Can the balanced scorecard be a source of competitive advantage?

The balanced scorecard plays a very important role in translating the overall strategies into the operational goals that the organisation would implement on a routine basis. It is important to break down the overall strategies into actionable steps. This is the only way in which the management can be sure that they are not only equipped but also in a good position to deliver on the vision outlined...

The first step in implementing the balanced scorecard is to break down the vision into strategies and overall organisational goals that would need to be delivered on. After this is done, the organisation then embarks on the process of scanning the whole organisation to identify all the relevant organisational functions whose activities and outcomes would contribute to the overall outcome are then identified. In each of these functions, the nature of activities to be undertaken is reviewed and specific goals established for each of them. The aim is to ensure that the departmental functions can be synched with each other to achieve strategic integration and synergy.

Strategic integration is said to have been achieved if different departments have their goals aligned to each other. For instance, is the organisation wishes to provide high quality products to consumers, the procurement functions need to focus on high quality materials while the manufacturing function focuses on strict quality control in the production. On the other hand, the marketing function would concentrate on highlighting the organisation’s commitment to quality to attract customers who value the quality while the HRM department would focus on job designs that emphasise the role of the employees in maintaining the quality of the company’s products. Such a directional approach would work to ensure that the whole organisation is tailored to delivering on the same approach.

Strategic synergy is achieved where the sum of the whole is greater than the sum of the individual parts. It is best brought out where different departments are aligned and reinforcing each other. In the example made above on the quality of products, the departments mentioned act as building blocks towards the higher outcome. If procurement focuses on best quality supplies while manufacturing focuses on the best quality production outcomes and marketers focus on highlighting the quality of products, there is synergy. The organisation’s focus on producing quality products is brought out more clearly than if the three functions were not designed to complement each other. This is strategic synergy.

On whether the balanced scorecard can be a source of competitive advantage, it must be noted that different competitive outcomes can come out of using this strategic management tool. If the organisation is not able to utilise it properly, it could be a source of competitive disadvantage where too much time is wasted trying to make sense of something that could easily be figured out. But where value is realised by helping to improve objective setting and monitoring, competitive parity is realised. Where there is a very high level of excellence in implementation of the balanced scorecard with all employees playing their part, a competitive advantage could be created. This would often be a rare achievement since studies have indicated that the BSC is complicated to implement while involving all employees. But at best, the competitive advantage could only be temporary as competitors could easily invest in capacity building and overcome their weaknesses.