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LIMITATIONS OF BALANCED SCORECARD Marko Rillo Tallinn Technical University The objective of this article is to follow certain aspects of Balanced Scorecard that have proven problematic and have demonstrated that the initial model elaborated by Kaplan and Norton is not as flawless as during the last ten years the most authors have claimed. Also some aspects of possible reduction of these problemsare shortly analysed. Short introduction of Balanced Scorecard The objective of Balanced Scorecard is to translate organisational vision and strategy into a specific objectives and measures in four main perspectives: finances, customers, internal business processes and learning/ growth. Managers today are acting in such a complex environment that setting right objectives and following themappropriately is absolutely vital to ensure the sustainability and development of any organisation. It has also been discussed that in order to follow the objectives accurately, it is very important to monitor the achievement of those objectives by using as optimal and as strategy-focused measurement system as possible. During 1985-90 leading theorists in this field reached the conclusion that themeasurement systems that to the date were concentrating mainly on financial information, were not sufficient any more to fulfil the control function. One of these groups that were active in Harvard Business School under the guidance of Robert S. Kaplan and David P. Norton published in 1992 their proposals to the problems that they analysed during two years project that lead to introduction of BalancedScorecard concept (Kaplan and Norton, 1992). Kaplan and Norton explain (ibid) that individually no measurement can establish clear guidance for action. As the organisations’ set-up is in most cases very complex and needs to follow several factors simultaneously, then it is necessary to pay attention to both financial and non-financial data. We may argue that already several organisations hadstarted to use non-financial data already way before Kaplan and Norton had published their opinions then Balanced Scorecard was, indeed, the first to capture the organisation’s entire strategy and established methodology according to which the measures are derived by logical cascade from organisation’s vision and mission and are implemented from top management to the lowest effectively measured levelpossible into one holistic set. Many international research projects have shown that Balanced Scorecard concept is a very popular tool around the world. At the same time together with numerous

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success stories there have been also several cases where the implementation project is not finalised at all. Therefore the author of the article decided to research whether there are any possibleways to summarise the shortcomings of the method in order to facilitate further research where these shortcomings might be overcome. To facilitate this, the author analysed several theoretical concepts focusing on implementation of Balanced Scorecard. Additionally he examined several alternative performance measurement methods to verify whether some of their aspects could be used in managingBalanced Scorecard. In addition the author also used his practical experience in Balanced Scorecard projects, during his lectures and using his Internet www-address at http://www.rillo.ee/ forum to discuss the other possibilities to map the problems related to Balanced Scorecard and to solve open questions. The author proves with his practical experience and with literature review that the BalancedScorecard has plenty of aspects where there are deficiencies that need to be taken into account. Cause-and-effect relations are not time-wise connected One of the most important strengths that the Balanced Scorecard is claimed to possess is the strong causal interrelations between the different elements that are mapped using the core strategy of an organisation as a source as the financial measures...
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