Development Of Balanced Scorecard In Malaysia Accounting Essay


Nowadays, the performance of a firm is easily influenced by the trend of global market and therefore it is essential to employ specific performance indicators into their business in order to compete with competitors. These performance indicators may including the combination of financial; competitor; human resource; market or customer; internal business progress; and environmental indicators that are suitable to their requirements and situation (D'Souza, 2000). The method of monitoring the performance of a firm should also be dynamic in order to adapt to internal and external changes. However, most of the firms are heavily dependence on financial or accounting measures that failed to measure operational performance and thus it is difficult for firms to accommodate with their internal changes. One of the most notable performance monitoring tools, Balanced Scorecard can helps those firms solving their problem by providing multidimensional view of performance measurement which include financial and non-financial measures. So, what is the 'Balanced Scorecard' actually is?

1.0.1 General view of Balanced Scorecard

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According to Kaplan and Norton (1996), "the Balanced Scorecard translates an organization's mission and strategy into an extraordinary, comprehensive set of performance measures and provides the framework for strategic measurement and management". Balanced Scorecard can also be explained as "an essential aspect of the Balanced Scorecard is the articulation of linkage between performance measures and strategy objectives, once linkage is understood, strategic objectives can be further translated into actionable measures to help organizations improve performance" (Banker, 2004). The Balanced Scorecard provides a strategic framework that involved the use of both financial and non-financial measures to measure firm performance in multidimensional view. Basically, there are four perspectives in Balanced Scorecard namely financial, customers, internal processes, and learning and growth perspective. The last three perspectives (customers, internal processes, and learning and growth) are used to supplement traditional financial measures for the purpose of non-financial measures (Koh, 2001).

1.0.2 History and development of Balanced Scorecard

Dated back to two centuries ago, the idea of measuring the performance with an objective to improve it was first presented by Lord Kelvin, a British scientist. The initial step towards Balanced Scorecard was taken when a company named General Electronics in 1950s presented the method of measuring divisional performance using a combination of financial and non-financial matrices (Iqra Abdullah, 2013).

In the era of 1975 to 1990, Japanese Management Movement contributed important move towards Balanced Scorecard when Japanese companies challenged western corporate world by bringing new principles such as Just-In-Time and Total Quality Management. In that era, western management was short term and financial performance oriented. The organizations were dissatisfied with performance measures in that time because these measures were giving misleading information. Therefore, a framework that can evaluate the performance of organization from multiple dimensions and provide the information about financial and non-financial performance was required.

In the year of 1992, Balanced Scorecard that 'translates the strategy into action' was introduced by David Norton and Robert S. Kaplan in a Harvard Business Review article to overcome the issues faced by organizations (Iqra Abdullah, 2013). The article was based on a research project conducted in 1990 that studied the performance measurement of companies that used intangible assets in value creation. The initial Balanced Scorecard measures the performance of firm from 4 dimensions: "How do our customers perceive us (Customers)? At what we should excel (Internal Processes)? How can we create value and improve (Learning and Growth)? How do we look at our stakeholders (Financial)?" (Sawalqa, 2011).

In 1993, Kaplan and Norton realized that common problem faced by different organizations is to align their long term strategies with short term actions after considering the interview of executive vice president of FMC Corporation whose had implemented Balanced Scorecard after the publication of their article in 1992. Therefore, they presented the four new management processes (translating the vision, communicating and linking, business planning, and feedback and learning) that separately or in combination with dimensions of Balanced Scorecard link the organization short term actions with the long term strategies (Kaplan R. a., 1996). The definition of Balanced Scorecard then changed from 'an improved measurement system to core strategic management system'.

In 2001, Kaplan and Norton introduced five principles of Balanced Scorecard that can turn an organization to a strategic focused organization. These principles are: translating the strategy into operational terms, alignment of organization with strategy, everyone must be involved in strategic process, make the strategy a continual and long term mobilize and process the change through top management of leadership. Within these five principles, there are several new element added to the theory. For example, strategy map, personal scorecards, balanced paychecks, strategic and operational budgeting, open reporting, and change management.

