Question

(8 points) How might the Dean of Edgewood College School of Business use a Balanced Scorecard to evaluate the program? Identify 2 objectives and 2 measures for each of the four Balanced Scorecard Perspectives. (see examples on text page 21 and 34).

Answer 1

The balanced scorecard is a method which displays organisation’s performance into four dimensions namely financial, customer, internal and innovation. The four dimensions acknowledge the interest of shareholders, customers and employees taking into account of both long-term and short-term goals.

Kaplan and Norton classified performance measures into four business ‘perspectives’:

(i) The financial perspective

(ii) The customer perspective

(iii) The internal business perspective

(iv) The learning and growth perspective

Financial Perspective: “How Do I/I/e Look To Shareholders?” In this step manager of a division or a unit, links its business objectives to the corporate strategy of the company as a whole. Financial performance measures indicate whether the company’s strategy implementation and execution are contributing to its revenue and earnings. To identify key performance measures in this perspective, managers, during strategic planning ask “How do we look to shareholders?”

Corporate strategy and strategic initiatives are examined from the financial perspective to see feasibility of these initiatives of being met. The financial objectives chosen at the onset of the balanced scorecard implementation should serve two purposes:

• To provide definite performance that was expected at the time of strategies selection.

• To provide a focus for objectives and appropriate measures in each of the other three perspectives.

Customer Perspective: “How Do Customer View Us?” In this stage, companies identify customers and market segments in which they compete and also the means by which they provide value to these customers and markets. Managers identify the lead indicators which make a particular business unit or product different from that of others. Lead indicator may vary from customer to customer or market segment. If for example, a customer values on-time delivery then on-time delivery becomes a lead indicator. Examples of lead indicators may include any number of customer considerations, including:

• On-time delivery

• On-site service

• After sales support

• Defects per order

• Cost of the product

• Free shipments etc.

Internal Business Perspective: “At What iviust be Excel?" In this stage companies identify processes and activities which are necessary to achieve the objectives as identified at financial perspectives and customer perspective stage. These objectives may be achieved by reassessing the value chain and making necessary changes to the existing operating activities. If maintaining net earnings is the financial objective of a company and after sales service can increase customer retention, then internal business perspective needs to improve after sales services to satisfy customer requirements to maintain net earnings. This objective may be achieved by providing for example toll free customer help lines, setting up service centres in all major cities.

Learning and Growth Perspective: ’HOW D0 We Continue TO Improve And Create Value? In the learning and growth perspective, Companies determine the activities and infrastructure that the company must build to create long term growth, which are necessary to achieve the objectives set in the previous three perspectives. Organisational learning and growth comes from three principle sources:

• People i.e. employee capabilities

• Systems i.e. information system capabilities and

• Organisational procedures i.e. motivation, empowerment and alignment.