Balanced Scorecard Summary.pdf - Management And Accounting...

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Management And Accounting Web Summary of the Balanced Scorecard Concepts Provided by James R. Martin, Ph.D., CMA Professor Emeritus, University of South Florida Balanced Scorecard Main Page | Strategy Related Main Page Citation : Martin, J. R. Not dated. Balanced scorecard concepts. Management And Accounting Web . 1. Four Strategic Perspectives The Balanced Scorecard concept involves creating a set of measurements for four strategic perspectives. These perspectives include: 1) financial, 2) customer, 3) internal business process and 4) learning and growth. The idea is to develop between four and seven measurements for each perspective. Two graphic illustrations appear below to help convey the idea. The measurements should be focused on a single strategy and be linked, consistent and mutually reinforcing. Some generic measurements are presented in the table below. Perspective Generic Measurements Financial Return of Capital Employed, Economic value added, Sales growth, Cash flow Customer Customer satisfaction, retention, acquisition, profitability, market share Internal business process Includes measurements along the internal value chain for: Innovation - measures of how well the company identifies the customers’ future needs. Operations - measures of quality, cycle time, and costs. Post sales service - measures for warranty, repair and treatment of defects and returns. Learning and growth Includes measurements for: People - employee retention, training, skills, morale. Systems - measure of availability of critical real time information needed for front line employees. 2. What is a Strategy? A strategy, according to Kaplan and his coauthors, is a set of hypotheses about cause and effect relationships. Defining an organization's strategy involves: 1) Defining the market the organization plans to serve - local, national, global. 2) Defining the customer . Broad or narrow, age group, income level etc. 3) Identifying the critical internal processes needed to capture and satisfy those customers. 4) Determining the individual and organizational capabilities required in the other perspectives. Porter defines Strategy as performing different activities from rivals’ or performing similar activities in different ways. For more on Strategy see Porter 1996 , Porter 1980 Competitive Strategy , Porter 1987 , and MAAW's Strategy section for many other summaries. 3. An Example related to Cause and Effect The chain of cause and effect relationships may start with improvements in the area of learning and growth. These improvements tend to cause improvements in business processes, which in turn cause improvements in customer satisfaction and subsequently cause improvements in sales and the financial measurements of profitability. The direction of the cause and effect relationships is emphasized below.
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  • Fall '16
  • Balanced Scorecard Concepts

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