Challenges in Implementation of Balance Scorecard

Although the concept of Balance Scorecard is powerful and logical, the implementation of it is nothing easy. There are many reasons that the implementation of Balance Scorecard can be challenging. These issues are presented as follow.

To define and select the relevant measures as the Key Performance Indicators are not something easy. It is not easy to select the relevant measures. To do this, the managers must have in-depth understanding on their respective business and industry environment. Besides, the selections of measures are subject to vulnerability of inaccurate assumptions by the managers. If the managers have misconceptions or wrongful assumptions, the measures selected will not be accurate, and may affect the organization negatively from the implementation of Balance Scorecard approach.

Experiences and investments are required for achieving a ‘mature’ system. The research from Hackett Group shows that only 27% of their clients who are embracing the Balance Scorecard approach have mature systems (that use a mix of financial and operational metrics). Firstly, as mentioned above, the implementation of Balance Scorecard required highly experience managers with both the business and the methods. If that is not available to the management of an organization, external consultants may be required, but it is reasonable to expect that external consultant may not have the required in-depth knowledge on the company’s business. Apart from that, investment from various dimensions, such as financial, human capital, time and opportunity costs is a must. The implementation of Balance Scorecard is not something easy, or fast; scarifying and changes in the short term is necessary.

Tracking too many measures. Companies also tend to track too many measures, as the management may not know which the most critical factors to be tracked are. This can result in excessive paperwork and non-productive works for the workforce.

The proper Balance Scorecard must have both measures and objectives, and to do this, managers must understand their strategic directions in details. The implementation of Balance Scorecard and its measures must be mutually supportive and internally consistent with the strategic objectives of the company. For a manager who does not have depth knowledge and understanding on the business nature, it is hard for him to derive a Balance Scorecard system that has consistent measures and objectives for the organization.

Resistance to change. As with any organization changes, some certain degree of resistance from the workforce is to be expected. The workers may refuse to follow new practices, and they may perceive that extra workload is required. They may not see the benefits of implementing a new system, and most importantly, the workers may not understand the advantages of the new system to them. All of these must be tackled passionately and consistently throughout the implementation process.

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