Disadvantages of Using Balanced Scorecard

1. Conflicting measures:
   Some measures in the scorecard such as research funding and cost reduction may naturally conflict. It is often difficult to determine the balance which will achieve the best results.
2. Selecting measures:
   Not only do appropriate measures have to be devised, but the number of measures used must be agreed upon. Care must be taken that the impact of the results is not lost in a sea of information.
3. Interpretation:
   Even a financially-trained manager may have difficulty putting the figures into an overall perspective.
4. Management commitment:
   The scorecard can only be effective if senior managers commit to it. If they revert to focusing solely on the financial measures they are used to, then the value of introducing additional measures will be reduced.
5. Does Not Provide Recommendations:
   The balanced scorecard gives an extensive overview of the company. It will give facts about your company’s execution and performance, but it will not provide recommendations on how to amend strategies and policies to overcome discrepancies. Therefore, to attain a complete analysis of a company’s performance, a more comprehensive strategy will be required.
6. Resistance from Employees:
   Resistance towards the balanced scorecard can come from top management or other officers. Some might perceive its implementation as an indicator that their performances are not appreciated, or as an additional administrative burden. Effective communication is essential during implementation.
7. Not Fully Efficient:
   The balanced scorecard system is most efficient when integrated with an accounting system. However, relying solely on it for evaluating a company’s performance may not be completely effective.
8. Takes Time:
   It takes time to adapt to the balanced scorecard system. This will require significant motivation from management to complete the process successfully.
9. High Implementation Costs:
   The initial cost of implementing the balanced scorecard can be high. Besides automation to create a database of financial transactions, additional funds and time will be required to train employees on the tool’s metrics.

(9 points explained @ 0.89 marks each = 8 marks)