Balanced scorecard

Question 1

What are the 4 aspects of the balanced scorecard?

Answer 1

Financial,
Internal Business,
Customer
Innovation and learning

Question 2

Shortcomings of relying on only financial performance measures

Answer 2

• Encourage short term actions
• May not make investments that promise long-term benefits if they hurt short term results
• Distorts communication
  motivation to manipulate data
• Pressure to deliver to stakeholders

Question 3

Common themes of Multi-dimensional frameworks

Answer 3

• Link with organisational strategy
• Include external and internal measures
• Incorporate financial and non-financial
• Make explicit trade-offs between measures
  (Fitzgerald 2007)
• indicators and targets

Question 4

The Balanced Scorecard (Kaplan and Norton 1992)

Answer 4

Attempts to communicate strategy and align everyday work with strategy.
- Financial, non-financial.
- Short term and long term
- Monitors and measures progress

Question 5

Learning and Growth

Answer 5

Long term growth. Innovations/continual improvements that add to firm value
e.g. training, R&D

Question 6

Internal Business Process

Answer 6

Core competencies and encouraged improved performance.
e.g. Internal operations, production processes, supply chain, deliveries

Question 7

Customer

Answer 7

Customer satisfaction and meeting customer needs
e.g. on time deliveries, customer retention, customer ratings and satisfaction scores

Question 8

Fincancial

Answer 8

Financial goals/targets, showing if strategy and implementation improve bottom line results
e.g. Profitability metrics, cost reduction, ROCE, ROE, increase in revenue or market share

Question 9

Cause and effect relationship

Answer 9

Kaplan & Norton 1996
The 4 perspectives are linked together with a cause and effect relationship

Question 10

Benefits of BSC

Answer 10

Organisations best interest
Focus on critical areas of the business
Linking perspectives
Link strategy to performance management

Question 11

Implementation issues

Answer 11

Top management commitment and employee involvement
Requires frequent reviews
Difficult to create links between non-financial and financial measures.
- Avoid measurement overload
- Link to incentive schemes
- Subjective and time lags

Question 12

Critisisms

Answer 12

• Malina and Delto 2001- if strategy not clearly defined
• Ittner and Larcker 2003 - lack of casual links between non-financial and financial
• Norreklit 2000 - overemphasis on measuring and quantifying. what about other things that are harder to measure?