Non-financial Performance Indicators

Question 1

Disadvantages of financial performance indicators (traditional method)

Answer 1

-internal focus
-manipulation of results
-do not convey the whole picture
-backward looking
-short termist

Question 2

Financial measures

Answer 2

-> provide adequate indicators of past performance but fail to signal contemporary improvement or decrement in organisational capabilities

Question 3

Importance of balanced performance perspective

Answer 3

-> having a balanced set of financial and non financial measures linked to the business unit strategy will enable companies to manage both short term and long term value creation

Question 4

Balanced scorecard definition

Answer 4

1. Approach to performance management
2. Use financial & non metrics
3. Provide a quick and comprehensive overview
4. Linked to core strategy
5. Develops business strategy

Question 5

Customer

Answer 5

-> whats important to the customer
1. Reputation
2. Quality of products

Question 6

Internal business

Answer 6

-> where we must excel
1. Employee satisfaction
2. Production quality

Question 7

Innovation

Answer 7

-> where we must develop and grow
1. Training
2. Long term investments

Question 8

Financial

Answer 8

-> what’s important to shareholders
1. Profitability
2. Cashflow

Question 9

Possible difficulties implementing the balanced scorecard

Answer 9

1. Validity of casual relationships between performance measures and objectives
2. Layers of scorecard needed
3. New data capture systems requirements to capture necessary info
4. Effective communication and participation
5. Need for training in the use of the balanced scorecard to manage performance