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In the same year, Kaplan and Norton realized that financial dimension of Balanced Scorecard caused difficulties to non-profit organizations and government agencies as this dimension is not the prime objective of the organizations. Thus, they modified the framework of Balanced Scorecard in which financial dimension was described in the three heads: cost of providing social service, value of the services provided by agency and cost of legitimizing authorities.

In 2007, Balanced Scorecard was linked with different initiatives of organizational improvements that were operational linkage, customer linkage, profitability linkage and budgeting linkage (Iqra Abdullah, 2013). As it was adopted by thousands of private, public, and non-profit organization around the world, Kaplan and Norton then extended and broadened the concept into a management tool for describing, communicating and implementing strategy (Kaplan R. S., 2010).

About the future of Balanced Scorecard, Robert S. Kaplan in the following words said that:

"The Balanced Scorecard will probably be around but there will have been developments. The strategy map is intuitively very appealing and will be used more often in concurrence with the Balanced Scorecard. Supervisory boards will focus more and more on monitoring and guiding the strategy of a company, using the Balanced Scorecard. There will be more annual reports that are arranged according to the Balanced Scorecard. We will see better ways of measuring the data needed for the Balanced Scorecard. ………. Techniques for better measuring innovation, employee capabilities, information system alignment, climate, culture, and customer success will certainly improve in the next ten years. ………." (Waal, 2003).

1.0.3 Development of Balanced Scorecard in Malaysia

In overall, the Balanced Scorecard is still not so 'famous' in Malaysia. There are several companies in Malaysia adopted the Balanced Scorecard but the amount of adopters are not so stimulated. Meaning to says, the amount of Malaysian adopters of Balanced Scorecard is still very little. There is one research paper prepared by Rozhan Othman (2005) shows the number of Balanced Scorecard adopters in Malaysia. The purpose of this research paper is to show the effects of the development of casual model of the strategy in the implementation of the Balanced Scorecard in Malaysia from year 2000 to 2005. Based on one of Othman's finding, there are 17 firms of 38 respondent firms have adopted the Balanced Scorecard. The earliest adoption of Balanced Scorecard in Malaysia was in year of 2000. Table below shows the number of adopters of Balanced Scorecard from year 2000 to 2005 in Malaysia:

Year of adoption





















Not reported





Source: Othman, R. (2006). Balanced Scorecard and casual model development: preliminary findings. Management Decision Vol.44 No.5, pp. 4.

There are an increased number of Balanced Scorecard adopters from year 2000 to 2003 but it is declined in the following years. The research paper shows some reasons of this phenomenon. Based on survey conducted, Othman found out that it is more difficult to developing reward and incentives for managers who were responsible for non-financial measures in Balanced Scorecard. On the other hand, some firms responded that it is more difficult to develop non-financial than financial measures and it is caused a lot of difficulties in order to cascading the scorecard. Besides, development of Balanced Scorecard takes longer time.

In this research, researcher adopted the mail survey in order to collect data. On the other hand, the sample of Othman's research consisted of randomly selected public listed companies. If the public listed company is a holding company, its subsidiaries were chosen for the study. The total number of companies chosen was 311 firms but only 38 companies responded to the survey.

2.0 Common Characteristics of Balanced Scorecard

Generally, the balanced scorecard is a performance management tool which consists of a combined set of performance measures that are derived from and support an organization's strategy. According to Kaplan and Norton (1996), "the balance scorecard translates an organization's mission and strategy into a comprehensive set of performance measures and provides the framework for strategic measurement and management". In addition, Kaplan and Norton describe the innovation of balance scorecard as follows:

The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation. (1996)

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Basically, the balanced scorecard grouped the performance measures into four groups illustrated in figure 1-1: financial, customer, internal business processes, and learning and growth.

Figure 1-1 Adapted from Robert S. Kaplan and David P. Norton, "Using the Balanced Scorecard as a Strategic Management System," Harvard Business Review (January-February 1996): 76.

From the financial perspective (how should we appear to our share-holders), it describes the tangible outcome of the strategy in terms of traditional financial measures such as shareholder value, revenue growth, return on investment (ROI), and lower unit costs (Kaplan & Norton, 1992). At here, it shows that Kaplan and Norton have not disregard the traditional need for financial data as traditional financial measures are still needed in order to measure past performance. In fact, the financial data will be vital for managers in their decision making as accurate and timely data will lead them to better decision making especially in decision that involved a large chunk of money.

Secondly, the customer perspective (how we should appear to our customer), according to Kaplan and Norton (1992), it states the drivers of revenue growth. It consists of general customer outcomes such as satisfaction, retention, growth and acquisition. Besides, it helps to differentiate value proposition the organization intends to offer in order to generate sales and obtain loyalty from customers. For example, an organization should analyze its customer in terms of types of customers and kinds of processes in which it provide its products to those customer groups in developing metrics for satisfaction.

Thirdly, Kaplan and Norton (1992) describe the internal process perspective (what business process must we excel at) as the process of identifying the operating, customer management, innovation, and regulatory and social process objectives for creating and delivering the customer value proposition and improving the quality and production of operating processes. In this perspective, managers should be allowed to know their business progress and whether their products and services satisfied the customer.

Last but not least, the learning and growth perspective (how will we sustain our ability to change and improve), as accordance to Kaplan and Norton (1992), it identify the most important intangible assets to the strategy. It aims to identify the human capital, information capital and organization capital that are needed to support the value creating internal processes. In addition, Kaplan and Norton also emphasize the need of "learning" rather than "training" as they continue by their claims for things such as mentors and tutors to be included within an organization.

3.0 The Importance of Balanced Scorecard

Basically, an organization will be guided through the balanced scorecard four perspective: financial, customer, internal business processes and learning and growth to do analysis on its performance as a whole. These four perspective are linked to each other as the success of one perspective will leads to the success of the other perspective. Through the four perspective, it is important for an organization to see whether they are going in the right direction and still in line with their vision.

First and foremost, the balanced scorecard is important for a company as a medium of communication to all members of the company from the top managers to lower level employees. This is supported by the facts that balanced scorecard was used in determining the objectives, measures, targets and the initiatives to achieve it. In addition, the balanced scorecard make each person in the company aware of their roles and motivate them to carry out their duties and responsibilities. This indirectly will lead to contributions from each of the employees towards the success of an organization.

Secondly, balanced scorecard can be served as an important tool in measuring the financial status of an organization. As we know, money is the lifeline of a business and the most significant asset for an organization aside of the human capital. Hence, it is vital for an organization to have a good performance measure in terms of their financial condition. Through the balanced scorecard, the company will be well-informed on their financial status and capabilities. They will at least have the knowledge on their capabilities to spend, to gain money as well as to sustain their business with the available funds. Yet, an organization must keep track with their financial data as it will be disastrous if the financial data is not manage properly. At the same time, an organization can create new ways to earn more profit as the balanced scorecard deals with strategy and the financial perspective will lets the organization to execute certain strategy based on their current available balance.

Thirdly, the balanced scorecard is important for an organization to set their goals. It is because the balanced scorecard approach can help to set an organization goals by giving appropriate weight to both financial and non-financial measures. This can be made possible as the balanced scorecard start with the vision and strategy that drives the business. From here, the balanced scorecard help to develop targets that measure progress towards success from the drivers of success identified for the organization vision. As the targets are well-informed, an organization will more likely to be success in achieving their goals as well-managed employees will work towards the goals. In addition, the employees will alter their efforts by focusing on the goals set to ensure the successful delivery of an organization vision.

