Week 10.2/ 11: Balanced scorecard

Question 1

Whys was the balance score card introduced?

Answer 1

It was developed in response to the financial performance measures limitations, such as being solely finance focused.

Also, financial performance measures wasn’t good for the 21st century due to increase in intangible assets.

Question 2

Who was the balance scorecard created by?

Answer 2

Kaplan and Norton in the 1990s.

Question 3

Aims to address the shortcomings of FPMs by:

Answer 3

1) linking performance measurement to organisational strategy
2) integrating non-financial measures into organisational performance measurement systems
3) use “leading” as well as “lagging” performance measures

Question 4

What are the 4 perspectives of BSC ?

Answer 4

1) Financial
2) Customer
3) Internal business processes
4) Learning and growth

Question 5

What are the objectives of the Financial perspective ?

Answer 5

1) Improve profitability
2) Reduce costs
3) Increase Revenue

Question 6

What are some examples of measures for the financial perspective?

Answer 6

1) Profit measures (ROI, RI, EVA, etc.)
2) Revenue measures
3) Cost reduction measures

Question 7

What are the objectives of the customer perspective?

Answer 7

1) Attracting new customers/retaining old customers
2) Customer satisfaction

Question 8

What are some example measures of customer perspective?

Answer 8

1) Market share
2) Customer satisfaction surveys
3) Repeat business
4) Sales percentage from new customers

Question 9

What are the objectives of the internal process perspective

Answer 9

1) High product quality
2) More efficient production processes
3) Optimise supply chain

(Looks from a operation POV)

Question 10

What are examples of measures for the internal business process perspective?

Answer 10

1) Defects per 1000 units produced
) Customer returns per 1000 units produced
3) Unit cost measures

Question 11

What are the objectives of learning and growth process?

Answer 11

1) Innovation
2) Dedicated employees

(looks at what the business needs to do in order to remain competitive)

Question 12

What is the cause and effect links?

Answer 12

“Better” learning and growth
causes
“Better” internal business processes
causes
“Better” customer experiences
causes
“Better” financial performance

Question 13

What are the benefits of BSC

Answer 13

1) Looks at perspectives other than financial performance alone.
2) Provides framework for linking strategic goals to performance measurement
3) Encourages managers to look at the organisation in a new way

Question 14

Limitations of BSC

Answer 14

1) expensive/ time consuming
2) Too many performance indicators could lead to information overload.
3) Difficult to establish cause and effect relationship

Question 15

How is BSC used in practice?

Answer 15

1) Widely adopted
2) Rewards/ bonuses are disproportionately weighed towards financial perspectives.

Question 16

What are the two main ways to include sustainabilty within the BSC and who introduced this?

Answer 16

By Figge et al., 2002

1) Subsumption
2) Addition

Question 17

What is Subsumption (include pros and cons) ?

Answer 17

Inclusion of social and environmental objectives within the existing perspectives. E.g. equality in learning and growth.

ADV: Incremental change can make sustainable chnage more accepted.

DIS: The overal mission is to increase profits.

Question 18

What is addition (provide pros and cons) ?

Answer 18

Inclusion of a fifth perspective wholly dedicated to social and environmental issues

ADV: More focused and direct.

DIS: Sustainability goals less integrated with existing strategies and objectives

Question 19

What is one problem when making a BSC?

Answer 19

Strategic objectives are often difficult to translate into practical measures – need to use imperfect proxy measures