...performance measures. All these measures should, in turn, support the strategic objectives. An effective Management Control System should include effective performance measures and evaluation, which will also link to rewards or disincentives. Ideally, the compensation structure should promote goal congruence and employees motivation and exclude elements of uncontrollability. Potential Problems with Existing Compensation Structure Although the current divisional contribution margin compensation structure enables controllability and motivates each division to work hard, it lacks goal congruence throughout the company. When managers are compensated solely based on divisional contribution numbers, divisional managers only focuses on divisional profits so as to gain their bonuses. On the other hand, Changing Motors’ main company goal is to not only be profitable, but also provide safe and reliable car products and services that customers can rely on. This issue of goal incongruence is related to the horizon problems and adoption of hard-selling tactic. Poor emphasis on company’s long-term goals The excessive emphasis on short-term contribution figures might cause divisional managers to lose sight of the company’s long-term strategic...
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...and Administrative Series, Nr. 2 (2008) 31-45 BALANCED SCORECARD APPLICATION IN UNIVERSITIES AND HIGHER EDUCATION INSTITUTES: IMPLEMENTATION GUIDE IN AN IRANIAN CONTEXT DARYUSH FARID, َ EHRAN NEJATI, HEYDAR MIRFAKHREDINI∗ M Close compete of universities and higher education institutes in recent year in order to offer high quality services and achieve higher national and International rank, has led to an increase in their demand for a customized approach for assessing and improving their performance. This paper studies the application of Balanced Scorecard (BSC), as a powerful measurement and assessment system, in universities and higher education institutes. Reviewing the existing literature, the paper also provides an implementation guide for BSC in an Iranian perspective. Eventually, the performance indicators for measurement purposes of the introduced case study are proposed. Keywords: Balanced Scorecard, BSC, Performance Assessment, Higher Education, Universities, Iran. Introduction In today’s world of global competition, providing quality service is a key for success, and many experts concur that the most powerful competitive trend currently shaping marketing and business strategy is service quality (Abdullah, 2006, p. 31). Institutes of higher education are also focusing on ways to render high quality education to their educators and have a better performance. Higher education institutes are facing new challenges in order to improve the quality of education. There...
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...private and public firms, governmental organisations along with non-profit organisations and many others. Traditionally Management Accounting was mainly focused on financial performance measures such as profit and loss figures and balance sheet figures. Now though, more emphasis is been given to the use of non-financial measures and incorporating these into the formal reporting systems used by organisations. The BSC allows the overall mission, policies and strategy of the organisation to be translated into an ample set of performance measurements. The BSC does not only focus on achieving financial objectives but instead allows a firm to pay attention to other non-financial goals that it must accomplish in order to meet its original, financial targets. The use of the BSC can be seen as a way of monitoring and improving both operational and financial performance of an organisation while a t the same time being used as a tool in order to aid the formulation and implementation of the organisation’s strategy. The idea of the Balanced Scorecard was first introduced by Kaplan and Norton in the 1992 Harvard Business Review article entitled “The Balanced Scorecard: Measures that Drive Performance”, which was based on a “multi-company research project to study performance measurement in companies whose intangible assets played a central role in value creation.”The original train of thought that lead to the creation of the BSC was that if companies were to improve the overall performance...
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...Accounting Readings: o AYB321 Text, Chapter 6, to p202 (BSZ Chapter 14) o AYB321 Text, Chapter 7 (BSZ Chapter 15) o For reference: Lipe, M and Salterio, S. (2000). The balanced scorecard: Judgemental effects of common and unique performance measures The Accounting Review, 75 (3), 283-389. (on CMD) Overview: Lectures 6 & 7 explore the use of Kaplan and Norton’s Balanced Scorecard (BSC) as a strategic performance measurement and evaluation method. Lecture 6 introduces the BSC by providing the performance measurement context, defining financial and non-financial and lead and lag indicators, and providing an overview of the four perspectives of Kaplan and Norton’s Balanced Scorecard. Lecture 7 explores and demonstrates the process of BSC development via strategy maps and KPI selection, before discussing the key findings of BSC-related research. Lectures 6 & 7 are structured as follows: Lecture 6: 1. Introduction 2. What is the BSC? 3. The four perspectives Lecture 7: 4. Strategy maps 5. Creating a BSC 6. What does the research say? 1. Introduction a) Performance Measurement Performance measurement serves the following purposes: Evaluate performance, and provide rewards Communicate the strategy, plans Allow managers to track their own performance against targets and take corrective action Guide senior managers in developing future strategies and operations...
