Exam 13: Performance Measurement and the Balanced Scorecard

A major strength of financial measures is that they provide a standardised measure in monetary terms, whereas non-financial measures are difficult to measure and therefore are rarely used in performance assessment systems.

The Demons fast food outlet provides intensive training for new staff, and ongoing training for existing staff. A focus of the ongoing training is to improve customer satisfaction. The training is considered to be a:

Which of the following examples would not normally be considered a strategic KPI?

The equation for calculating economic value added (EVA) is as follows: EVA = before-tax profit + interest - (cost of capital x total capital employed).

The store manager of the Red Shoe has asked the store's staff to make a record of customer requests for stock that is unavailable. Determining the percentage of stock that is unavailable when customers ask for it would normally be considered to be a:

The four dimensions of the balanced scorecard are: the financial perspective; the monetary perspective; the customer perspective; and the learning and growth perspective.

Levels within an organisation are often categorised according to the types of responsibilities placed on managers. When a responsibility centre is considered an investment centre,

A driver KPI measures factors that will cause a change, whereas an outcome KPI measures the result of a change.

Sallie's Cleaning service is a large commercial cleaning service with two divisions. The Office Division services businesses by cleaning their offices once a day during non-business hours. The Residential Division offers cleaning services to individuals in their homes, usually on a weekly basis, although other arrangements can be made. Sallie's competition is very aggressive, especially for the Office Division. In the past the division managers have been evaluated primarily on sales volume. Although the divisions operate as independent businesses, the corporate president would like to increase the accountability of the division managers by making them also responsible for expenses. Since the company has no manufacturing operations and capital investments are minimal, the president does not intend to account for assets assigned to the divisions.

The economic value added (EVA) method of assessing performance involves:

Kaplan and Norton's Balanced Scorecard has principally been applied to for-profit organisations. In such applications, the scorecard's four perspectives (financial, customer, learning and growth, and internal business) are highly appropriate. However, Kaplan and Norton also acknowledge the applicability of the Balanced Scorecard to not-for-profit organisations; they state, though, that the four traditional perspectives may need to be altered in such situations. Required: Suppose you were the manager of a not-for-profit shelter for the homeless. Suggest at least three perspectives you would need to consider in developing performance evaluation metrics for your organisation. For each perspective, identify two or three specific performance measures you would include in your organisation's Balanced Scorecard.

Non-financial indicators of performance are easier to measure than financial indicators.

In the context of performance measurement, drivers are the indicators that measure the items that will cause a change in the outcome measures.

The economic value added (EVA) is a method of measuring how effectively a company achieves the objective of creating shareholder value.

The rate of return on investment is an appropriate performance measure for an investment centre.

For each of the following industry-specific KPIs indicate whether it is a financial, customer, internal process or learning and growth perspective.

For each responsibility centre described below, indicate the type of responsibility level that is the most appropriate. Select one (or more) of the following levels. If you select more than one level, explain your reasoning. Responsibility levels are: CC = Cost centre PC = Profit centre IC = Investment centre

Levels within an organisation are often categorised according to the types of responsibilities placed on managers. When a responsibility centre is considered a cost centre,

An internal business process perspective of a balanced scorecard system addresses the question 'What do we need to do to develop our employees?'

The financial perspective of a balanced scorecard contains driver measures such as return on assets and return on shareholders' equity.