Part 2 - Balance scorecard

Question 1

What is Balance Scorecard

Answer 1

+ The balanced scorecard has four perspectives: financial, customer, internal business process and innovation and growth. Indicators are needed for each perspective.
+ The indicators suggested here are for the use of the board at a strategic level and not detailed operational management

Question 2

Financial perspective

Answer 2

+ Economic profit, Income from operations, Working capital, Operational cash flow Inventory turns

Question 3

Customer perspective

Answer 3

+ The customer’s views are important for growth
+ The scores of a customer survey may be used to indicate their satisfaction
+ Customer retention (through percentage of revenue generated from existing customers) may be a better objective measure.

Question 4

Internal business process

Answer 4

+ The operating margin indicator suggested in the financial perspective will supply useful information about the overall efficiency of internal processes
+ Based on the issues facing the company

Question 5

Innovation and learning

Answer 5

+ Training is a key issue for Fearties, so the percentage of staff who are qualified is an appropriate indicator.
+ The time taken for this training and its costs may also be measures of the organisation’s ability to learn and improve this process
+ Revenue generated from new services offered would also measure innovation at Fearties

Question 6

Advantages of balance scorecard

Answer 6

• It looks at both INTERNAL and EXTERNAL matters concerning the organisation
• It is related to the key elements of a company’s STRATEGY, and in this respect links to LONG-TERM objectives as well as SHORT-TERM ones.
• FINANCIAL and NON-FINANCIAL measures are linked together.

Question 7

Disadvantages

Answer 7

• Conflicting measures: The objectives of cost reduction (financial) may limit the investment to speed up the manufacturing process (internal process)
• Subjectivity and difficult to measure: including non-financial indicators
• Selecting measures: There are many indicators in each perspectives => how to select is a problems, need expertise
• Management commitment: not too focus on finacial perspectives