Week 6 - Balanced Scorecard and MD Models

Question 1

what is a balanced scorecard?

Answer 1

• Translates mission and strategy into a comprehensive set of performance measures
• highlights the non-financial objectives that an organisation must achieve in order to meet its financial obligations
• provides a framework to describe the key elements in the achievement of strategy

Question 2

Three types of balanced scorecards?

Answer 2

1. Type 1: a specific multidimensional framework for strategic performance measurement that combines financial and non-financial measures
2. Type 2: type 1, plus an explicit recognition of cause-and-effect relationships
3. Type 3: a type 2 BSC which explicitly implements strategy by defining objectives, action plans and reports, and which is linked to incentives

Question 3

benefits of balanced scorecard?

Answer 3

1. focusses attention on strategy and strategic direction
2. can improve communication throughout organisation
3. increases visibility of goals and objectives
4. links non-financial and financial measures together
5. directs attention to those areas considered critical to the success of the organisation

Question 4

criticisms of balanced scorecard?

Answer 4

1. do cause and effect relationships exist?
2. time lapse between recognising an item of strategic importance and finding whether its been successful
3. lack of acknowledgment of a time dimension
4. evidence of the effect of non-financial measures on financial outcomes
5. relative importance of the four dimensions
6. does it serve multiple stakeholders?

Question 5

difficulties with measuring performance with not-for-profits

Answer 5

• objectives difficult to define and may conflict
• difficult to judge if non-quantitative objects are met
• how to measure inputs
• difficulty in defining a cost unit for a service
• political, social, legal and financial constraints

Question 6

successful performance management requires:

Answer 6

• financial and non-financial measures
• results and determinant (driveR) meaures
• measures with internal and external focus
• measures to support the competitive advantage and the customer proposition and the achievement of strategy

Question 7

what is wrong with ROI and residual income as performance measures?

Answer 7

1. they’re historical measures - not a good predictor of the future
2. influenced by accounting policies
3. enhanced by delayed discretionary expenditure
4. improves as assets are aged
   
   1. fo

Question 8

what is wrong with EPS as a performance measure?

Answer 8

1. they’re historical measures - not a good predictor of the future
2. influenced by accounting policies
   
   1. capitalising assets results in lower expense charges to profit and loss so better ROI
3. enhanced by delayed discretionary expenditure
4. improves as assets are aged
   
   1. intentionally delaying replacement of old assets lowers the book value, less depreciation charged so reduces net assets value and manipulates ROI
   2. Reducing balance method depreciates assets less and less as they age resulting in higher profit

Question 9

What is a contemporary performance measurement system?

Answer 9

• A system that translates business strategies into deliverable results… combining financial, strategic and operating business measures to gauge how well a company meets its targets
• CPM system exists if financial and non-financial performance measures are used to operationalise strategic objectives

Question 10

performance management framework?

Answer 10

• key objectives
• strategy
• targets we are aiming for
• rewards/punishments in place
• feedback loops

Question 11

Balanced ways to report performance?

Answer 11

1. intangible asset scorecard
2. performance pyramid
3. tableau de bord
4. results and determinants framework
5. balanced scorecard

Question 12

What is the Tableau de bord

Answer 12

similar to BSC

founded on multiple criteria models of control that use financial and non-financial measures

each member of management team has a tbd