---------------25 April 2008 Balance Score Card: A Critical Evaluation Many a times, well intentioned efforts fail because of a lack of a firm grip over reality. Hence a realistic and meaningful appraisal of ground realities is the bedrock on which a successful business enterprise rests. A company cannot make a fortune by relying on good intentions only. The real task is to develop an ability to quantify the objectives. Once siphoned out, numbers ultimately make it feasible to sort out the reasons behind undesirable failures and possibly suggest the means to avoid costly mistakes.
This is easier said then done. Though, a majority of the companies are sharp at developing mission statements, the actual performance often leaves a lot to be desired. Owing to the negligible amount of facts and data at their disposal, companies fail to quantify the extent to which the desired results have been achieved. Ideally, the planning running the modern businesses should be such as to offer a ‘helicopter vision’ of the entire enterprise at one glance. Still, most of the businesses succumb to the conventional mistake of taking financial management for holistic planning.
Mere financial management is not enough Using merely financial parameters to assess the health of a business is like trying to guess the IQ of a person on the basis of the size of his shoes. This stands to be more then true in the contemporary business environment where success is often defined by the availability and management of information. Traditionally speaking, the business owners till now have been relying solely on financial report cards to determine the extent to which their policies have succeeded.
Such an approach can undoubtedly be classified as being partial in today’s technology driven economies. David P. Norton believes that financial management systems often miserably fail to recognize the importance of intangible assets like knowledge, customer satisfaction, employee motivation, work culture, etc (2001). Though they claim to give a realistic view of the state of affairs, their one-dimensional approach often fails to take into account the various human and cognitive factors that define the soul of an organization. Financial management is inadequate for directing and evaluating the strategies that a company must follow to create value by investing money and efforts in areas like technology, R& D, employee training, etc.
At least the available data seems to convey so (University of Missouri 2001). It has been found that in an average company; only 5 percent of the work force understands their company strategy and only 25 percent of the managers have strategy linked incentives. May sound pathetic, but more then 60 percent of the businesses fail to link their budget to strategy. Nearly 86 percent of the executives spend less then an hour per month in discussing the company strategy.
Things would not have been so pathetic if financial management had been more then enough to understand the dynamics in a company. This calls for a holistic system of business management accounting that takes into consideration all the tangible and intangible factors that influence the growth of a business. Most of the times, financial figures happen to be passive facts that only explain the past performance of a company without giving any meaningful insight into the existing realties or the strategies to be followed in the future.