Week 11- Balanced Scorecard and strategic management systems

Question 1

what is the balanced scorecard?

Answer 1

a way to assess performance using both financial and non-financial measures

Question 2

why is a reliance on financial performance measures problematic?

Answer 2

✓ Business unit managers might feel under pressure to meet short-term performance measures
✓ Short-termism: Long-term profits may be sacrificed because managers focus on short-term firm profitability
✓ Motivates business unit managers to play the system by setting easy profit targets for example
✓ Lag indicators: financial measures look at the past actions of the business and they are reflected in today’s performance measures
A problem in using financial measures like ROI and EVA is that they are “backward looking”
✓ Not well-suited in a service economy

Question 3

what impact can reliance on financial performance measures have on a business?

Answer 3

Can lead to suboptimal decisions and actions

Question 4

what are some examples of non- financial performance measures?

Answer 4

customer service, market performance, innovation, goal achievement, employee involvement

Question 5

what are the four perspectives of the balanced scorecard?

Answer 5

– customer ( how do our customers perceive us)
– Financial ( how do we appear to shareholders)
– Internal ( At what processes should we excel)
– innovation ( What should we learn to grow and prosper)

Question 6

what are some of the ways you can measure financial performance?

Answer 6

Profit, cash flow, Return on Investment (ROI), Earnings per share (EPS), market share

Question 7

what are some of the ways you can measure customer performance?

Answer 7

customer satisfaction, quality, cost

Question 8

what are some of the ways you can measure internal performance?

Answer 8

Activity-based costing (ABC), Just-in-time (JIT), Total quality
management (TQM), reengineering

Question 9

what are some of the ways you can measure innovation performance?

Answer 9

New products, new processes, new competencies

Question 10

what are leading indictators?

Answer 10

measures that identify future non-financial and financial outcomes to guide management decision-making

Question 11

what are lagging indicators?

Answer 11

are measures of the final outcomes of earlier management plans and their execution

Question 12

what are the benefits of the balanced scorecard?

Answer 12

1. Encourages all employees to consider the impacts of their decisions on profitability
2. Appear to work in various types of organisations

Question 13

what are the costs of the balanced scorecard?

Answer 13

1) Choosing and validating measures

2) training and iterpretation activities

Question 14

what is the impact of leading indcicators on motivation?

Answer 14

Increases employee motivation becaiuse employees can see what needs doing and the steps that they need to take to achieve a goal.