The Balance on the Balanced Scorecard: A Critical Analysis of Some of Its Assumptions
University of Aarhus - Department of International Business
Management Accounting Research, Vol 11, No 1, March 2000
In recent years academic scholars have given increasing attention to the importance of strategic measurement systems including both non-financial and financial measures. One of the approaches adopted is that of the Balanced Scorecard (Kaplan & Norton, 1996a). It is distinct from other strategic measurement systems in that it is more than an ad hoc collection of financial and non-financial measures (Kaplan & Norton, 1996a; Kaplan & Norton, 1996b). It contains outcome measures and the performance drivers of outcomes, linked together in cause-and-effect relationships, and thus aims to be a feed-forward control system (deHaas and Kleingeld, 1999). Furthermore, the balanced scorecard is intended not only as a strategic measurement system but aslo as a strategic control system which can align departmental and personal goals to overall strategy (Kaplan & Norton, 1996a).
This paper first examines the extent to which there is a cause-and-effect relationship among the four areas of measurement suggested (the financial, customer, internal-business-process and learning and growth perspectives). The paper then examines whether the balanced scorecard can link strategy to operational metrics which managers can understand and influence. Finally, it discusses and suggests some improvements to the balanced scorecard.
JEL Classification: M40, M46, D23
Date posted: March 16, 2000