What are the strengths and weaknesses of the BSC built at the bank? What pitfalls need to be avoided for a successful BSC project?
Strength of Balanced Scorecard for Bank:
- BSC takes a holistic (organizational-wide) view of performance
- It is related to the strategic planning and management of the company
- In the strategy map of BSC everybody can understand the cause and effect of logical mapping and direction towards the strategy objectives.
- It elaborates how the performance measures are going to be realized, hence, more concentration is given to the processes of designing the system
- BSC design processes starts with the articulation of a shared strategic vision specific to the organization, and backwards to define the priority strategic activities and outcomes that need to occur to achieve success.
- It represents the specific strategic issues of the organization.
- BSC focuses on only four business areas, planning, organizing, leading, and controlling, and within each area focuses only on the most important performance indicators
Weakness of BSC:
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- The causality relationships between the areas of measurement in the BSC are unidirectional and too simplistic
- The BSC neglects the time dimension.
- The lack of the integration between top-levels and operational levels’ measures.
- the absence of the integration limits the use of BSC from the higher levels only
- BSC is incapable to answer the questions related to the competitors movements. Additionally, the BSC does not evaluate the significant changes in external conditions.
Pitfalls to avoid:
- Some high-level strategies such as financial targets, markets and customer segments, and aspirational brand and customer value positioning, may be too vague to translate well into a BSC.
- There are a lot of details and technicalities to putting a BSC in place, enough so that any organizations can get bogged down and confused.
- When metrics data collection requires too much effort, the job will fall by the wayside and so will results.
- A poorly structured metrics approach to monitoring scorecards is problematic