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...t i c l e i n f o Article history: Received 5 July 2010 Accepted 11 April 2011 Processed by Triantaphyllou Available online 20 April 2011 Keywords: Health service Multicriteria analysis Case study Performance measurement Balanced scorecard Business strategy a b s t r a c t The Balanced Scorecard (BSC) methodology focuses on major critical issues of modern business organisations: the effective measurement of corporate performance and the evaluation of the successful implementation of corporate strategy. Despite the increased adoption of the BSC methodology by numerous business organisations during the last decade, limited case studies concern non-profit organisations (e.g. public sector, educational institutions, healthcare organisations, etc.). The main aim of this study is to present the development of a performance measurement system for public health care organisations, in the context of BSC methodology. The proposed approach considers the distinguished characteristics of the aforementioned sector (e.g. lack of competition, social character of organisations, etc.). The proposed measurement system contains the most important financial performance indicators, as well as non-financial performance indicators that are able to examine the quality of the provided services, the satisfaction of internal and external customers, the selfimprovement system of the organisation and the ability of the organisation to adapt and change....
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...BALANCED SCORECARD APPLICATION IN LENDING/MICROFINANCING INSTITUTIONS: A STRATEGIC MAP IMPLEMENTATION IN THE PHILIPPINES CONTEXT This paper studies the application of Balanced Scorecard (BSC) as a powerful measurement and assessment system, in lending/micro financing institutions. Adopting the balanced scorecard (BSC) model, this exploratory study investigates the critical performance measures that lending/micro-financing institutions in the Philippines need to emphasize in their performance reporting to drive high performance. The proposed model can assist the lending institutions in assessing organizational performance, making it highly applicable for managers. Reviewing the existing literature, the paper also provides an implementation guide for BSC in the Philippines perspective. Eventually, the performance indicators for measurement purposes of the introduced case study are proposed. Keywords: Lending/ Micro financing Institutions, MFIs, Financial Services, Balanced Scorecard, BSC, Organizational Performance Assessment, performance reporting, Philippines. 1. Introduction In many developing countries, microfinance plays a vital role in providing the poor (i.e. micro-entrepreneurs, small farmers, fishermen) with access to credit and helping them improve their lives by encouraging entrepreneurial activity (Arch, 2005; Bhatt & Tang, 2011; Khandker, 1996; Llanto, 2004). It has also proven to be “a potent tool for poverty reduction by helping the poor...
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...1Management Control Systems (MCS) 10 2.2Elements of Management Control 11 2.3Boundaries of Management Control 11 2.4 Benefits of management control systems 12 2.5 Limitations of Management control systems 12 CHAPTER 03 13 Management control systems and strategy: 13 A critical analysis 13 3.1 Relationship between Management control systems and strategy 14 3.2 Levels of strategy from organization point of view 14 3.2.1Corporate-Level Strategy 14 3.2.2 Business Unit Strategies 15 3.2.2.1 Business Unit Mission 15 3.2.2.2 Business Unit Competitive Advantage 15 3.4 Responsibility Centers 16 3.4.1 Nature of Responsibility Centers. 16 3.5 types of Responsibility Centers 17 3.5.1 Revenue Centers 17 3.5.2 Expenses Centers 17 3.5.3 Profit Centers 18 3.5.4 Investment center 21 3.6 Concept of Transfer Pricing in relation to Responsibility center 22 CHAPTER 04 23 Budgeting and performance measurement 23 4.1Budgeting as a Control Mechanism 24 4.2Business performance management 25 4.3Balanced Scorecard 26 CHAPTER 05 29 FINDINGS AND CONCLUSION 29 5.1 Findings 30 5.2 Conclusion 30 5.3Bibliography 31 CHAPTER 01 About the report 1.1Introduction To introduce this topic and understanding the importance of management control system we know that in the present globalised world, organizations need to use management control systems that go beyond the strategies that focus on acquisition of technology and logistics which are not sufficient to give the organization sustained...
