Learning Objective
Show Question: Although financial measures are important for evaluation purposes, many organizations use a mix of financial and nonfinancial measures to evaluate performance. For example, airlines track on-time arrival percentages carefully, and delivery companies like Federal Express (FedEx) and United Parcel Service (UPS) monitor percentages of on-time deliveries. The balanced scorecard uses several alternative measures to evaluate performance. What is a balanced scorecard and how does it help companies to evaluate performance? Answer: The balanced scorecardA balanced set of financial and nonfinancial measures used by organizations to motivate employees and evaluate performance. is a balanced set of measures that organizations use to motivate employees and evaluate performance. These measures are typically separated into four perspectives outlined in the following. (Dr. Robert S. Kaplan and Dr. David P. Norton created the balanced scorecard, and it is actively promoted through their company, Balanced Scorecard Collaborative. More information can be found at the company’s Web site at http://www.bscol.com.)
The goal is to link these four perspectives to the company’s strategies and goals. For example, a high percentage of on-time arrivals is likely an important goal from the perspective of the customer of an airline. A high percentage of defect-free computer chips is likely an important goal from the internal business process perspective of a computer chip maker. A high number of continuing education hours is likely an important goal from the learning and growth perspective for tax personnel at an accounting firm. Measures from a financial perspective were covered earlier in this chapter. Companies that use the balanced scorecard typically establish several measures for each perspective. Table 13.4 "Balanced Scorecard Measures" lists several examples of these measures. Table 13.4 Balanced Scorecard Measures
Measures established across the four perspectives of the balanced scorecard are linked in a way that motivates employees to achieve company goals. For example, if the company wants to increase the defect-free rate and reduce product returns, effective employee training and low employee turnover will help in achieving this goal. The idea is to establish company goals first, then create measures that motivate employees to reach company goals. Key Takeaway
Review Problem 13.7Assume Chicken Deluxe, the fast-food restaurant franchise featured in this chapter, uses a balanced scorecard. Provide at least two examples of measures that Chicken Deluxe might use for each of the following perspectives of the balanced scorecard:
Solution to Review Problem 13.7
End-of-Chapter ExercisesQuestions
Brief Exercises
Exercises: Set A
Exercises: Set B
Problems
One Step Further: Skill-Building Cases
Comprehensive Cases
What are measures in a balanced scorecard?The balanced scorecard involves measuring four main aspects of a business: Learning and growth, business processes, customers, and finance. BSCs allow companies to pool information in a single report, to provide information into service and quality in addition to financial performance, and to help improve efficiencies.
What are the four perspectives of the balanced scorecard?The four perspectives of a traditional balanced scorecard are Financial, Customer, Internal Process, and Learning and Growth.
What are the four categories of measures in a balanced scorecard quizlet?a strategic-based performance management system that typically identifies objectives and measures for four different perspectives: the financial perspective, the customer perspective, the process perspective, and the learning and growth perspective.
What is balanced scorecard in performance management?The balanced scorecard (BSC) is a strategic planning and management system. Organizations use BSCs to: Communicate what they are trying to accomplish. Align the day-to-day work that everyone is doing with strategy. Prioritize projects, products, and services.
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