Section Eight • Internal Analysis - Methods of Assessing Performance (Kaplan and Norton, Elkington)

Question 1

Describe what Kaplan and Norton’s Balanced Scorecard is (2 bullets)

Answer 1

1) Kaplan and Norton’s Balanced Scorecard model is used to assess business performance and in developing, implementing and monitoring strategy.
2) It uses both financial and non-financial data, including measures of efficiency and effectiveness, and links them to the overall strategy and vision of the business.

Question 2

What does the Balanced Scorecard look like?

Answer 2

Question 3

What do managers need to consider for the four different perspectives?

Answer 3

the objectives, measures, targets and initiatives are key to the success of their strategy.

Question 4

What is an example of the Financial Perspective? (5 bullets)

Answer 4

Question: “how do we create value for shareholders?”
Objective: e.g. increase profitability
Measures: e.g. ROCE, sales growth, etc
Target: e.g. increase ROCE by 3%
Initiatives: e.g. promotional campaigns. increase efficiency of production methods etc

Question 5

Explain an example of the internal business perspective. (5 bullets)

Answer 5

Question: “how can we improve our processes?”
* Objective: e.g. improve efficiency
* Measures: e.g. capacity utilisation, unit cost, productivity, etc.
* Target: e.g. increase labour productivity by 15%
* Initiatives: e.g. try different production methods,
introduce new technology, etc.

Question 6

Explain the** learning and growth** perspective (5 bullets)

Answer 6

Question: “how can we continue to grow and improve?”
* Objective: e.g. increase employee development
* Measures: e.g. labour retention, amount of staff development, etc.
* Target: e.g. increase labour retention by 10%
* Initiatives: e.g. staff training and development,
changing organisational design, etc.

Question 7

Explain the customer perspective (5 bullets)

Answer 7

Question: “what do our customers value about us?”
* Objectives: e.g. improve customer loyalty, attract new customers
* Measures: e.g. market share, number of new customers, brand loyalty
* Target: e.g. increase number of new customers by 5%
* Initiatives: e.g. speed up delivery times, improve quality of product, etc.

Question 8

What is the Elkington’s Triple Bottom Line Model used for?

Answer 8

Elkington’s Triple Bottom Line model is used to measure a business’s performance in relation to three overlapping areas - profit, people and planet.

Question 9

Explain profit, people and planet

(3 bullets)

Answer 9

• Profit: the ‘traditional’ financial or economic value created by the company.
• Impact on People: a company’s social values and the way it treats
  its employees and the local community.
  * Impact on the Planet: a company’s environmental values
  and impact on the environment.

Question 10

What does the Elkington’s Triple Bottom Line look like?

Answer 10

Question 11

What does the overlapping area in the centre of the Bottom Line mean?

Answer 11

The overlapping area in the centre of the diagram (where all three circles overlap) is the area of sustainability - this is the ideal balance between social, environmental and financial performance.

Question 12

What is the idea of the Triple Bottom Line?

Answer 12

The idea is that businesses are responsible to all their stakeholders, and to the planet. A business can only be sustainable if it balances financial performance with its impact on people and the planet.