The balanced scorecard has found many followers. In the last ten years, it has spread in various variations around the world. But this concept has both pros and cons. Therefore, it is necessary to think carefully about the possibility of its implementation.
Advantages of the SSP
Looking at the positive aspects, it is necessary to emphasize that the balanced system of key indicators has proven to managers that financial indicators, although necessary, are not sufficient. They cannot be used to take into account intangible resources, especially those related to the level of knowledge. Business development in key areas often depends on savings based on production growth, and for this it is necessary to be able to correctly distribute not only financial capital, but also physical capital.
Advantages and disadvantages of the BSC
This type of management is ios database convenient to observe and control using financial indicators. But in the information sectors of the economy, the importance of other resources increases: the ability to concentrate and use knowledge-related potential is needed.
If a company relies heavily on these reserves, it is difficult to manage it based on tangible indicators. A second factor against relying solely on financial data is that it incentivizes short-term results. When managers' compensation and stock options are tied to quarterly profits, they will seek to increase these numbers, regardless of whether this will negatively impact long-term prospects.
Financial indicators remain important in the BSC, but they are supplemented by leading indicators. They allow you to evaluate the factors that affect the effectiveness of the company's business activities. The SPP allows management to track various elements of the organization's work and evaluate the economic environment.
A direct link can be established between such indicators as the leading indicator – leading indicators of efficiency for the current year and the lagging indicator – lagging indices for the next year. Based on this, we conclude that it is possible to make a reliable forecast of the future financial position of the company and to manage in advance the expected expectations from investments by monitoring certain non-monetary reference points.
To get an idea of the health of the body, the doctor needs to listen to the heart, take tests, measure blood pressure. By analogy: the state of affairs of the company also needs to be judged based on several key data. The correct development of the balanced scorecard serves to accurately assess the main indicators.
Once you have a vision of where you want your company to go, you can put it into action by making efforts to improve key performance data. This could be through customer retention or cost-cutting measures.
Using the balanced scorecard method helps to align the interests of the company's employees at different levels, drawing their attention to the same set of indicators. Sometimes an explicit correlation is used, for which the SPP is developed for different departments based on the corporate system. If we consider the ideal option, the BSC can show the presence of competent and interested employees in the company (using the development and training vector), the efficiency of processes (this is the operational direction), the level of customer satisfaction (a client-type