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Exercise 22-17 Sustainability and the balanced scorecard LO A3 Midwest Mfg. uses a balanced scorecard as...

Exercise 22-17 Sustainability and the balanced scorecard LO A3

Midwest Mfg. uses a balanced scorecard as part of its performance evaluation. The company wants to include information on its sustainability efforts in its balanced scorecard. For each of the sustainability items below, indicate the most likely balanced scorecard perspective it relates to. Select your answers using C (customer), P (internal process), I (innovation and learning), or F (financial).
1. Customer rating of sustainability reputation

2. Average price of green products

3. Hours of sustainability training completed

4. Cubic feet of natural gas used

5. Customer surveys of company's sustainability reputation

6. Dollar sales f green products

7.Number of new green products developed

8. Kilowatts of electricity used

9. CO2 emissions

10. Dollar amount spent on researching green products

Solutions

Expert Solution

Answer: Most likely balance score card prespective for following sustanability items are as follows:

Sustainability items Balance Scorecard Perspective Detail
Customer rating of sustainability reputation C Customer
Average price of green products F Financial
Hours of sustainability training completed l Innovation and Learning
Cubic feet of natural gas used F Financial
Customer surveys of company's sustainability reputation C Customer
Dollar sales of green products F Financial
Number of new green products developed F Financial
Kilowatts of electricity used F Financial
CO2 emissions F Financial
Dollar amount spent on researching green products F Financial

Notes:

1. Environmental perspective was not influenced by Learning and Growth perspective, Internal Business Process and Customer. However, environmental perspective is affected by the financial perspective. Internal Business Processes perspective and learning and growth perspective, both affect consumer perspective which then affects the consumer perspective the financial perspective (ROA and CFOA), Majorly activites mention in the question were related to environment and environment perspective is affected by financial perspective, therefore we include environment perspective in financial perspective category.

2. Financial perspective: Key objective that is related to the company’s financial health and performance may be included in this perspective. Revenue and profit are obvious objectives that most organisations list in this perspective. Other financial objectives might include:

  • Cost savings and efficiencies (for example, a specific goal to reduce production costs by 10% by 2020)
  • Profit Margins (increasing operating profit margins, for instance)
  • Revenue sources (for example, adding new revenue channels)

3. The Customer Perspective:

This perspective focuses on performance objectives that are related to customers and the market. In other words, if you’re going to achieve your financial objectives, what exactly do you need to deliver in terms of your customers and market(s)?

Included in this perspective you might find objectives for:

  • Customer service and satisfaction (increasing net promoter scores, or reducing call centre waiting times, for example)
  • Market share (such as, growing market share in a certain segment or country)
  • Brand awareness (for example, increasing interactions on social media)

4. The Innovation and Learning perspective:

What processes do you need to put in place to deliver your customer- and finance-related objectives? That’s the question this perspective aims to answer. Here you would set out any internal operational goals and objectives – or, in other words, what does the business need to have in place and what does the business need to do well in order to drive performance?

Examples of internal process objectives might include:

  • Process improvements (for example, streamlining an internal approval process)
  • Quality optimisation (such as, reducing manufacturing waste)
  • Capacity utilisation ( sucha as using technology to boost efficiency)

5. The Learning and Growth perspective:

While the third perspective is about the concrete process side of things, this final perspective considers the more intangible drivers of performance. Because it covers such a broad spectrum, this perspective is often broken down into the following components:

  • Human capital – skills, talent and knowledge (for example, skills assessments, performance management scores, training effectiveness)
  • Information capital – databases, information systems, networks and technology infrastructure (such as, safety systems, data protection systems, infrastructure investments)
  • Organisational capital – culture, leadership, employee alignment, teamwork and knowledge management (for example, staff engagement, employee net promoter score, corporate culture audits)

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