Necessity of the balanced scorecard in effective strategic management

The balanced scorecard was developed as a tool that is necessary for the operationalization of organisational strategies. It provides a framework through which the organisation not only gauges the viability of its strategies but also creates a plan for attaining them. In the context of change management, creation of objectives to reinforce strategies can be likened to the concept of maintaining the momentum for change. The organisation may have a strong overall vision but would only be motivated to continuously make efforts when they have to achieve short term goals from time to time. The BSC therefore adds meaning to strategic management in terms of maintaining momentum.

A practical evaluation of the strengths and weaknesses of the organisation also forms an important benefit of using the balanced scorecard. This tool of strategic management helps by getting the management to identify the specific activities that would be needed to achieve the overall strategies. Upon identifying them, an evaluation is therefore done to identify the capabilities that must be possessed or mastered in order for the objectives to be achieved. In this process, the organisation must identify the resources or capabilities that must be possessed or these objectives to be met.

The other element of the balanced scorecard is that it works like a jig-saw puzzle where different parts have to be brought in and fitted in their respective places for the whole to make sense. The balanced scorecard compels the organisation to thoroughly review every function and department. It cements the fact the organisation is a bundle of resources and functions that must be organised to achieve a common goal. Effectiveness and efficiency of each of these functions is necessary for the overall goal of the organisation to be achieved. In the absence of such a management tool, managers are predisposed to concentrate on the functions that are considered to be most important.

For example, an institution of higher learning could concentrate on enhanced value of its teaching services since this is the core function of the organisation. This could be done at the expense of administrative functions which also play a very important role in influencing customer satisfaction as well as the ability of the organisation to attract and retain customers. Similarly, a manufacturing company could overly emphasise on efficient production while ignoring important elements such as excellence in knowledge management. This would lead to it being less competitive in terms of ability to understand changing market preferences and how the organisation can cater for such needs profitably.

The main functions in the organisation include financial functions, marketing functions, operational functions, social responsibility functions and administrative functions. In some of the cases, the goals of the different functions could be seen to be in competition with each other. For instance, where the marketing department requires an extensive branding campaign while the financial goal is to cut costs and achieve cost effectiveness, the strategic manager would need to consider where to strike the balance. The balanced scorecard enables such a manager to understand the different departmental objectives and understand what needs to be prioritised. This makes it very valuable to the organisation.