Balanced Scorecard The following list gives a number of measures associated with the Balanced Scorecard:
a. number of new customers
b. percentage of customer complaints resolved with one contact
c. unit product cost
d. cost per distribution channel
e. suggestions per employee
f. warranty repair costs
g. consumer satisfaction (from surveys)
h. cycle time for solving a customer problem
i. strategic job coverage ratio
j. on-time delivery percentage
k. percentage of revenues from new products Required:
1. Classify each performance measure as belonging to one of the following perspectives: financial, customer, internal business process, or learning and growth.
2. Suggest an additional measure for each of the four perspectives.
THE BALANCED SCORECARD—BASIC CONCEPTS Segment income, ROI, residual income, and EVA are important measures of managerial performance, but they lead managers to focus only on dollar figures, which may not tell the whole story for the company. In addition, lower-level managers and employees may feel helpless to affect income or investment. As a result, nonfinancial operating measures that look at such factors as market share, customer complaints, personnel turnover ratios, and personnel development have been developed. Letting lower-level managers know that attention to long-run factors is also vital reduces the tendency to overemphasize financial measures. Managers in an advanced manufacturing environment are especially likely to use multiple measures of performance and to include nonfinancial as well as financial measures. For example, General Motors evaluated Robert Lutz, then head of product development, on the basis of 12 criteria. These criteria include how well he used existing parts in new vehicles and how many engineering hours he cut from the development process.7 The Balanced Scorecard is a strategic management system that defines a strategic based responsibility accounting system. The Balanced Scorecard translates an organization’s mission and strategy into operational objectives and performance measures for the following four perspectives:
• The financial perspective describes the economic consequences of actions taken in the other three perspectives.
• The customer perspective defines the customer and market segments in which the business unit will compete.
• The internal business process perspective describes the internal processes needed to provide value for customers and owners.
• The learning and growth (infrastructure) perspective defines the capabilities that an organization needs to create long-term growth and improvement. This perspective is concerned with three major enabling factors: employee capabilities, information systems capabilities, and employee attitudes (motivation, empowerment, and alignment).
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