Management Accounting – Yeboah, Derrick – EMBA2013-045

The Balanced Scorecard
– The good and the bad and the ugly. A personal write-up

a set of measures that give top managers a fast and comprehensive view of the business. 2007).Management Accounting – Yeboah. Another reason is that most companies’ operational and management control systems are built around financial measures which bear little relations to the company’s progress in achieving lingterm strategic goals. developed by Kaplan and Norton (1992). accounting figures do not emphasize the elements which will lead to good or poor future financial results. The balanced scorecard allows managers to look at the business from four important perspectives. Similarly. These traditional measures of performance ignores certain vital measures that directly translate into how the organisation is performing compared to its strategy. Thus the emphasis on short-term financial measures leaves a gap between the development of strategy and its implementation (Kaplan and Norton. Secondly. One of the problems with accounting figures is that the financial consequences of the uncompleted chains of action extend beyond the time of measurement (Nørreklit 2000). It provide answers to four basic questions:     How do customers see us? (customer perspective) What must we excel at? (internal perspective) Can we continue to improve and create value (innovation and learning perspective) How do we look to our shareholders? (financial perspective) Goals and measures are tagged to each of these perspectives and forces managers to focus on the most useful and critical measure. In as much the accounting figures provide some basis for the value of the company. the backward and historic nature of the measure without any reference to how the company will survive the future. Introduction and Overview Financial measures of accounting system has long been the measure of performance and how a company or an organisation is progressing towards achieving its strategy objectives and control is mainly limited to comparing these accounting figures using previous years data as a starting point. The above amongst other reasons led to the development of large number of strategic measuring tools which took into consideration both the financial and non-financial measures of which one is the balanced scorecard. Furthermore. The balanced scorecard can be seen as a dashboard of indicators reflecting various signals that eventually drive business strategy. Derrick – EMBA2013-045 A. The weaknesses with these traditional measures of performance include firstly. managers are able to view various aspects of the business from different areas simultaneously Kaplan and Norton (1992). For example managers may be reluctant to make new investments that do not yield and may eventual adversely affect short-term returns even if it has future financial benefits to the organisation. this is likely to cause a dysfunctional behaviour in some managers by forcing the organization to pursue short-term financial results rather than the long-term goals of the organisations. 1|Page . This poses the risk of the organisation’s strategic plan being remote from the organisation’s day-to-day actions (Nørreklit 2000). these accounting measures do not reflect the full range of the organisation’s objectives are limits the scope to just a portion of the objectives.

The employees will try to reach good results in the areas measured. this will also require a total shift in the way managers view the performance measurements and how employees now need to look at the way their performance. 2000). In a service industry where number of new clients and learning are scorecard targets. In most situations with companies. training may be sacrifice and this will have a negative effect on the overall future of the organisation.Management Accounting – Yeboah. the company can identify areas of focus and of most importance to them and limit their scorecard to those areas. It can easily involve a whole system change and even a customised system to capture and collect the require information. it should be constantly monitored and diagnosed and reviewed to cope with the dynamic business environment. 2|Page . The balanced scorecard addresses a deficiency in the traditional management systems. Now they are measured on the reduction in customer calls as this is tied up with how good the production and sales teams are selling the right product to the right customers. Consider a team previously measured on how many customer calls they receive needing customer service. The balanced scorecard can unify these areas by setting dual goals that will in turn complement each other. There are several strong cases to support the balanced scorecard. In summary. improving one side of business may adversely affect the other side. the inability to link a company’s long-term strategies to its short-term actions. Some weaknesses with the Balanced Scorecard Amidst these benefit. Take for example the sales team of a company against learning and talent development. If the focus is only on the bottom-line numbers. This helps the company to determine what goals are important and what measures to be collected to provide relevant targeted information for managers. there is a possibility the employees may ignore the market research on customer preferences or changing market dynamics. The development and implementation of the balanced scorecard can be labour intensive owing to the fact that it is a consensus-driven approach (Jon. it is without doubt some criticism and weaknesses. for example. It is sometimes likely that employees will use the scorecard as their target and ignore certain vital aspects that are not being measured. too (Nørreklit 2000). With the balanced scorecard. Derrick – EMBA2013-045 The strengths of the Balance Scorecard The strengths of the balanced scorecard cannot be over-emphasised. for the success of the scorecard. The balanced scorecard does not replace the financial measures but rather complements it in a way that enables businesses to have a holistic view of the performance. Following from the above. This means organizations should ensure the scorecard is not static but dynamic as time passes. This seems therefore to bring together the company’s operational and management control systems in line with the company’s progress towards long-term strategic objectives With balanced scorecard setting of goals and suitable measures for each perspective. the goals will then include both the revenue (financial) and the learning (Learning and Growth). but this will be to the detriment of other elements which may be important.

