Further Aspects Of Performance Analysis

Question 1

What are the four perspectives of the Balanced Scorecard?

Answer 1

1. Customer
2. Internal business process
3. Learning and growth
4. Financial

Question 2

How do our customers see us describes which of the four perspectives of the balanced scorecard?

Answer 2

Customer perspective.

Question 3

At what must we excel? Falls under the ________________ perspective.

Answer 3

Internal business process perspective

Question 4

The learning (or innovation) and growth perspective focuses on what?

Answer 4

How can we continue to grow and change in the modern dynamic business environment?

Question 5

How do we look to shareholders? Falls under which perspective?

Answer 5

Financial perspective

Question 6

What is an objective?

Answer 6

A specific, measurable statement of what will be done to achieve goals within a defined timeframe.

Question 7

What is a performance measure?

Answer 7

A quantitative or qualitative characterization of performance used to evaluate progress toward an objective.

Question 8

Define a lagging indicator and state which of the perspectives of the balanced scorecard is a lagging indicator.

Answer 8

Lagging or downstream indicators show the effect of decisions long after they are made. The balanced scorecard refers to financial measures as a lagging indicator because that performance results from past decisions.

Question 9

What is a leading indicator and what which performance indicators are examples of same?

Answer 9

Leading or upstream indicators drive future financial performance. These are the non-financial performance indicators relating to customers, internal business processes and learning and growth.

Question 10

What are the advantages of the balanced scorecard?

Answer 10

1. It leads to a wider view of performance rather than concentrating on the financial aspects of performance. Managers are unlikely to distort the performance measure as poor performance is difficult to hiding using multiple measures.
2. It takes a long-term perspective of business performance and links performance measurement to the organizations’s objectives and therefore it’s strategy. This ensures that what is measured is relevant to the strategy and objectives of the organization.
3. Using only a small number of KPIs ensures that management is able to concentrate on the most important aspects (ie what gets measured gets done) and not be confused by an excessive number of performance indicators.

Question 11

What are the disadvantages of the balanced scorecard approach?

Answer 11

1. Introducing the balanced scorecard would require training and a change in culture. Managers and staff may initially be sceptical.
2. Identifying the most appropriate measures may be difficult.
3. Obtaining the data to determine whether some of the measures have been achieved may be hard.
4. The balanced scorecard focuses only on the needs of two stakeholders - owners and customers; it ignores the needs of other groups, such as employees.
5. If management is not sufficiently selective in its choice of appropriate KPIs, managers have to analyse a large number of KPIs, some of which may conflict with each other, and have to determine which give the most significant results.