What next for the Balanced Scorecard?

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Professor Robert Kaplan and Dr David Norton were in Edinburgh last week to receive honorary fellowships from CIMA, marking 20 years of the Balanced Scorecard (BSC) system.

Back in 1992, the performance management landscape was an “ugly picture” with around 90% of organisations failing to execute their strategy and 95% of employees not knowing what the strategy of their organisation was.

Fast-forward to 2012 and now more than 70% of companies across the world now claim to use the BSC. But what will the next 20 years hold for the scorecard?

Speaking at a CGMA event at the University of Edinburgh, the BSC creators were on hand to map out the next phase in the performance management saga.

Dr Norton took on the big question of whether the BSC was now “obsolete” and put forward the major challenges facing performance management going forward.

He said the BSC “must adapt to remain relevant” to a world that demands greater transparency, corporate responsibility, better risk management and changing patterns of human capital management.

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  • Managing human capital
  • Networked economy
  • Transparency
  • New role for corporations
  • Risk

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THE BSc

In terms of economic adversity one of the key components in any organisation is the Financial perspective. This changes cause and effect and the chain of events that follow.

Cash-flow is still king in SME's and to some extent larger organisations too, i.e. you only have to look at Comet, who are now in receivership. The cause of this was I believe, lack of knowledge of what the customer wanted coupled with a lagging behind in technological know-how. The effect of all of this was: disaster and cash-flow - negativity syndrome.

These major contributory factors all intersperse with management and key  personnel - who may have a plethora of knowledge that typically in some organisations, remains untapped and unfortunately - not passed on.

 

Dr ALLEN D. LUNN

 

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15th Nov 2012 13:48

The Balanced Scorecard (BSC)

The BSC was always controversial in its effectiveness. It was developed from the Altman z-score that has been proven to be ineffective.

While the BSC set various elements it wishes to address, the importance of each element is is given a quantitative calibration that is subjective and not comparable between organisations and statistically robust because of the subjectiveness, especially in calibration and weighting change.

there is also no monitor of whether it is applied correctly.

The BSC adopted for credit analysis failed as demonstrated in the financial crisis.

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By dl
16th Nov 2012 22:09

Innovation accounting
I have a feeling that innovation accounting and test,measure,learn methodology will over time replace or at least complement the balance scorecard approach.

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17th Nov 2012 02:32

innovation accounting

Is this the same as confidence accounting?

 

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