Question

The following measures belong to one of the four perspectives of the balanced scorecard: 1) Return on investment 2) Marketing time 3) Number of new customers 4) Percentage of income from new sources 5) Quality costs 6) Employee productivity Required: a. Identify the appropriate perspective for each measure listed above. b. Suggest a possible strategic objective that could be associated with each measure (Be sure to clearly label each article)

Answer 1

a. Identify the appropriate perspective for each measure

Answer:-

The Balanced Scorecard is a set of performance targets and results relating to four dimensions of performance—financial, customer, internal process and innovation/ Learning and Growth Perspective. It recognises that organisa­tions are responsible to different stakeholder groups, such as employees, suppliers, customers, com­munity and shareholders.

1. Financial Prespective :- i) Return on Investments

ii) Percentage of Income from new Sources

2. Customer Prespective ;- i) Number of new Customers

3. Internal Process- Prespective :- i) Marketing time

ii) Quality Costs

4. Learning and Growth Prespective:- i) Employee Productivity

b. Suggest a possible strategic objective that could be associated with each measure

Answer:-

1. Financial Perspective:

The balanced scorecard uses financial performance measures, such as net income and return on investment, because all for-profit organisations use them. Financial performance measures provide a common language for analysing and comparing companies. People who provide funds to companies, such as financial institutions and shareholders, rely heavily on financial performance measures in deciding whether to lend or invest funds. Properly designed financial measures can provide an ag­gregate view of an organisation’s success.

2. Customer Perspective:

In the customer perspective of the Balanced Scorecard, managers identify the customer and market segments in which the business unit will compete and the measures of the business unit’s performance in these targeted segments. This perspective typically includes several core or generic measures of the successful outcomes from a well-formulated and implemented strategy.

The core measurement group includes measures of:

a. Market share

b. Customer retention

c. Customer acquisition

d. Customer satisfaction

e. Customer profitability

3. Internal-Business-Process Perspective:

In the internal-business-process perspective, managers identify the critical internal processes in which the organization must excel.

These processes enable the business organizations to:

i. Deliver the value propositions that will attract and retain customers in targeted market segments, and

ii. Satisfy shareholder expectations of excellent financial returns.

The key to excellence in any organization is control of its processes to produce reliable and consistent products and services. Performing the right processes in the right manner leads to consis­tent levels of product and service quality. The difficulty lies in finding the right process variables to measure and setting the standards appropriate to performance levels of each of the process measures. Process and operational measures are leading-edge measures that are more short-term-focused.

4. The Learning and Growth Perspective:

For incentive purposes, the learning and growth perspective focuses on the capabilities of people. Managers would be responsible for developing employee capabilities. Key measures for evaluating managers’ performance would be employee satisfaction, employee retention, and em­ployee productivity.