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Critics of The Balance Scorecard

I summarized these opposing views from Art Kleiner's January 2002 article "What Are the Measures That Matter?" in 'strategy+business' magazine.

Kaplan's View

Professor Kaplan (Harvard) is the most visible figure behind Activity-Based Costing (ABC) and the Balanced Scorecard, which come from accounting methods. He sees both as full-scale cultural changes tools, to break down the implicit barriers between finance - accounting and operations. ABC uses computers to gather cost data from a system perspective. It parses costs among projects, processes, and products. Its goal is to the cut more accurately the non-value added activities than traditional cost accounting can. It helps financial folks see what operators see. The Balanced Scorecard holds the team accountable. The Balanced Scorecard is high quantitative on the supply side. It's an update of management by objectives. (Peter Drucker 1960s).

In April 2004, Norton and Kaplan and Steven R. Anderson wrote the Havard Business Review "Time-Driven Activity-Based Costing":

In the classroom, activity-based costing (ABC) looks like a great way to manage a company's limited resources. But executives who have tried to implement ABC in their organizations on any significant scale have often abandoned the attempt in the face of rising costs and employee irritation. They should try again, because a new approach sidesteps the difficulties associated with large-scale ABC implementation.

In the revised model, managers estimate the resource demands imposed by each transaction, product, or customer, rather than rely on time-consuming and costly employee surveys.

Opposing View

Professor Johnson (Portland State University in Oregon) argues that using microeconomics (ABC) to drive management decision-making has been a sin since the 1950s. Too many MBAs make decisions entirely from quantitative information, rather than from explicit, detailed knowledge of how a company works and customer wants. He blames the troubles that mainstream companies get into -- for example, the current predicaments of the U.S.'s big three automakers -- on the misuse of measurement. Companies should focus on the 'means,' e.g., designing a production system that makes errors visible and correctable the moment they occur, rather than enforcing targets and goals. Error counts will naturally get lower. The 'ends' would take care of themselves.

Cover of Kaplan and Norton's Balanced Scorecard BookProfessor Robert S. Kaplan's book with consultant David P. Norton, "The Balanced Scorecard: Translating Strategy into Action" Harvard Business School Press, 1996.

 

 

 

 

Graphic of Johnson's book 'Profit Beyond Measures'Professor H. Thomas Johnson's book with with Swedish consultant Anders Bröms, "Profit Beyond Measure: Extraordinary Results through Attention to Work and People" Simon & Schuster Inc., Free Press, 2000

 



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