The Balanced Scorecard or BSC is performance management and IT governance tool, which is used to evaluate the companys efficiency and identify those aspects which need modification or improvement (Kaplan & Norton, 1996). It helps to develop the policies of the enterprise according to the vision and the initial goals. This technique was first introduced in early nineties and since that time many private businesses have utilized it. This paper aims to discuss its positive and negative sides as well as the peculiarities of implementation.
First, it should be pointed out that BSC is based on the idea that the effectiveness cannot be measured only according to quantitative data, in other words, income level, because profitability of the enterprise does not fully reflect the external processes within the company. The developers of this method, Robert Kaplan and David Norton focus on such parameters as
- the relationships with the customers;
- learning and growth;
- business processes and
- finances (Kaplan & Norton, 1996, p 43).
This framework is frequently used by IT professionals, who try to align information technologies with the strategic objectives of the management. Such use of BSC can be illustrated in table format.
This table represents the steps which IT department must take in order to increase clients and employees satisfaction, establish better coordination among the stakeholders, and keep the firm up-to-date with the ever-changing computer technologies.
Hence, we can say that Balanced Scorecards help to work out specific action plan to the IT executives. To some extent, this scorecard is an assessment template which indicates which elements of the companys structure should be changed. In this regard, we need to mention that IT governance frameworks are always dependent on the strategic plan. The scorecard, which has been presented in this paper, is just an example.
Chief Information Officer (CIO) usually has to map out specific action plan for a particular situation. Still, BSC can be of great assistance for IT management. Overall, the main task is to make sure that IT department helps to improve the relations with clients and contributes to the better performance.
On the whole, the major benefit of this approach is that it enables the management to single out the kea elements of production process. Each of them can be better adjusted to the specific needs of the stakeholders: owners, customers, management, and the staff. Additionally, this technique allows us to translate the original vision into a step-by-step policy (Niven, 2002). Furthermore, BSC interconnects separate business programs such as customer service, re-engineering, software development and so forth. These are the benefits of this method.
However, we need to say that usefulness of this approach is sometimes questioned. The main reason is that modern scholars do not actually know for certainty whether the success of any business is directly connected with the use of balanced scorecards. The thing is that performance and profitability of any enterprise can be explained by some other factors such as the situation in the market, the demand for a particular product etc (Richard et al, 2009). This is why so many managers cannot always determine which of IT governance frameworks is most helpful.
Secondly, we should take into account that it is rather difficult to compile the results of different balanced scorecards, especially if we are speaking about large organizations which comprise a great number of departments. The key problem is that judging from the results of such assessment one cannot come to the conclusion as to the specific action plan. BSC is more suitable for the collection of information rather than decision-making.
Another limitation of BSC is that this technique mostly measures internal processes within the company but it does not take into consideration the external factors, for instance, competition, demand or other outside forces that can influence the development of the firm (Niven, 2002, p 307). However, one of the major concerns is that that the preliminary evaluation of data may be wrong. In other words, the company can tailor specific policies, based on the results of BSCs and these results may not valid. A mistake anywhere along the line can lead to a complete failure.
Still, even despite these imperfections, Balanced Scorecards may prove rather efficient. First, they clearly identify internal factors which may impact the performance of any enterprise. Secondly, this method offers elaborate and concise criteria for assessment. On the basis of these results, the management can develop strategies for enhancing the effectiveness of the enterprise. The key benefit of BSCs is that they align each department with the strategic goals. This framework is a good IT governance framework because it shows how to boost the process of production and make IT technologies more suitable to the needs of the customers and the personnel.
Reference List
De Haes, S & Grembergen, W. V. (2004) IT Governance and Its Mechanics. Information Systems Control Journal, vol. 1, pp 50 -57.
Grembergen, W. V. (2004). The Balanced Scorecard and IT governance. Governance Intitute. Web.
Kaplan, R.S. & Norton D. P. (1996). The balanced scorecard: translating strategy into action. Cambridge: Harvard Business Press.
Niven, P. (2002). Balanced scorecard step by step: maximizing performance and maintaining results. New York: John Wiley and Sons.
Richard, P.M. Devinney, T. & Yip, G, S. (2009). Measuring Organizational Performance: Towards Methodological Best Practice. Journal of Management, vol. 35, pp. 718-804.