Kaplan & Norton's balanced scorecard

Question 1

What is the balanced scorecard model?

Answer 1

A strategic planning & management system which is used in organisations to align their activities to their mission & strategy.

Question 2

What does the model attempt to do?

Answer 2

Attempts to achieve a balance between financial & other measurers of performance- that can lead to sustained, long-term performance.

The model recommends that managers track a small number of key measurers that collectively measure four dimensions: financial, customer, internal business process & learning and growth.

Question 3

What are the 4 different performance measures a business should look at within the balanced scorecard?

Answer 3

Financial
Customer
Learning & growth/ organisational capacity
Internal business processes

Question 4

What are the key financial measures a business would track ?

Answer 4

Revenue
Expenses
Net income
Cash flow
Asset value
Profitability ratios
return on investment

Question 5

What key measures would a business take when looking at the customer?

Answer 5

How satisfied the customers are with the business.

• Customer satisfaction.
• Customer retention.
• Market share.
• Brand strength.

Question 6

What key measurers would a business take when looking at the internal business processes?

Answer 6

How efficient & effective the business is.

Look at quality control
Speed of new products to market.
Lead time
Unit costs
Inventory held

Question 7

What key measures would a business take when looking at learning & growth/ organisational capacity?

Answer 7

Flow of new business ideas & concepts
Employee satisfaction
Employee turnover
Employee skills & ability to keep & retain skilled employees.
Employee education

Question 8

What needs to happen to the four dimensions & what could happen if this is not done well?

Answer 8

Need to be measured, analysed & improved together, ignoring one dimension could result in the business losing balance & failing to thrive.

Question 9

What are the drawbacks of this model?

Answer 9

End up having to many measures of performance- need ensure not measuring too many pieces of data.
Need to try and find balance between indicators.
Some businesses still largely focused on financial parts- e.g. due to commission.
Therefore hard to make links with bonuses etc with the other parts of the scorecard.
It is complex & difficult to quantify.

Question 10

What are the advantages of this model?

Answer 10

Provides a broader view of how the business is performing.
It may detect weaknesses early, as well as allowing employees to see their importance within the organisation- therefore may act as a motivator.
It involves everyone in the business, not just the financial part of the business.