Purpose of Assignment

The purpose of this assignment is increase learners’ knowledge of ways to effectively use the balanced scorecard to measure organizational performance.

Assignment Steps

Resources: Management: A Practical Introduction; Bureau of Labor Statistics; annual reports of selected organizations.

You may use the same organization you used in previous weeks.

Review the four perspectives of the Balanced Scorecard Module in Section 16.3 of Management: A Practical Introduction to practice reading and evaluating the information it presents.

Use the four perspectives of the Balanced Scorecard and your company documents.

Determine the possible metrics for each quadrant for your organization.

Explore the website for an organization comparable to yours.

Determine the possible metrics for each quadrant for the organization.

Explore the website for an organization not comparable to yours.

Determine the possible metrics for each quadrant for the organization.

Compare metrics for both organizations versus the metrics for your organization.

Complete a 700-word summary including the following:

• Identify the metrics for your organization.
• Identify the metrics for the comparable organization.
• Identify the metrics for the non-comparable organization.
• Summarize how the metrics differ.
• Identify potential performance gaps in your organization.
• Recommend actions to reduce the performance gaps.

Format the assignment consistent with APA guidelines.

Click the Assignment Files tab to submit your assignment.

The Balanced Scorecard: A Dashboard-like View of the Organization Robert Kaplan is a professor of accounting at the Harvard Business School and a leading authority on strategic performance measurement. David Norton is co-founder of Balanced Scorecard Collaborative. Kaplan and Norton developed what they call the balanced scorecard, which gives top managers a fast but comprehensive view of the organization via four indicators: (1) customer satisfaction, (2) internal processes, (3) innovation and improvement activities, and (4) financial measures. “Think of the balanced scorecard as the dials and indicators in an airplane cockpit,” write Kaplan and Norton. For a pilot, “reliance on one instrument can be fatal. Similarly, the complexity of managing an organization today requires that managers be able to view performance in several areas simultaneously.”21 It is not enough, say Kaplan and Norton, to simply measure financial performance, such as sales figures and return on investment. Operational matters, such as customer satisfaction, are equally important.22 The Balanced Scorecard: Four “Perspectives” The balanced scorecard establishes (a) goals and (b) performance measures according to four “perspectives” or areas—financial, customer, internal business, and innovation and learning. (See Figure 16.5, opposite page.) 1. Financial Perspective: “How Do We Look to Shareholders?” Typical financial goals have to do with profitability, growth, and shareholder values. Financial measures such as quarterly sales have been criticized as being shortsighted and not reflecting contemporary value-creating activities. Moreover, critics say that traditional financial measures don’t improve customer satisfaction, quality, or employee motivation. Page 521FIGURE 16.5 The balanced scorecard: four perspectives Source: Reprinted by permission of Harvard Business Review. Exhibit from “The Balanced Scorecard—Measures that Drive Performance,” by R.S. Kaplan and D.P. Norton, February 1992. Copyright © 1992 by the Harvard Business School Publishing Corporation; all rights reserved. However, making improvements in just the other three operational “perspectives” we will discuss won’t necessarily translate into financial success. Kaplan and Norton mention the case of an electronics company that made considerable improvements in manufacturing capabilities that did not result in increased profitability. The hard truth is that “if improved [operational] performance fails to be reflected in the bottom line, executives should reexamine the basic assumptions of their strategy and mission,” say Kaplan and Norton. “Not all long-term strategies are profitable strategies. . . . A failure to convert improved operational performance, as measured in the scorecard, into improved financial performance should send executives back to their drawing boards to rethink the company’s strategy or its implementation plans.”23 2. Customer Perspective: “How Do Customers See Us?” Many organizations make taking care of the customer a high priority. The balanced scorecard translates the mission of customer service into specific measures of concerns that really matter to customers—time between placing an order and taking delivery, quality in terms of defect level, satisfaction with products and service, and cost. Quiznos is a good example. The company uses a speed-dining approach to develop new products and test out different pricing strategies. The company invites groups of 25 people to a location in which they move from station to station and try out new Page 522menu options. This technique has reduced the time from test kitchen to market to six months, as opposed to the one year needed by a key competitor.24 3. Internal Business Perspective: “What Must We Excel At?” This part translates what the company must do internally to meet its customers’ expectations. These are business processes such as quality, employee skills, and productivity.25 Top management’s judgment about key internal processes must be linked to measures of employee actions at the lower levels, such as time to process customer orders, get materials from suppliers, produce products, and deliver them to customers. Computer information systems can help, for example, in identifying late deliveries, tracing the problem to a particular plant. 4. Innovation & Learning Perspective: “Can We Continue to Improve & Create Value?” Learning and growth of employees is the foundation for all other goals in the balanced scorecard. The idea here is that capable and motivated employees, who possess the resources and culture needed to get the job done, will provide higher quality products and services in a more efficient manner. Making this happen requires a commitment to invest in progressive human resource practices and technology. An organization’s commitment to innovation and learning is often assessed via employee surveys like the one used in the self-assessment below. To what extent was your current or past employer committed to the innovation and learning of its employees? You can find out by completing Self-Assessment 16.1. SELF-ASSESSMENT 16.1 Assessing the Innovation & Learning Perspective of the Balanced Scorecard The following survey was designed to assess the innovation and learning perspective of the balanced scorecard. Go to connect.mheducation.com and take Self-Assessment 16.1. When you’re done, answer the following questions: 1.   Where does the company stand in terms of commitment to innovation and learning? Are you surprised by the results? 2.   Use the three highest and lowest scores to identify the strengths and weaknesses of this company’s commitment to innovation and learning. 3.   Based on your answer to question 2, provide three suggestions for what management could do to improve its commitment to innovation and learning. Strategy Map: Visual Representation of a Balanced Scorecard Since they devised the balanced scorecard, Kapan and Norton have come up with an improvement called the strategy map.26 A strategy map is a visual representation of the four perspectives of the balanced scorecard that enables managers to communicate their goals so that everyone in the company can understand how their jobs are linked to the overall objectives of the organization. As Kaplan and Norton state, “Strategy maps show the cause-and-effect links by which specific improvements create desired outcomes,” such as objectives for revenue growth, targeted customer markets, the role of excellence and innovation in products, and so on. An example of a strategy map for a company such as Target is shown on the next page, with the goal of creating long-term value for the firm by increasing productivity growth and revenue growth. (See Figure 16.6, next page.) Measures and standards can be developed in each of the four operational areas—financial goals, customer goals, internal goals, and learning and growth goals—for the strategy. Page 523FIGURE 16.6 The strategy map This example might be used for a retail chain such as Target or Walmart.