017), the essay has discussed how and why the BSC came about to be a global programme. Furthermore, the essay has discussed both intended and unintended effects of BSC. To be precise, the intended consequences have been categorised into two broad categories, that is, advantages at the organizational strategy level and advantages at the strategic alignment level. Unintended consequences that have been noted are; high cost and time consuming, employee resistance to BSC implementation, complicated implementation process, and overemphasising on internal factors and ignoring external factors surrounding the organization.

This essay has noted that BSC alters the way performance is assessed, organization processes are managed, and whether management is considered as strategic. Further, it has been observed that the reach of the BSC as a general theory has spread over more than three decades, partly as a result to its focus on success and partly from complications that it presents. In tandem, as represented problems changes, so are extensions and developments of BSC (Cooper, Ezzamel & Qu, 2017).

We can now summarize that predicting future performance, which is a role of BSC, is usually a highly complex process involving various aspects (Hoque, 2014). As a consequences, a system which does not take into account all relevant variables will likely show invalid results. As such, in order to reduce some of the unintended effects or limitations of the BSC, this author recommends that further research are needed that will explore how a comprehensive BSC that incorporate other variables such as suppliers, sustainability, risk and environment can be developed in order to come up with a better strategic management programme.


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