Balanced scorecard-lecture (1).pptx - Balanced scorecard Barriers to the Successful Implementation of the Balanced Scorecard INTRODUCTION • Since the

Balanced scorecard-lecture (1).pptx - Balanced scorecard...

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Balanced scorecard Barriers to the Successful Implementation of the Balanced Scorecard
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INTRODUCTION Since the concept was introduced in the early 1990s by Kaplan and Norton as a performance measurement system, the Balanced Scorecard (BSC) has attracted considerable interest among different organizations, practitioners and researchers. According to Niven (2006), 60% of the Fortune 1000 companies are either implementing or attempting to implement the BSC. Further, a study conducted by Bain & Co (2009) states that about 49% of organizations in North America, 54% in Europe, 52% in Asia, and 56% in Latin America use the BSC.
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INTRODUCTION Due to its wide acceptance and effectiveness, the BSC was proclaimed one of the 75 most influential ideas of the twentieth century by The Harvard Business Review (Niven 2005, 2006). In order to build a BSC in an organization, a great deal of effort is needed. Resources such as time, expertise, and money should be employed in every BSC initiative. Despite its worldwide popularity, the success of the BSC is quite low. According to Atkinson (2006, cited by Othman, 2007), it is estimated that 70% of BSC initiatives have failed. This fact brings to mind the difficulties involved in the implementation process of the BSC, and the reasons which cause so many BSC initiatives to fail.
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INTRODUCTION Although many different organizations are using the BSC as a management technique to implement corporate strategy, a number of them have encountered different problems when trying to introduce the concept in their business. The majority have either implemented the BSC but without any significant improvement in performance, or they have given up in the implementation process itself.
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The origins of the Balanced Scorecard The Balanced Scorecard was developed by Robert Kaplan, a Harvard University professor, and David Norton, a consultant from the area of Boston. In 1990 they started research in several companies with the aim of exploring new methods of performance measurement. Traditionally, industries had been relying mainly on financial measures to indicate performance. Many criticisms arose about using only financial measures to track organization performance. In their study, Kaplan and Norton argue that financial measures were too one sided and not relevant to many levels in the organization and that reliance only on financial measures may affect the ability of organizations to create value (Niven, 2006).
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Shortcoming of BSC Kaplan and Norton (1992) argue that focusing exclusively on financial performance measurements worked well in the era of industrialization, but in the era where new competences were emerging, financial measurements are not enough. Niven (2006) indicated some criticism of the excessive use of financial measures: The rising importance of intangible assets. Traditional financial measures are not designed to capture the aspects or performances of customers, suppliers, employees, company culture, quality, and opportunities for learning and innovations. Performances of these intangible assets should be measured because they represent the operational drivers for future financial performance.
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