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...performance. There are many methods of measuring performance but the goal is the same — to find out what is working well and what needs to change. Performance measurement can keep a firm on track towards its vision and help achieve its objectives. Balance Scorecard (BSC), an important measure of an organization’s performance is defined as “a document that translates an organization’s mission and strategy into a comprehensive set of performance measures that provides the framework for implementation of its strategy”. A Balance Scorecard strikes a balance between financial and operating measures, links performance to rewards, and gives explicit recognition to diversity of organizational goals. In its simplest form The Balanced Scorecard breaks performance monitoring into four interconnected perspectives: • Financial perspective: Highlights achievement of financially strategic goals, including continued maximization of shareholder value and reasonable return on invested capital for business enterprises. • Customer Perspective: identifies the targeted market segments and measures the company’s success in those segments. It includes customer’s perception of the business, satisfaction, and other value added measures. A non-profit will look to its target population that it serves to see if it is meeting their expectations. • Internal Business Process perspective: analyses how to improve internal operations, maximize efficiencies, Increase quality and productivity and cut down on inefficiencies...
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...Department of Management, Faculty of Business Administration Anadolu University, Eskisehir, Turkey Tel: 90-222-335-05-80/ 2544 Received: Sep. 16, 2014 doi:10.5296/jmr.v6i4.6355 E-mail: ergunk@anadolu.edu.tr Accepted: Oct. 13, 2014 Published: October 13, 2014 URL: http://dx.doi.org/10.5296/jmr.v6i4.6355 Abstract The aim of this study is to analyze performance indicators used by airline companies within the framework of a performance and strategic management tool, namely, ’balanced scorecard (BSC)’, and to assess its applicability in the airline business. Designed as a multiple case study by collecting data from primary and secondary sources, the participants of this study are scheduled airline businesses operating in Turkey. The airline companies have been found to use similar performance indicators within the financial, customer-based, internal business process, and learning/growth perspectives of BSC. Airline companies are recommended to use BSC because it allows them to transform their strategies into measurable performance indicators and to assess their performance multi-dimensionally. Keywords: Strategic Management, Performance Management, Balanced Scorecard, Airline Industry, Performance Indicators 109 www.macrothink.org/jmr Journal of Management Research ISSN 1941-899X 2014, Vol. 6, No. 4 1. Introduction Airline businesses operate in an industry that employs a large number of personnel and which requires huge amounts of...
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...Strategy and Balanced Scorecard Steve Wu 23.10.2014 1 Objectives for today 1. The Balanced Scorecard What is strategy? Elements of a Balanced Scorecard Implementation issues 2. Strategic Analysis of Operating Income 2 What is Strategy? Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. A thorough understanding of the industry is critical to implementing a successful strategy. Strategy Tactics and concrete actions Means Policy and higher-order goals Ends 3 Basic Business Strategies 1. Product differentiation—an organization’s ability to offer products or services perceived by its customers to be superior and unique relative to the products or services of its competitors Leads to brand loyalty and the willingness of customers to pay high prices 2. Cost leadership—an organization’s ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control Leads to lower selling prices 4 Financial Performance Measures Financial performance measures are traditional measures based on financial statements Examples of financial performance measures? Core financial measures Net income Return on assets (ROA) Return on (common) equity (ROE) Sales revenue Sales growth Total costs Cost reduction rate 5 Financial Performance Measures Financial measures reflect outcomes...
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...Methodology 1.5 Limitations of the study BALANCED SCORECARD 2.1 Overview of the Balanced Scorecard (BSC) 2.2 Objective 2.3 Design 2.4 Original design method 2.5 Improved design method 2.6 Popularity 2.7 Variants and alternatives CRITICAL ANALYSIS ON THE CONCEPT & USING OF BALANCED SCORECARD WHETHER IT IS THE UNIVERSAL SOLUTION FOR THE BUSINESS MANAGEMENT? 3.1 Crucial investigation of the concept and using of Balanced Scorecard 3.2 A comprehensive new approach for the measurement and management 3.3 Is the Balanced Scorecard a universal key to the business management? 3.4 Balanced Scorecard: a question of conjecture and application CHAPTER FOUR: THE SUSTAINABILITY OF THE BALANCED SCORECARD 4.1 The Balanced Scorecard: an instrument for sustainability management 4.2 Different possible approaches of integrating environmental and social aspects 4.3 The process of formulating a sustainability Balances Scorecard 4-7 5 5 5 6 7 8-15 9-11 12 12-13 13 14 14 14-15 16-25 CHAPTER TWO CHAPTER THREE 17-21 21-22 22-23 23-25 26-32 CHAPTER FOUR 27-28 28-30 31-32 1 A iti al a alysis of Bala ed “ o e a d as a pe fo a e easu e e t tool: a o e ie of its usage a d sustai a ility CHAPTER FIVE FINDINGS 5.1 Balanced Scorecard links the performance measurement for better business management and it is an universal solution 5.2 The sustainable Balanced Scorecard 5.3 Why sometimes BSC fails? 5.4...