Other than that, the balanced scorecard is important for an organization as a tool in measuring the incentives that will be given to each of the employee. In order to give incentive compensation such as bonuses, salary increase and promotion, an organization should has a performance measurement tool as their assistance in making such decision. However, with the use of balanced scorecard, an organization can tied the incentive compensation to the balanced scorecard performance measures. Though, managers must make sure that the performance measures use on those who are being evaluated are sensible, reliable, understandable and not easily manipulated. As Kaplan himself, one of the originators of the balanced scorecard, once mentioned in his interview with the CFO Magazine in year 2001, " Compensation is such a powerful lever that you have to be pretty confident that you have the right measures and have good data for the measures before making the link".

Besides that, the balanced scorecard is important for an organization in determining the key drivers for future performance. The balanced scorecard can help to identify the key drivers for future performance by grouping those key drivers in its four perspective. For example, the balanced scorecard has stated the drivers for revenue growth in its customer perspective. It is important for an organization to determine the right drivers along with the key performance indicators for each expected future outcomes. This is to ensure that the desired outcomes will be achieved if the performance indicators is related to the possible outcomes. Furthermore, it can lead to the increase of focus on the particular business strategy that can achieve the desired outcomes. With the more focus on the particular business strategy, the employees will be more aware and motivated with their own roles towards the achievement of the organization goals.

4.0 Advantages and Disadvantages of Balanced Scorecard

Kaplan and Norton developed the Balanced Scorecard (BSC) with masters in management accounting, to provide four perspectives in management and evaluation of corporate performance or value to managers (Kaplan and Norton, 1996a, 1996b). They also point out that the implementation of the BSC is to attain the following goals: (1) Clarify and translate vision and strategy; (2) communicate and link objectives and measures; (3) plan, set targets, and align strategic initiatives; and (4) enhance strategic feedback and learning.

Kaplan and Norton created the balanced scorecard to help business owners capture a wide and balanced view of their company's performance. The balanced scorecard focuses not only on the financial aspects of the business, but also on customer relations and reactions, internal business processes, learning and growth. The balanced scorecard gives executives and senior management an actionable outline of goals and strategies to increase or maintain performance levels. This method of resource management allows for clear communication between various levels of management by providing an exacting framework for reporting.

A balanced scorecard is a management tool that businesses use to track how well a staff of people executes their required activities. The balanced scorecard tracks the objectives, measures, targets and initiatives of each subset. It also raises innovation and process improvement methods such as six sigma and lean manufacturing to a corporate goal. It also ensures that voice of the customer is equally important. The scorecard has improved some businesses, but it is no cure-all, especially for companies who have shaky finances and not enough time to implement a company-wide plan. The advantages of the Balanced Scorecard are well publicised, but, it has its own problems or disadvantages like any business process or application as well.

4.1 Advantages

First of all, BSC provides a broad consideration of all business aspects, both financial and human. It is a performance management tool, used to improve the organization value creation flow with a more integrated viewpoint (Fletcher and Smith, 2004). The balanced scorecard also encourages managers to better understand the multiple aspects of performance. It can help an organization to manage its changes, and help managers to develop the entire evaluation mode of influencing corporate value (Barsky and Bermser, 1999; Norreklit, 2003; Davis and Albright, 2004).

Apart from that, BSC takes into consideration how each part affects another, rather than just focusing solely on the performance of one particular aspect. Once a balanced scorecard system is in place, it allows for ongoing monitoring of goals and objectives. Therefore, it helps in diagnosing difficulties ahead before they arise or maybe evolve into huge disasters. Unlike traditional methods of tracking the financial health of a business, the balanced scorecard gives you a full picture as whether your company is meeting its objectives. While it may seem that a company is doing well financially, it may be that customer satisfaction is low, inadequate employee training, or that the particular business processes are outdated.

