ACC51112 Balanced Scorecard
ACC51112 Balanced Scorecard
Management Services
Balanced Scorecard
Managers do not rely on either financial or nonfinancial performance measures alone. They
recognize that financial performance measures summarize the results of past actions. Financial
performance measures are important to a firm’s owners, creditors, employees and so forth. Thus, they
must be watched carefully by management. Nonfinancial performance measures concentrate on
current activities, which will be the drivers of future financial performance. Thus, effective
management requires a balanced perspective on performance measurement.
The process usually starts with the determination of the firm’s long-term goals. These long-term goals
are usually financial in nature, such as financial growth that can be expressed in profit growth
percentage, revenue growth percentage and return on sales. The balanced scorecard comes into
play when we determine what the firm should be doing right now to ensure that its long-term
financial goals will be met.
• Customer Perspective – measures having a direct impact on customers. Answers the question:
“How do the customers see us?”
o E.g. customer satisfaction, customer retention, market share, customer complaints
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• Learning and Growth Perspective – measures describing the company employee’s learning
curve. Answers the question: “How can we continually improve and create value?”
o E.g. employee satisfaction, employee turnover, training and recreation
Within each perspective, a small number of strategic objectives are identified. The company sets
targets for each objective and measures against the targets on a regular basis to determine success
or failure. Measurement is undertaken through performance measures (should be small in number,
easily understood and can acted upon quickly). Performance measures must contain leading and
trailing measures.
• Strategic objectives – a statement of what the strategy must achieve and what is critical to its
success
• Strategic initiatives – key action programs required to achieve strategic objectives
• Performance measures - describe how success in achieving the strategy will be measured
• Baseline performance – the current level of performance for the performance measure
• Targets – the level of performance or rate of improvement needed in the performance
measure
Lag indicators are measures of the financial outcomes of earlier management decisions such as
profit and cash flow. These key financial measures only change well after management has already
made the important decisions that affect key operational results. They are less useful for performance
management and control.
QUIZZER:
Balanced Scorecard; Concepts
1. What is the most important purpose of a balanced scorecard?
A. To develop strategies
B. To set prices for products
C. To begin the budgeting process
D. To properly measure performances
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4. Which one of the following statements about a balanced scorecard is incorrect?
A. It is directly derived from the scientific management theories. *practical in nature;
based on operations
B. It relies on the perception of the users with regard to service provided.
C. The notion of value chain analysis plays a major role in the drawing up of a balanced
scorecard.
D. It seeks to address the problems associated with traditional financial measures used to
assess performance.
8. Which of the following is least likely to be a critical success factor within the financial
perspective of the balanced scorecard?
A. Increasing market share *customer perspective
B. Decreasing operating costs
C. Increasing residual income
D. Increasing return on investment
9. Which of the following is a performance measure for the financial perspective of a balanced
scorecard?
A. Quality costs *IBP perspective
B. Revenue growth
C. Employee turnover *Learning & Growth perspective
D. Productivity measures *IBP perspective
10. Economic value-added is a performance measure under which perspective of the balanced
scorecard?
A. Financial perspective
B. Customer perspective
C. Learning and growth perspective
D. Internal business process perspective
11. Which of the following would be the most appropriate measure for financial performance?
A. Return on investment
B. Number of new customers *Customer perspective
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C. Number of old customers *Customer perspective
D. Manufacturing cycle efficiency *IBP perspective
12. Market share is a performance measure under which perspective of the balanced scorecard?
A. Financial perspective
B. Customer perspective
C. Learning and growth perspective
D. Internal business process perspective
13. Number of customer complaints would be a performance measure for which perspective?
A. Financial perspective
B. Customer perspective
C. Learning and growth perspective
D. Internal business process perspective
14. On a balanced scorecard, which of the following would not be an example of a customer
satisfaction measure?
A. Market share
B. Response time
C. Customer relation
D. Economic value added
15. Which of the following would be the most appropriate measure of customer service?
A. On-time delivery
B. On-time production *IBP perspective
C. Return on investment *Financial perspective
D. Reduction of re-work costs of defective units *IBP perspective
16. Which of the following is a performance measure for the customer perspective of a balanced
scorecard?
A. Profit *Financial perspective
B. Customer complaints
C. Employee satisfaction *Learning & Growth perspective
D. Manufacturing cycle efficiency *IBP perspective
17. Operational productivity measures are performance measures under which perspective of the
balanced scorecard?
A. Financial perspective
B. Customer perspective
C. Learning and growth perspective
D. Internal business process perspective
19. Which of the following is a performance measure of the internal business process perspective
of a balanced scorecard?
A. Training and recreation *Learning & Growth perspective
B. Return on investments *Financial perspective
C. Economic value added *Financial perspective
D. Reducing non-value added activities
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20. Which is more of an internal process measure than an external-based measure?
A. Cycle time
B. Profitability
C. Market share
D. Customer satisfaction
21. Employee satisfaction is a performance measure under which perspective of the balanced
scorecard?
A. Financial perspective
B. Customer perspective
C. Learning and growth perspective
D. Internal business process perspective
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26. The total manufacturing cycle (or throughput) time is
A. 4 days
B. 7 days
C. 8 days
D. 10 days
28. What is the partial product for direct materials for 2023?
A. 0.50 units per yard
B. 0.45 units per yard
C. 0.975 units per yard
D. 1.20 units per yard
29. What is the partial productivity for direct manufacturing for labor for 2022?
A. 0.50 units per hour
B. 0.45 units per hour
C. 0.975 per hour
D. 1.20 units per hour