Balance Scorecard & Performance Sector

Question 1

Perspectives

Answer 1

4 Perspectives 
Customer perspective
Financial perspective 
Learning and innovation perspective 
internal business perspective

But also - Suppliers, Safety, Community interactions.

Question 2

Characteristics of BSC

Answer 2

• Financial and non-financial measures
• Long term (non-financial) and short term
• Leading (performance drivers such as training rates, new products) and lagging (outcome measures such as employee satisfaction and profit) indicators

Question 3

Kaplan and Norton (1996)

Answer 3

Requirements for successful BSC

1) The mission and vision statements must be expressed as an integrated set of objectives and measures
2) The strategy must be linked to departmental and individual objectives.
3) Senior management involvement
4) Managers should understand that they cannot maximise performance on all four perspectives simultaneously.

Question 4

Advantages of BSC

Answer 4

1) It prevents sub optimisation
2) Predicts future financial performance
3) Connects employees actions with companies overall mission
4) Priorities improvement initiatives
5) Stakeholder theory
6) Minimises information overload

Question 5

Limitations of BSC

Answer 5

1) it translates strategy and mission but it does not guarantee a winning strategy
2) There are practical difficulties in linking strategy to operations and using measures that translate the vision and mission of the organisation
3) Changes in the business environment may invalidate the strategy and BSC accordingly
4) Improving the three operational perspectives may not necessarily improve the financial perspective (if management does not take actions to capitalise on operational improvements)
5) The causality between the four perspectives is questionable because:
- it requires a time lag which is not part of the BSC
- the reasoning is imprecise
6) it excludes some important stakeholders such as suppliers. These perspectives can be added to a conventional BSC but how the cause-effect chain will look like

Question 6

Stakeholder Scorecards

Answer 6

• The stakeholder scorecard identifies the major constituents of the organisation - shareholders, customers, and employees - and frequently other constituents such as suppliers and the community.

Question 7

Public sector performance indicators (PIs)

Answer 7

Accountability, Equity, Control

Question 8

Measuring public sector performance through Value for Money Audits

Answer 8

Economy, Efficiency, Effectiveness

Question 9

Financial Perspective

Answer 9

To Survive (measures such as cash flow)
To Succeed (measures such as sales growth, operating income, profitability)
To prosper (measures such as market share by segment, ROE, market value of equity)

Question 10

Customer Perspectives

Answer 10

Get standard products to market sooner (lead time)
Develop innovative products (percent of sale form new products)
Customer satisfaction (customer survey, Sales growth)

Question 11

Internal Business perspective

Answer 11

Focus on processes with the greatest impact on customer satisfaction
Goals may include: manufacturing excellence, design productivity and new product introduction

Question 12

Innovation and Learning perspective

Answer 12

(Kaplan and Norton 1992)
Launch new products 
Improve time to market 
improve efficiency 
improve employee skills and satisfaction and organisation learning

Question 13

Public Performance indicators (PIs): Benefits

Answer 13

• Clarifying objectives
• Agreeing measures of activity
• Greater understanding of delivery process
• Comparing performance
• Setting appropriate targets
• Promoting accountability