Characteristics of Good BSC Company Analysis

One very basic function of management of companies is BSC company analysis. BSC or the balanced scorecard, as we all know, is a management tool that tracks all aspects of performance, including the effectiveness of management processes, structures, and people to set relevant goals and objectives, formulate related plans, and come up with adequate implementing strategies.

The kind of BSC described above is, of course, the ideal one and generally the most apparent manifestation of a functional BSC is its ability to establish company routines; the usefulness of which can be measured directly against plans and consequently against organizational goals and objectives. That said; a valid analysis of the performance of specific processes, structure, or people should be based on measurable outputs expected at the end of a day, month, or year. If a company has an operational long-term plan, then obviously, a scorecard analysis should be able to tell current company status relative to said long-term plans.

We can cay that an analysis of how the company is performing is always an ongoing activity, day in and day out. This is especially true when the outputs of established routines can be linked directly to predetermined plans. This means that standards set by balanced scorecards provide active guidance to all company activities. Thus, the process of analysis is easier and more accurate as well. Management would then have constant access to the information it needs to address emerging situations that can have negative or positive effects to the company later on. This kind of proactive analysis provided by BSCs is also the ideal.

There are many ways to analyze the efficiency of company operations. A balanced scorecard that does not provide mechanisms for evaluation or assessment can be immediately judged as defective, for how can management tell if they are doing all right or not without evaluation of performance? Some companies conduct formal and periodic assessments and some contract consultancies for systems audits. The latter may be more expensive, but analysis of company management systems, as reflected in its balanced scorecards by outsiders can definitely result to more objective and realistic findings.

Management efficiency analysis based on balanced scorecard measures is not complete when the measures themselves are not subjected to separate analysis. That would be saying that the measures are perfect and outputs falling short of expectations are always the result of inefficiency. The fact is that people can be efficient and still fall short. In the first place, objectives need to be realistic for plans and accompanying measures to be realistic as well. Thus, an analysis that deals on just quantities or statistics can hardly offer a deeper understanding of what is happening, although it can prompt management to dig deeper. Such an action will, of course, be dependent on how negative the quantitative findings are. In this kind of analysis, many important things that are not quantifiable but are equally important in that they can impact on future operations are missed.

Formulating and implementing a balanced scorecard ensures that company activities are aligned with goals and objectives. But balanced scorecard measures can be rendered useless by changing internal and external conditions or when goals are not anchored on realistic assumptions. Thus, BSC company analysis is one management function that cannot be taken for granted.