Besides that, the balanced scorecard allows a comprehensive view of all functions that affect business performance, not just financial results. Balanced scorecards include key performance indicators in each of the employee, internal processes, customer, and financial categories. These KPI are specific to the business and chosen to support the corporate strategy. For example, if a company believes financial success depends on having well-trained employees, efficient production processes and satisfied customers, then performance in each area would be reported in the scorecard. Once the KPI have been identified, they must be measured. Financial performance is measured by metrics such as profit margin, while nonfinancial areas need nonfinancial measures. Employee skill can be measured by the amount of training completed, production efficiency by the amount of materials or time required per item, and customer satisfaction by number of complaints. Hence, company performance in all categories can then be easily presented in a balanced scorecard and compared with the desired targets.

Likewise, by using the same key performance indicators and metrics consistently, improvement can be tracked over time. In fact, balanced scorecards are often used in companies with continuous improvement programs. It allows comparison to be made with company targets and industry benchmarks. BSC can provide concurrent consideration of both the leading and lagging factors of performance evaluation, both financial and non-financial, internal and external business, qualitative and quantitative measurement, as units of a performance measurement track to successfully attain corporate strategy, objectives and missions (Barsky and Bermser, 1999; Huefner, 2002; Fletcher and Smith, 2004) that is, to clarify strategy and translate it into action. Moreover, the balanced scorecard can be a leading indicator of a company's success if used properly. In the contrary, financial indicators such as profit and revenue are lagging indicators since they have already occurred. For example, a scorecard that evaluates a sales department will count the number of leads generated, follow-up calls, in-person meetings and closing documents offered. A marked increase in all of these numbers predicts future sales growth for the firm. The financial indicators are well balanced with customer processes and growth dynamics focused indicators. It is not about unduly favoring one type of performance to the detriment of other components. The integration of the dynamic perspective of growth is also one of the strengths of this method.

BSC can clarify mission and long-term strategy, and to translate vision in terms of all the structures in an organization (Bontis et al., 1999). It gives significant information on organization performance. The aim of each organization is making profit. Yet, it is not an easy task to succeed if the company does not have a strategic goals nowadays. Strategic aims suggests that executives review information from BSC to become prepared for likely complications. Sure, it is preferable to fix issues in which a couple of solutions have been presented. Therefore, BSC is employed while the strategic aims standards can be altered. A company must be sure that any strategic action implemented matches the desired outcomes. Meanwhile, BSC system also offer signals on bad effectiveness as well as blunders in management.

A balanced scorecard is not just a measurement tool, it is a communication tool. This method of resource management allows for clear communication between various levels of management by providing an exacting framework for reporting. Its unique characteristics of being simple and concise format conveys all the essential information about the company's strategy and performance in one page. Therefore, it can be used to educate the employees on company strategy and demonstrate how their work affects overall performance. It can also be used for internal performance and continuous improvement to outside stakeholders such as investors, lenders and the community.

By using a balanced scorecard approach, the immediate future is not the only thing being evaluated. Often, when an accountant observes the financial bottom line (perhaps the company is not doing well), suggestions given are immediate, rather than looking for long-term purposes. Thus, balanced scorecards can allow stakeholders to determine the health of short, medium, and long term objectives at a glance. The Dow Jones Sustainability Indexes defines corporate sustainability as "a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments." The balanced scorecard method can be adapted to this model to include environmental, social and economic factors. For example, environmental performance can be measured and tracked in terms of carbon footprint or compliance to environmental law. Social performance can include support of community groups and charitable organizations. Companies can measure and communicate their sustainability strategies to internal and external stakeholders by using the balanced scorecard.

Finally, BSC system is an easy platform. Users will certainly have to have balanced scorecard software that is generally simple to apply. Therefore, directors and staff members also do not require state-of-the-art technical specialty on know-how to deal with balanced scorecard system. It would not necessarily mean, however, that beginners may implement BSC system immediately.

4.2 Disadvantages

Due to the facts that the balanced scorecard looks the affect as a whole, the performance and encouragement of the individual can be lost. For many companies that are not very inclined towards individuals and the organizational culture, implementing the balanced scorecard can be viewed as establishing new monitoring tools rather than genuine performance measurement tools. The large number of variables taken into consideration to form a viable scorecard can be cumbersome and result in unnecessary jobs itself. The balanced scorecard is also the tool for the internal focus and it largely ignores developments of the external business environment. It focuses on selective shareholders and customers and fails to consider the activities of competitors and interest groups such as suppliers.

Although the balanced scorecard is being praised for balancing both financial and non-financial metrics, it has been criticized for being solely focused on balanced information. Thus, if the scorecard fails to include financial and non-financial objectives, it loses its value as a strategic tool. This limitation is worsened by the fact that balanced scorecards do not define an acceptable balance between the two. The financial information included on the scorecard is limited. However, to be successfully implemented, the balanced scorecard must be part of a bigger strategy for company growth that includes thorough accounting methods.

The balanced scorecard takes forethought. It is not a quick fix and it takes considerable thought to develop an appropriate scorecard (Beverly Dianne Calhoun, 2004). It is not a tool that just provide quick solution for a problem. Instead, it is recommended that people hold a meeting to plan out what goals that company would like to reach and achieve. Once the company have clearly stated its objectives, management can then begin to break down these objectives in what company need, financially, to bring these objectives to fruition. Besides, many companies use metrics that are not applicable to their own situation. It is notably important that the information being tracked while using the balanced scorecards is applicable to company needs. Otherwise, the metrics will be meaningless.

Besides, the different elements that go into creating a balanced scorecard make it less attractive. Once the scorecard is created, the nature of business can change over time, requiring the company to change the scorecard. There are software programs that can manage the scorecard upkeep, but choosing the wrong one may set back the company's ability to evaluate their employees. If the company cannot put in the time to create and change the scorecard, it might not be a good solution for the business.

Furthermore, balanced scorecard does not include direct financial analysis of economic value or risk management. Goal selection under balanced scorecard does not automatically include opportunity cost calculations. As the balanced scorecard can add a new type of reporting without necessarily improving quality or financial numbers, it can seem to be an additional set of non-value-added reporting or, even worse, a distraction from achieving actual goals. Overly abstract balanced scorecard goals are easy to reach but hard to quantify. When a company failed to meet its balanced scorecard goals, the goals need to be re-interpreted to the current state of affairs to meet success or avoid failure.

Moreover, implementing a balanced scorecard system can be costly in terms of training time and additional expenses for any consultants that are required during the process. To figure out the initial cost for a balanced scorecard plan, the company must take the number of employees training in the new system and multiple their wages by the amount of hours they will be trained. In fact, the cost of a facilitator of the plan, cost for the software, and labour needed to maintain it, plus software license expenses, and testing and installation of the software are additional costs. In conjunction, there will be maintenance costs for both the software and the training.

Due to the high initial costs of the program mixed with the time spent on developing the employees, the balanced scorecard program may make a company appear to be not maximizing its own wealth. Shareholders who want the company to make money as much as possible may feel that the balanced scorecard plan wasted the money of company. While this is debatable throught the claims that developed employees will create more results, it will not be entirely evident to shareholders in the short term.

Other than that, the balanced scorecard is essentially a large chart that gives people a top-down overview of the entire company. It does not, however, provide the ideas to improve the performance of the company. The balanced scorecard acts as a fact sheet, but it requires that the management of the company analyze the facts and come up with the evaluation and suitable strategy. It will not be the solution for all of the company's problems and must be combined with a larger overall strategy in order to achieve its potential benefits for the company.

Meanwhile, data mining is also a negative aspect of the balanced scorecard because of the need to continually obtain relatively obscure information from managers. Employees may feel they are preoccupied and do not have time to fill out forms or data for every action they take. As a consequence, this may harm the productivity of company.

Given that many of the advantages are of an intangible nature, it would be difficult to quantify them in a robust manner and to obtain satisfactory scientific evidence of the true value of the balanced scorecard (Stella Mooraj, 1999). Since there are various advantages and disadvantages of balanced scorecards, it is important for company to recognize whether the BSC is truly beneficial to be fully integrated into accounting system. If the company relies upon the balanced scorecard as its sole metrics for measuring performance, it will likely be disappointed. If, instead, the balanced scorecard is used as a shorthand glance at the health of the company, the tool can be quite effective.

5.0 The Challenges in Implementation of Balanced Scorecard

One of the challenges in implementing the balanced scorecard (BSC) is there are few measures can be found in each of the perspective mentioned in the framework of BSC. For information, BSC contains performance drivers (leading indicators) of the company's strategy and the outcomes of the strategy (lagging indicators). However, an appropriate combination of both the leading and lagging indicators should be made in order to have a good BSC. Hence, when an organization constructed too few measures in each of the perspective exist in BSC, it fails in achieving the balance between both the mentioned indicators as well as financial and non-financial indicators. In other words, it can be simply said that there is a need of balance between the leading and lagging indicators in constructing BSC.

The second challenge is the making of a quantitative link between the non-financial leading indicators and expected financial results. As we know, the financial measures are the lagging indicators that categorized as dependent variables and retrospective in nature. Yet, to generate linkage between non-financial performance measures and the expected financial results can be difficult and even pointless in generating it. It is simply because the time-lags exist between the action and results is unpredictable as it might take longer time than what have been expected. In addition, there might be several factors such as the impact of apparently insignificant decisions and diverted resources can influence the results. Therefore, it will be a huge challenge for a manager to create link between the non-financial leading indicators and the expected financial results.

The third challenge is to encourage involvement from the organization as a whole. Basically, to build and support the implementation of BSC in an organization, the senior leadership team musk work side by side in setting the objectives, measures and targets. As we know, to change an organization perception towards BSC should be led from the top as the top-down approach will most likely excel in promoting the BSC. It is because without commitment from the senior management team, there will be no shared commitment among the employees within the organization in order to align and implement BSC successfully. Furthermore, when there is proper communication exist between top management and the lower level employees, the BSC will be communicated through the organization in a more efficient yet effective manner. In the meantime, the strategy and action to support the implementation of BSC need to be shared among the members of the organization. This is vital in ensuring the significant process improvements throughout the organization so that not only high level goals will be achieved, but also successfully generate the required bottom line result. This can be done, however, by subdividing the high level goals into sub process level in which the actual improvement activities take place.

The fourth challenge is to ensure the efficiency of data collection process and reporting in BSC. Since BSC first introduced by Kaplan and Norton in year 1992, there have been many critics towards the data collection and reporting lies within the BSC. One of the most notable critics is there is a lack of efficient data collection and reporting in BSC. This is due to the facts that many organizations have overemphasized the financial metrics rather than balancing the other metrics along with the financial metrics. This is because the existing systems within most of the organizations have already support the needs for collecting and reporting financial measures. Nonetheless, most of the organizations seems to have ignored the importance of defining only the vital metrics and allocation of resources towards the achieving good results for those metrics. They tend to give excuse by saying that data collection process for metrics consumes a lot of time and efforts. Thus, in order to ensure the efficiency of data collection and reporting throughout BSC, there is a need of prioritize the key performance indicators to make sure the investment in metrics is spent on the information that will be most relevant in improving the performance of an organization as a whole.

Last but not least, the final challenge will be how to keep the BSC development process short. As we know, BSC is one of the most comprehensive performance measurement tools that includes both financial and non-financial measurements. Yet, it development process can be complicated as it involved the organization as a whole. Besides, the setting of leading and lagging indicators in each of the BSC perspective can be time-consuming as well as the data needed for each of the perspective can be costly in terms of money and time. For that reason, there is a need for an organization to keep the development of BSC short due to the facts that strategy might change if the implementation process takes too long. In fact, some of the indicators might become obsolete and require changes as measuring with wrong indicators can lead to distraction of an organization from its strategy. Nevertheless, an organization must find an optimal period of time for the BSC implementation as short development process might not justifiable in nature.

6.0 Conclusion