Scribd
Upload
14 views27 pages

Strat Cost MGT - Chapter 7

The Balanced Scorecard is a strategic management tool that translates an organization's mission and strategy into performance measures across four perspectives: financial, customer, internal processes, and learning and growth. It emphasizes the importance of both financial and nonfinancial objectives to drive future performance and decision-making. The tool aids in identifying cost drivers, improving resource allocation, and aligning operational activities with strategic goals.

Uploaded by

aokijiadmiral19
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
14 views27 pages

Strat Cost MGT - Chapter 7

The Balanced Scorecard is a strategic management tool that translates an organization's mission and strategy into performance measures across four perspectives: financial, customer, internal processes, and learning and growth. It emphasizes the importance of both financial and nonfinancial objectives to drive future performance and decision-making. The tool aids in identifying cost drivers, improving resource allocation, and aligning operational activities with strategic goals.

Uploaded by

aokijiadmiral19
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 27

THE BALANCED

SCORECARD
A TOOL TO IMPLEMENT STRATEGY
THE BALANCED SCORECARD
• The balanced scorecard translates an
organization's mission and strategy into a set of
performance measures that provides the
framework for implementing the strategy.
• The balanced scorecard does not focus solely
on achieving financial objectives. It also
highlights the nonfinancial objectives that an
organization must achieve to meet its financial
objectives.
THE BALANCED SCORECARD
The scorecard measures an organization’s performance
from four perspectives:
1. financial,
2. customer,
3. internal processes, and
4. learning and growth.

A company's strategy influences the measures it uses to


track performance in each of these perspectives.
THE BALANCED SCORECARD
• Financial performance measures summarize the results
of past actions and are important to a firm’s owners,
creditors, employees and so forth.
• Nonfinancial performance measures concentrate on
current activities which will be the drivers of future
financial performance.

Note: Effective management requires a balanced


prospective on performance measurement, a viewpoint
that some call the "balanced scorecard“ perspective.
THE BALANCED SCORECARD
The balance scorecard integrates performance
measures in four key areas:

1. Financial perspective
2. Customer satisfaction
3. Internal business processes
4. Innovation and learning
ROLES OF BALANCED SCORECARD IN SCM

•Identifies cost drivers across perspectives.


•Balances cost reduction with value creation.
•Facilitates better resource allocation.
IMPORTANCE OF BSC IN STRATEGIC COST
MANAGEMENT
•Links cost management to strategic goals.
•Provides a comprehensive view of
performance beyond financials.
•Helps identify cost drivers and areas for
efficiency.
•Facilitates better resource allocation and
decision-making.
FINANCIAL PERSPECTIVE
• Measures of profitability and market value among
others, as indicators of how well the firm satisfies its
owners and shareholders.
• These financial measures show the impact of the firm's
policies procedures on the firm’s current financial
position and therefore its current return to the
shareholders.
FINANCIAL PERSPECTIVE
OBJECTIVES MEASURES

Revenue Growth:
Increase the number of new products % of revenue from new products
Adopt a new pricing strategy Product and customer profitability
Cost Reduction:
Reduce unit product cost Unit product cost
Reduce distribution channel cost Cost per distribution channel
CUSTOMER PERSPECTIVE/SATISFACTION
• Measures of quality service and low cost, among others,
as indicators of how well the firm satisfies its customers.
• Many companies today have a corporate mission that
focuses on the customer. “To be number one in delivering
value to customers” is a typical mission statement.
• The balanced scorecard demands that managers translate
their general mission statement on customer service into
specific measures that reflect the factors that really matter
to customers.
CUSTOMER PERSPECTIVE/SATISFACTION
OBJECTIVES MEASURES

Core:
Increase market share % of market (market share)
Increase customer retention % growth of business from existing
customers, and percentage of
repeating customers
Increase customer acquisition Number of new customers
Increase customer satisfaction Ratings from customer surveys
INTERNAL BUSINESS PROCESSES
• Measures of the efficiency and effectiveness with
which the firm produces the product or service.
• Identifies and monitors the critical internal operations
that drive value for customers and stakeholders.
• Examples include improve operational efficiency,
optimize cost management, and innovate and
improve processes.
INTERNAL BUSINESS PROCESSES
OBJECTIVES MEASURES

