Balanced Scorecard Flashcards
What is the balanced scorecard?
It measures performance in 4 different aspects of achievement.
What are the 4 aspects of achievement?
1) Customer perspective.
2) Internal perspective.
3) Learning and growth.
4) Financial perspective.
Define customer perspective.
How do the customers see us.
Define internal perspective.
What must we excel at in terms of quality and customers needs.
Define learning and growth.
Can we continue to improve and create value.
Define financial perspective.
How do we look to our shareholders.
Identify and explain 3 problems which could arise when the balance scorecard is applied.
1) Poorly defined metrics - metrics need to be relevant and clear.
2) Lack of a formal review structure - Scorecard works best when reviewed frequently enough to make a difference.
3) Too much internal focus - to solve problems need to focus on external environment too.
Provide an example of each aspect of achievement.
Financial - Sales from new products and existing products.
Customer - percentage of complaints resolved or closed.
Internal - Resource utilisation ratio.
Learning and growth - Staff turnover.
What are the purposes of the balanced scorecard.
- Clarity and update strategy.
- Communicate strategy throughout the company.
- Align unit and individual goals with strategy.
- Link strategic objectives to long term targets and annual budgets.
- Identify and align strategic initiatives.
- Conduct periodic performance reviews to learn about and improve strategy.
Drawbacks of balanced scorecard.
- Doesn’t lead to a single aggregate summary control.
- Measures may give conflicting signals and confuse management.
- The organisation is recognised as separate departments instead as a set of processes.
- The approach isn’t a quick fix, takes considerable thought to develop an appropriate scorecard.