the really successful ones start with top leadership support. Translating the Vision The process will start with translating the vision. the stakeholders involved in achieving these objectives needs to be brought on board and for them to find value. and make some progress. Derrick – EMBA2013-045 B. Think Ltd has the vision of becoming the best online solutions provider in Africa and that will be their primary focus for the metric. several factors need to be considered and to design these scorecards some factors need to be considered as well. in each case breaking it down to the relevant bit. The real challenges are in engaging leaders. to personalise their objectives tying it to the primary objective. Measures to monitor performance Now there will be the need to tie the scorecard to the organisation’s planning. strategic planning and strategic control. The customers. these objectives are targeted to individual performance and reward systems to enable individuals understand how their own productivity supports the overall strategy. measurements and control. By relying on measurements. The following pertains to their balanced scorecard design and measures. Think will need to identify the most influential drivers of the desired outcome and the measuring criteria to gauging the progress make with these drivers. The key concepts is measuring the right things that these stakeholders will find value in and not everything. Communicating the Link The next aspect will be communicating and linking. This forces the need for financial budgets. employees and stakeholders need to find value in what is being measured and only by this will you get the desired attitude and response to make it a success. These high-level scorecards are cascaded down to individual business units and groups and these objectives and measures are translated into objectives and measure appropriate for each group. managers. While some efforts are staff-generated. For example. you will come up with what will constitute the metrics for achieving the organisational vision. This will start by defining the primary objectives. Think will cascade to the various sections (Marketing/Web Technologies/Client Integrations/General Business). 3|Page . The Balanced Scorecard for Think Ltd. To make it more effective. employees. customers. and stakeholders in the design process. As the new strategy is disseminated up and down the organisational structure. In adopting the balance scorecard. for example. Stakeholders and Process After this. Essential Think needs to ask what constitutes “the best” and who their targeted customers will be. supports strategic goals. This is essential to bring in the same directions. The influential drivers and performance measures that have been agreed for Think will constitute the following. the balanced scorecard becomes the communication tool. an internet solutions provider with a vision to become the best total online solutions provider in Africa.Management Accounting – Yeboah.

4|Page .Management Accounting – Yeboah. This will test. There should be transparency in the process to ensure credibility and usefulness to both senior managers and frontline managers. Feedback and Learning Finally there should be a feedback and learning system that feeds the scorecard with the results from the various sections. This should help with refining strategy and to make sure managers know how far or close they are to these targets and if the strategy is on course. Derrick – EMBA2013-045 Financial Measures Contribution to Revenue Targets Meeting the budgets on costs Cross-Sell of Products Delighting our Customers Reductions in customer complains Post-Implementation review score of 4 Accelerated Implementation of customer projects Team Building Team Meetings Brainstorm Sessions Number of Birthdays celebrated Out-Of-Office Trips Training and Development E-Learning Targets Number of Technical Certifications Succession Planning Results of monthly quiz and awards won by the team Processes to achieve primary objectives There is a need to ensure credibility in reporting and by that a system of recording these measures should be in place to provide unison in measuring targets and collecting data. validate and modify the strategy where required.

Derrick – EMBA2013-045 Think’s balances score card is below: THINK LTD.8 0.075 40% 90% 96% 23% 4 3 3 5 4 Implementation Time Saved Reduction in Customer Complains % Total Score Quality and Team Dynamics Team Meetings held Brainstorm Sessions Number of Birthdays celebrated Out-Of-Office Trips Number of meetings held Number of sessions held Number of birthdays celebrated out of the number of birthdays Number of OOO trips per year 12 6 8 2 1 0 1 0 2 1 2 1 3 1 4 1 6 2 7 2 50% 33% 88% 100% 3 4 3 3 5|Page .5 10 0.5 13.4 0.5 13.2 3.3 0.8 4.5 5 13.5 2.5 0.1 5 9 2 0.5 8.Management Accounting – Yeboah.433333 28% 80% 45% 5 3 3 4 Non-Financial Customer Satisfaction and Service Product Cross-Sell Score Post-Implementation Review Score Number of Products per client PIR average score Implementation time from client contract to go live date % reduction in Customer Complains 2 5 14 60 0.1 1.5 11 1 0.3 0.2 2 0.4 5.5 4 0. MONTHLY SCORECARD Measure Financial Overall Revenue ($) Non-Sales Team contribution to revenue target ($) YOY revenue increase % Total Score Target Overall revenue ($m) Sales contribution ($m) YOY revenue Increase % Target Jan Feb Mar Total Score 100% 5 0.1 2 1.

00% 40.00% 16.00% 4 Final Score YTD Completed e-Learnings Number of certified staff Completion of succession plan Awards and Quiz wins 13 4 3 4 0 1 1 0 2 1 1 1 0 1 0 0 2 3 2 1 2 15% 75% 67% 25% 5 3 3 5 4 4.25 3 ***% = % of target achieved Detail Scorecard in xlsx format attached for reference Weight and rating based on the below: Measuring guide Score 1 2 3 4 5 % 100% 80% 60% 40% 30% 6|Page .Management Accounting – Yeboah. Derrick – EMBA2013-045 Total Score Learning and Development Mandatory e-Learnings Number of technical certifications Succession Planning Monthly Quiz and Awards Total Score Summaries Non-Financial Financial % Score Average Score 4 4 % Score 40% 40% % of Overall Performance 24.

“Using the Balanced Scorecard as a Strategic Management System''. Issue 6. Saving Lives”. D. P (2007). Management Accounting Research. S and Norton. S and Norton. 65-88 Kaplan. R.Management Accounting – Yeboah.a critical analysis of some of its assumptions”. pp57-62 7|Page . Harvard Business Review. M (2000). Derrick – EMBA2013-045 References Nørreklit. Jul-Aug Kaplan. Harvard Business Review. Vol. 2000. R. “Saving Money. H (2000). P (1992). S and Norton. D. “Managing for the long-term''. Harvard Business Review. Jul-Aug Jon. 11. 78. ''The Balanced Scorecard: Measures that Drive Performance''. P (2007). R. Nov/Dec. Jan-Feb. “The balance on the balanced scorecard . D. 61-66 Kaplan. Harvard Business Review.

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