Balance Scorecard Assignment

1. Explain how you understand this statement: Balanced scorecard is a method in

measuring performance that balances the financial and non financial aspects of
performance.
Answer: Balanced scorecard not only focuses on achieving financial objectives, it
also highlights the nonfinancial objectives that an organization must achieve to
meet and sustain its financial objectives. Besides that, balanced scorecard use of
financial and non-financial performance measures to evaluate short-and long-run
performance in a single report. The balanced scorecard reduces managers’ emphasis
on short-run financial performance, such as quarterly earnings, because the key
strategic nonfinancial and operational indicators, such as product quality and customer
satisfaction, measure a company’s long run investments in those areas. The financial
benefits of these long run investments may not show up immedi-ately in short-run
earnings; however, strong improvement in nonfinancial measures usually indicates the
creation of future economic value. For example, an increase in customer
satisfaction, as measured by customer surveys and repeat purchases, signals a strong
likelihood of higher sales and income in the future. By balancing financial with
nonfinancial measures, the balanced scorecard broadens management’s
attention to short-run and long-run performance.

2. Explain four components of performance measures in a Balanced Scorecard and how

they support each other.
Answer:
Four components of performance measures in a balanced scorecard are:
● Financial perspective: This perspective evaluates the profitability of the
strategy and the creation of shareholder value.
● Customer perspective: This perspective identifies targeted customer and
market segments and measures the company’s success in these segments.
● Internal business process perspective: This perspective focuses on internal
operations that create value for customers that, in turn, help achieve financial
performance. The internal-business-process per-spective is composed of three
subprocesses: 1) Post-sales-service process, 2) Operations process, 3)
Innovation process
● Learning and growth perspective: This perspective identifies the people and
information capabilities necessary for an organization to learn, improve, and
 grow. Chipset’s learning-and-growth perspective emphasizes three
capabilities: 1) Motivation of employees to achieve organizational goals 2)
Employee process capabilities 3) Information-system capabilities

Each of these four perspectives is linked in a chain of cause-and-effect

relationships. For example, a training program to improve employee skills (the
learning and growth perspective) improves customer service (internal process),
which, in turn, leads to greater customer satisfaction and loyalty (customer)
and, eventually, increased revenues and margins (financial).

3. BSC is called as translating or communicating management/strategy into operational

level/operation. Explain how you understand this.
Answer: Balanced scorecard helps to communicate to all employees of the
organization by translating the strategy into a coherent and linked set of performance
measures by identifying measures for each measure and finalizing scorecard strategic
objectives, measures, targets, and the initiatives to achieve the targets. That’s why
managers should carefully select performance measures for their company balance
scorecard, and keep the company’s strategy. the performance measures should be
understandable and controllable to a significant extent by those being evaluated.

4. Explain briefly what the figure below explains (hints: explain why the steps are following
the arrow).

Answer: These four BSC views are interconnected hierarchically. The main objective
is to achieve excellent financial results. To achieve this, a learning and growth
perspective helps to improve internal business processes by sustaining the capacity
 for improvement by defining people and information capabilities. By improving key
business processes, they can bring greater value to customers and also increase
customer satisfaction, thereby improving customer views, business success in the
pepper market. By increasing customer satisfaction, they can increase their market
share. This will enable companies to achieve their goals and increase their shareholder
value. All of these will increase their financial performance.

5. Here is an example how financial component in BSC is derived into measurement

tools. First, management set the strategy and target to meet its objectives (ex. Grow
operating income) second, the management (higher & middle level) decide the
measurement (rati, etc) to measure performance of the measurement. Third column
shows what effort they can make to improve the performance. They compare the result
to the targeted performance to assess whether they meet the targeted performance or
not. Benchmarking some measures used in exhibit 9.4 in your book, find the examples
of other 3 components of BSC using the format in this example below.

Answer:
a. customer perspective

b. Internal business process perspective

c. Learning and Growth perspective’