MA - Balance Scorecard (Overview & In-depth) Flashcards
Explain what strategic mapping is
Strategic mapping is - a visualization process designed to communicate and validate strategy
- Is a performance measurement and management system
What is the three steps process to create a BSC
- Develop the organization’s strategy, through a process such as strategic planning
- Map the strategy using the strategic mapping process
- Build the BSC based on the strategy map
Provide three examples of how generic strategic mapping is used.
- Financial - Revenue growth strategy, Productivity strategy, Asse utilization
- Customer perspective - Add/retain high-value customers, increase revenue per customer, reduce cost per customer
- Internal business process - Customer management leadership, internal operation excellence, effective governance & control, Public relations
- Learning & growth - Human capital, information capital, organization capital
How are the four balanced scorecard perspectives used
- Financial - how organization is seen by its owners and investor
- uses the more traditional measures of financial performance
Ex. Return on asset, excess of revenue over expenses, equity, capital employed - Customer - how the organization is seen by customers and the market
Lagging indicators - information represents what has happened in the past
Leading indicators - insights into the future performance - Internal business process
- Focuses on the organization’s core competencies and the areas where are needed
Ex. Service delivery, number of manufacturing defects, variance analysis of standard cost - Learning and growth
- Perspective is concerned with the ability of the organization’s people to change and improve.
Intellectual capital and continuous learning
- BSC have an interrelated cause and effect flow
- Management can use MSC to justify hard to explain budget and expenditures on developing employees’ skills
Explain the difference between Goals, Measures and Target
Goals - What the organization strives to achieve
Measure - What the organization will track to determine if it has met its goals
Target - How the organization determines whether it has met its goals
What are the advantages and disadvantages of BSC
Advantage
- Help align with operational activities
- Facilitates strategic discussion at the senior management and board level by illustrating the organization
- Provide balanced view of performance, including both financial and non-financial measures and leading and lagging indicators
Disadvantage
- High cost of implementation, and its results are good only if the organization take the time to set out well-developed objective
- Organization metrics must be relevant to the situation and strategy
- Managers tend to focus only on the goals they will be measuring, rather than overall organizational success
What are the 6 steps of building a strategy map
- Specify an overriding objective - very brief statement of what the organization needs to over the used is as follows
- Determine the dominant value proposition - differentiating set of offering that customers place high value on
- Choose the key financial strategies - optimal mix of revenue growth, productivity, and asset utilization for achieving the overrising objective
- Choose the key customer strategies - key decisions around both revenue and customer-related reduction necessary to achieve the financial strategies
- Executive through the internal perspective strategies - set of action that need to be carried out to realize the plans and strategies that have been made to win the marketplace
- Plan the learning and growth strategies
What is the four-step approach to building BSC
- choose the perspective framework
- Financial, customer, internal business process, learning & growth - pick the goals for each perspective
This means there should be a different set of foals for financial, customer, internal business, and learning and growth - Establish the appropriate measure that will accompany each BSC goals
- Just the measure is being selected, not the target or how the result will be assessed. - Decide on the specific quantitative representation or target that will later indicate
- Use the SMART approach (Specific, measurable, attainable, realistic, timely
What are the practical tips
- Each perspective should contain four to seven goals. Having fewer than four creates a risk of a perspective being underrepresented more than seven makes tracking cumbersome and can take
- There should be a blend of leading indicators and lagging indicators
- The quality of measures provided in a BSC is more important than the quantity. High-quality measures are linked in a meaningful way to the organization’s goals.
