Unformatted text preview: . Each
indicator should be congruent with the overall entity objectives. Further, each measure should be
easily determined and understood. These measurements can relate to financial outcomes, customer
outcomes, or business process outcomes. Although a balanced scorecard approach may include
target thresholds that should be met, the primary mantra is on improvement. This means that all
participants are continually striving to beat pre-existing scores for each measure. Download free ebooks at bookboon.com
42 Balanced Scorecard Approach to Performance Evaluation Tools for Enterprise Performance Evaluation Early in this chapter, you saw how responsibility accounting concepts caused performance reports to
be prepared for different steps in the corporate ladder. This notion is equally applicable to the
balanced scorecard approach. The overall corporate entity may have macro targets and measures.
Similarly, sub-units will have their own unique goals. A scorecard approach can even be pushed
down to the individual employee level. For instance, a retail store may require that tellers complete
a certain number of transactions per hour. This “quota” in essence would represent a nonfinancial
metric that can be scored for each employee. 5.1 The Balance Scorecard in Operation
You saw for Blue Rail Manufacturing a number of examples of financial goals that could be
included in a balanced scorecard assessment. Examples include the standard cost for material, the
standard labor hours per rail set, the expected production level, and so forth. But, what would be
some examples of customer outcomes and business process outcomes? Potential Customer Outcomes: Results of a customer satisfaction survey Product returns/warranty work rates The frequency that customers reorder (or do not reorder) Estimated market share New customers that are based on referrals of existing customers Frequency that customer bids lead to customer orders Customer complaint/compliment rates Price in comparison to competitors Potential Business Process Outcomes Defect free units as a proportion of total production Frequency/size of product liability claims Time from order receipt to shipment Size of customer order backlogs Lost production days due to out-of-stock raw materials or equipment failure Employee turnover rate Employee morale survey results Employee accident rates/claims for workers’ compensation Average experience level of employees In reviewing this list of potential items for inclusion in a balanced scorecard performance appraisal,
you have probably thought of some additional items for inclusion. The choice is up to management.
The idea is to find those items that drive business success in a way that is consistent with the
corporate philosophy. Perhaps Blue Rail has a goal of 100% customer satisfaction with respect to
quality, but knows that its price will be 20% higher than competitors. Or, Blue Rail may have a goal
of being the lowest cost provider and will tolerate some degree of customer discord. Download free ebo...
View Full Document