Balance Scorecard and Strategic management systems

Question 1

Objective of performance measurement/evaluation systems

Answer 1

In order to implement corporate strategy and thus a PMS has to be tailored to specific company

Question 2

Reliance on financial measures in insufficient

Answer 2

• short-termism: long terms sacrificed as managers focus on short term profitability
• motivates managers to play the system and manage data
• lag indicators: shows past performance, does not tell how to improve (backward-looking)
• not appropriate for service companies

Question 3

Balance Scorecard (BS)

Answer 3

Set of discrete yet linked measures of business performance that provides managers with comprehensive and timely information

Question 4

Balance Scorecard combines…

Answer 4

• outcome and driver measures
• financial and non-financial
• internal and external
• short and long-term
• not limited to accounting data

Question 5

4 main perspectives for BS

Answer 5

1. financial perspective
2. customer perspective
3. internal perspective
4. innovation

Question 6

Leading vs Lagging indicators

Answer 6

Leading: identifies future non-financial and financial outcomes to guide management decision-making
Lagging: identify how the company did so far

Question 7

How balance is achieved

Answer 7

• balance set of dimensions
• balance quantitative and qualitative measures
• balance backwards and forward looking measures

Question 8

Advantages of BS

Answer 8

• used to communicate what is important to employees at all levels
• encourages employees at all levels to consider their impacts and decisions on profitability
• appropriate in various types of organizations

Question 9

Implications of BS

Answer 9

• too many measures: information overload
• review results and update measures frequently
• establish links between non-financial and financial measures