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...Table of Contents Introduction 3 Background 2 BSC Advantages 4 BSC Disadvantages 5 Review 4 Methodology 6 Pre-study essentials 5 How to Implement a Balanced Scorecard 7 Discussions and Results 9 Conclusion: 13 Recommendations: 13 References 14 Introduction Any business organization’s goal is to improve its operational performance. Through the employment of various types of performance measures, firms can assess the efficiency and effectiveness of their business process objectives. Furthermore, performance measurement tools can help businesses in evaluating their resource allocation processes in order to determine how resources can be better managed and distributed to the appropriate channels, Kaplan and Norton (1996) introduced the concept of a “Balanced scorecard (BSC)” as a basis for a strategic management system. This approach not only included financial and non-financial aspects but also blended business strategies into management systems. Background What is balanced scorecard? The BSC developed by Robert Kaplan and David Norton, and has been adopted by a wide range of leading edge organizations, both public and private. The BSC is a conceptual framework for translating an organization’s vision into a set of performance indicators distributed among four perspectives: Financial, Customer, Internal Business Processes, and Learning and Growth. BSC perspectives: 1. Financial perspective The importance...
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...• 1. Provide a systematic, well-researched description of the critical success factors of Norwalk. Where is the strength of this company and what are the key risks? In other words, what would be the scarce attention of the management of Norwalk should focus mainly on? 2. Rate the Balanced Scorecard (BSC) Norwalk (Exhibit 2). To what extent does that with the analysis of assignment 1? What changes / additions are needed to the Balanced Scorecard makes sense to deploy management control within the division Norwalk? Ensure good argumentation, in which attention is paid to the balance between short and long term and to the balance between the different performance perspectives. 3. Norwalk developed by the Balanced Scorecard is designed primarily as a reporting tool for Chadwick. To what extent does the card as shown in Exhibit 2 for this specific purpose? In light of this purpose the explicit restriction to hard, objective data a good idea? Again, pay attention to the motivation of the answer. Reply belonging to question 1 In order to answer this question, we must first understand the business strategy of Norwalk. We must determine the keys to the business strategy or the “Critical Success Factors.” Critical success factors are dependent on which strategy is implemented. For Norwalk, the following critical success factors should be Included: • Relationships and Current Networks: The salesmen are trained to sell new products alongside the existing product lines...
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...Hi Ihab Thank you for your great post. The process of implementing BSC is not easy and selecting the best performance measurement is the most challenging step. I agree with you how critical BSC is playing in the organizational future success as it is enhance effectively in developing the organizational strategy, measuring the result of the objectives. A survey been done of U.S. financial services companies (Ittner and Laecker, 2006) discovered that, most of these companies were not satisfied with their measurement systems. They believed there was too much emphasis on financial measures such as earnings and accounting returns and little emphasis on drivers of value such as customer and employee satisfaction, innovation and quality. ‘Limitations of financial data as a measure of total firm value, non-financial performance measures are necessary for an efficient performance evaluation’ (Kaplan and Norton, 1992). It is very important to take Stakeholders as first consideration in the implantation of BSC, where the organization must first of all understand the company value drivers and its mission, which means, the valuable approaches that will make the stakeholders convinced with the company future profit. Once these approaches are determined, the company will be able to use measurements that will translate the stakeholder’s objectives. Best Regards Qasim References: Kaplan, R. S. and Norton, D. P. (1992). ‘The balanced scorecard - measures that drive performance;, Harvard...
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...Guidelines in corporate management The Balanced Scorecard – Translating Strategy into Action Introduction Public transport organizations face many barriers when trying to execute the strategy formed by their corporate managements. Some of these common barriers include: • The vision barrier, which arises when most managers and employees do not really understand the organization’s strategy. The people barrier, which arises when only a small portion of managers have some incentives regarding strategy and performance. The management barrier, which arises when most management teams spend only a small amount of time discussing strategy. The resource barrier, which arises when most of the business units fail to link their daily work and therefore their budgets to the overall strategy. • • • Balanced Scorecard was developed by Robert Kaplan, a professor at Harvard University and David Norton, a consultant from Boston. They began developing the approach after leading a research study of a dozen companies exploring new methods of performance measure. Kaplan and Norton put together a system that was able to measure a variety of activities throughout the organization: customer issues, internal business processes, employee activities and the concerns of shareholders. Under the Balanced Scorecard system, a company’s financial results are “balanced” and interlinked with all of these perspectives. This scorecard was successfully adopted by a number of organizations and the results...
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