Innovation:
Increase the number of new products Number of new products vs.
planned
Increase proprietary products % revenue from proprietary
products
Operations:
Increase process quality Quality costs, output yields, % of
defective units
Decrease process time Cycle time and velocity
INNOVATION AND LEARNING
• Measures of the firm’s ability to develop and utilize
human resources to meet the strategic goals now and
into the future.
• Focuses on the organization's ability to innovate,
improve, and learn to drive future growth.
• Intense global competition requires that companies
make continual improvements to their existing
products and processes and have the ability to
introduce entirely new products with expanded
capabilities.
INNOVATION AND LEARNING
OBJECTIVES MEASURES

Increase employee capabilities Employee satisfaction ratings


Employee turnover percentages
Hours of training
Increase motivation and alignment Suggestions per employee
Increase information systems capabilities % of processes with real-time
feedback capabilities
FEATURES OF A GOOD BSC
• Should tell the story of a company’s strategy by
articulating a sequence of cause-and-effect relationships.
• It helps to communicate the strategy to all members of the
organization by translating the strategy into a coherent
and linked set to understand measurable operational
targets.
• In for-profit companies, it places strong emphasis on
financial objectives and measures.
• Should focus only on key measures to be used by
identifying only the most critical ones.
• Should highlight suboptimal tradeoffs that managers may
make when they fail to consider operational and financial
measure together.
INTERNAL BUSINESS PROCESS PERFORMANCE
▪ Delivery Cycle Time - This is the total elapsed time
between when an order is placed by a customer and
when it is shipped to the customer. Part of this time is
wait time that occurs before the order is placed into
production.
▪ Throughput (Manufacturing Cycle) Time - This is the
total elapsed time between when an order is initiated
into production and when it is shipped to the
customer (time/units produced).
INTERNAL BUSINESS PROCESS PERFORMANCE
INTERNAL BUSINESS PROCESS PERFORMANCE
▪ Manufacturing Cycle Efficiency - MCE is the ratio of
value added time to total throughput time. It represents
the percentage of time an order is in production in which
useful work is being done. The rest of the time represents
non-value added time.

▪ Velocity – is the number of units of output that can be


produced in a given period of time (units produced/time).
INTERNAL BUSINESS PROCESS PERFORMANCE
▪ Value-Added Time:
1. Process time

▪ Non-Value-Added Time:
1. Wait time
2. Inspection Time
3. Move Time
4. Queue Time
Example:
Southwest Company keeps careful track of the time
relating to orders and their production. During the most
recent quarter, the following average times were
recorded for each unit or order:
Wait time 17 days
Inspection time 0.4 day
Process time 2.0 days
Move time 0.6 day
Queue time 5 days
Goods are shipped as soon as production is completed
Example:
▪ Throughput time = 2+0.4+0.6+5 = 8 days
▪ MCE = 2/8 = 0.25
▪ Non-value added activities take up 75% of
the total production time
▪ Delivery cycle time = 17+8 = 25 days
Example: (Balanced Scorecard)
At the end of 2021, Mejorar Company implemented a
low-cost strategy to improve its competitive position. Its
objective was to become the low-cost producer in its
industry. A balanced scorecard was developed to guide
the company toward this objective. To lower costs,
Mejorar undertook a number of improvement activities
such as JIT production, total quality management, and
activity-based management. Now, after two years of
operation, the president wants some assessment of the
achievements. To help provide this assessment, the
following information on one product has been
gathered:
Example: (Balanced Scorecard)
Identify the following for year 2021 and 2023:
Velocity
Cycle time
% of total revenue from new customers
% of very satisfied customers
Market share
2023 % change in actual total production cost
2023 % change in days of inventory
Defective units as a % of total units produced
2023 % change in hours of training
Total revenue (in peso)

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy