Sustainable Microfinance - Balanced Scorecard's added value for ...

• Derived from strategy;
• Stimulates continuous improvement;
• Clearly defined purpose;
• Simple to understand and use.
Researchers and commentators have identified widespread satisfaction with the BSC
as a tool for implementing and communicating strategy. For example, the following
benefits have been recognized: the clarity of focus which it brings to the critical
factors determining performance (Kanji and Sa, 2002; Ritter, 2003); its value as an
information system for diagnosis and control (Pandey, 2005); its contribution to the
effectiveness of strategy implementation through the translation and communication
of strategy in the form of tangible measures (Kanji and Sa, 2002); its use as a
substitute for traditional budgeting (Ax and Bjornenak, 2005); and its flexibility and fit
to different organizations (Kanji and Sa, 2002).
3.2.8 Criticism on the BSC
However, research has also shown that BSC users are not very knowledgeable
about the cause and effect relationships that should govern the selection of
performance measures. In practice, users simply have a belief in the relationship
between measures rather that testing and identifying the nature of actual
relationships. Implementations have met a series of practical problems (Ahn, 2001).
The BSC has also been criticized because the temporal link between the variables is
not clear (Nørreklit, 2000; Kunc, 2008). If a cause and effect relationship requires a
time lag between cause and effect, then it is problematic that time is not part of the
scorecard. The effect of the measures will occur at different times as different areas
of performance involve different time scales (Hopper et al., 2007).
Herrscher (2006) argues for what he calls ‘the’ ’really’ ’integrated BSC’ that links
functions, responsibilities, inputs and outputs. Nørreklit argues that some
stakeholders, such as suppliers and public authorities, are excluded from the
traditional BSC model and proposes that ‘a coherent strategy is one in which the
properties of the different areas of strategic focus (finance, market requirements,
technology, internal business processes, etc) are integrated and harmonized,
allowing the ends planned to be achieved through the working together of the
Elmar Hoogendoorn 34
Sustainable Microfinance