KAPLAN AND NORTON’S BALANCED SCORECARD Flashcards
When did this first come out, and what did businesses start paying more attention to
This came about in the 1990s when business started to pay more attention to issues with: Corporate, social, responsibility - Not just considering profits, but also a business considering the wider impact that it has on society.
What is the Kaplan & Noton’s balanced scorecard system used for
Kaplan & Noton’s balanced scorecard is a system used to analyse the financial and non-financial performance of a business from a range of stakeholder perspectives.
What does it allow businesses to do (from a perspective aspect)
This allows the organisation to look at the business not only for a shareholders benefit but also for all stakeholders (even though shareholders are still stakeholders)
What does a balanced scoreboard look like
https://docs.google.com/document/d/1ixpv_dWxdys26HIkMpbkrEHfA6unAQFucaFmVl1hV9E/edit
What are some examples of finanical in the scoreboard
Financial - Being things like total capital employed, profitability etc.
What are some examples of internal business practises in the scoreboard
Internal business practices - How effective the business is at meeting customer orders on time, labour productivity, chasing up debts (receivables) etc
What are some examples of learning and growth in the scoreboard
Learning and growth - Is the business learning and reinvesting for the future
What are some examples of customer in the scoreboard
Customer - The impact on the customer
What would you want to do for each catagory
Assess the strengths and weaknesses
Set SMART objectives that will contribute to achieving the organisations purpose
Set strategy to achieve objectives
Review progress made against targets & begin process again
The organisation needs to be taking a holistic view on this, for example: If the business decided to pay out profits to shareholders, then they won’t have as much money to invest into learning and growth.
What are the financial meausres
Stakeholders that are considered: Shareholders
Measures: Gross profit margin, Operating profit margin, return on capital employed, Gearing etc
Example objectives: Reduce cost of sales by 15% by June 2024
Example strategy: Pay suppliers upon delivery and negotiate a reduction in raw materials
What are the internal business practices
Stakeholders considered: managers, employees
Measures: Labour productivity, inventory turnover, payables days, lead time etc.
Example objectives: increase labour productivity by 10% by December 2024
Example strategy; All warehouse employees to receive 20 hours of off the job training
What is the customer the customer
Customer:
Stakeholders considered: customers
Measures: Customer satisfaction levels, brand awareness, market share, quality measures
Example objectives: Increase customer satisfaction levels to 99% by June 2025
Example strategy; Introduce total quality management (TQM) to reduce number of faulty products leaving factory
What is the learning and growth
Stakeholders: management, shareholders, local/ national community, employees, customers
Masures: Labour retention, % turnover invested in market research/ research and development
Example objectives: Produce prototype design of new products
Example strategy: Invest £10 million into research and development
What are the advantages of the balanced score card
Encourage a systematic approach to reviewing performance and creating new strategy
Based on quantatitive and qualatitive data
Encourages a range of perspectives to be considered
Encourages a long term approach to decision making
Balance comes from considering the impact of one strategy across a range of performance measures
WHta are some disadvantages of a balance score card
Time consuming and expensive to complete
Complexity of balancing needs of one stake holder against another
Number of different targets may be consing or conflict with each other
May require several strategies to be implemented at the same time
