The company reports failure, not just because the company fails to implement the process but actually the company fails to manage the process. Since, the balanced scorecard approach that was initially followed by Worldclass had been through many problems that have declined the effectiveness of the balanced scorecard in the process of measuring business performance; hence, the evaluation of compensation scheme reveals that management bonuses are more dependent on the achievement of financial objectives such as sales revenues and earnings before interest and tax, which have led the management to focus more on the achievement of financial objectives because they know that the major portion of their bonus is based on the achievement of financial objective; therefore, it is probable that they may prefer the achievement of financial objectives over the achievement of a non-financial objective in order to qualify for the bonus. However, in order to improve the effectiveness of balanced scorecard, the reward scheme should be revised and there should be a balance between financial and non-financial measures along with objectives on which the management is rewarded. (Jones, 2011)
Furthermore, the balanced scorecard is aimed to achieve long term objectives and then sets the Key Performance Indicators (KPI) for measuring the performance on achievement of those long term objectives, however, the balanced scorecard in exhibit 3 shows that there are KPIs with short term or even long term objectives.
In order to facilitate better results, there should be clear benchmarks available to the staff against which they can judge their performance. Companies usually define few vital metrics and commit the automatic collection of data and subsequently report to achieve good results but this is not the case here, the management incurs substantial time and cost to collect excessive data. On the other hand, the management only uses 4% of its data for its decision making.
Further, the company has not also prioritized the key performance indicators, so the management does not have enough idea about the areas, which really need improvement because excessive data may overlap the important information that will increase difficulty for the management in decision making
The basic motive of the balance scorecard is to improve the organization’s process by identifying the deficiencies in the process and to set appropriate process improvement methodologies so as to address the issue. The company has implemented the process as a guiding strategy but does not take any initiatives to improve the process, which ultimately results in employees’ de-motivation. Further, the employees are being held liable for which they have no concern (Problems Implementing a Balanced Scorecard).
Balanced scorecard has widely been used to improve the organization’s process by aligning the organization’s objective with those of the management. Employees are the core assets of the organization, which contribute towards achieving the organization’s objective, so they are treated with care, but on the other hand, the company fails to manage their employees and they are being held liable for things that are not related to them. Further, their incentive schemes have also been wiped out, which de-motivated them and may tend to move from the organization’s corporate mission.
In order to facilitate better results, the organization shall continually review the KPIs and the review shall be based on the priority of such indicators i.e. important indicators shall be reviewed monthly whereas, less important indicators can be reviewed quarterly but that’s not the case here, the organization reviews the KPIs on basis of the nature rather than its importance such as financial factors are reviewed monthly whereas, non-financial and other factors are reviewed quarterly.
It has already been cleared from the fact that the organization is giving more priority to the financial factors and it is ignoring other non-financial factors. Further, non-financial factors are as important as financial factors because it assists the management in improving the organization’s operations, which will ultimately contribute towards achieving the organization’s mission.
However, the objective of the balanced scorecard will only be achieved when the objectives of different departments are aligned together to achieve the corporate mission of the organization but that is not always the case in an organization because there are some trade-off arrangements between the departments where the performance of a single department may significantly been affected due to the implications of the other department. Meanwhile, these arrangements may sometimes de-motivate the employees because their incentives may be based on factors, which are dependent on other’s actions so an organization shall consider avoiding these factors and aligning the objectives of different departments towards achieving the corporate mission of the organization.............................
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