Lecture 20 Flashcards
Strategic cost management
is the application of cost management tools and techniques which simultaneously aims to improve an organisation’s strategic position and reduce its costs
The Balanced Scorecard
No one measure of performance is more important than the others
To get to where we want to go we must keep an eye on all key performance measures
The 4 processes of the strategic management system
Translating the vision – statements should be expressed as integrated set of objectives and measures
Communicating & Linking – long-term objectives are understood such that the departmental and individual objectives are aligned with it
Business Planning – basis for allocating resources and setting priorities
Feedback & Learning – can measure the short-term performance of all perspectives such that strategies can be modified if necessary
BSC – Pros
It forces clear specification of strategic objectives and appropriate measures in four areas
The BSC helps top management to communicate and implement its strategic vision throughout the firm.
It highlights critical success factors and measures of value throughout the firm.
It provides a method of balancing short-term and long-term concerns.
BSC – Cons (limitations)
It is not the final story: it provides performance measurementBUT, performance management ?
When multiple measures are used, there is a danger that some measures are not really value drivers (i.e., there may be no obvious link between the measures and financial success) Remember – if it is not helping management – drop it
Choice of measures may be impeded by measurement difficulties
Critical factors required for a successful performance measurement system
It must be integrated with the overall strategy of the business
There must be a system of feedback and review
The system must be comprehensive
The system must be owned and supported throughout the whole organisation
Measures need to be fair and achievable
The system needs to be simple, clear and understandable
