Beruflich Dokumente
Kultur Dokumente
Modules 1 and 2
Strategies
Strategic Planning
Modules 6, 8 and 9 Module 3
Measurement and
Reporting
Modules 4, 5, 6, 7 and 8
2
Purposes of performance measures
Problems and limitations of conventional
performance measures
Non-financial performance measures
Problems with non-financial performance measures
The Balanced Scorecard
Features of a good Balanced Scorecard.
Implementation Pitfalls
3
Communicate the strategy and plans of the
business, and goal alignment
Track performance against targets
Identify problem areas
Evaluate subordinates’ performance and as a
basis of rewards
Guide senior managers in developing future
strategies and operations
4
Return on investment (ROI)
Residual Income (RI)
Economic Value Added (EVA)
Profit
Revenue
Cost
Cost variance
5
They are not actionable
Financial measures emphasise one perspective
Financial performance measures provide
limited guidance for future actions
May encourage actions which decrease
shareholder and customer value
6
Financial measure focus on the outcome of
past actions
Not on the determinant of the outcome
7
Non-financial measures reflect the drivers of
future financial performance
8
Raw Material & Scrap Product Quality
Control Warranty claims
Quality
Customer complaints
Lead time
Defective products
9
Production Delivery
Manufacturing cycle % of on-time
time deliveries
Velocity
% of orders filled
Manufacturing cycle
efficiency Delivery cycle time
10
Wide choice available
Development can be ad-hoc and undirected
Some measures lack integrity
Some measures not easily translated into
financial outcomes
11
Non-financial and financial measures
Have a strategic orientation—directly measure
areas that provide competitive advantage
Many companies have introduced a Balanced
Scorecard to manage the implementation of
their strategies
12
The balanced scorecard translates an
organisation’s mission and strategy into a
comprehensive set of performance measures
for each key strategic area.
◦ A combination of financial and non-financial
measures.
13
There are four perspectives of the balanced
scorecard:
1 Financial perspective
2 Customer perspective
3 Internal operations perspective
4 Learning and growth perspective
14
Non-financial and operational indicators
measure fundamental changes that a company
is making.
The financial benefits of these fundamental
changes may not be captured in short-run
earnings.
Strong improvements in non-financial
measures signal the prospect of creating
economic value in the future.
15
◦ Reflects perspective of the shareholder
◦ Summarises the financial outcomes of
decision and actions
◦ Measures include various cost and product
measures, return on investment, cash flow
measures, shareholder value measures
16
Measures of the company’s success in
achieving customer value
◦ Outcome (lag) measures include customer
profitability, market share, number of new
customers
◦ Lead indicators include on-time delivery,
number of defects
17
◦ Objectives relate to specific processes that
contribute to achieving customer and
financial objectives
◦ Processes critical to delivering products to
customers and achieving financial strategies
◦ Measures of cost, product quality, time-
based measures, new product development
18
Focuses on the capabilities of the organisation
to achieve superior internal processes that
create both customer and shareholder value
◦ To deliver long-term growth and
improvement
◦ Measures focus on employee capabilities,
information systems capabilities and
organisational climate
19
Shows the cause and effect linkage
Lead indicators
◦ Measures that drive the outcomes and provide
information that is actionable and management
Lag indicators
◦ Monitor progress towards the organisation's objectives
20
21
Measures in the balanced scorecard provide
balance between
◦ Short-term and long-term objectives
22
Improvements in non-financial measures will
not result in improved profits if:
◦ Management has selected the wrong critical success
factors
23
Commitment and leadership from top
management
24
Must motivate managers to take actions that
eventually result in improvements in financial
performance
25
Managers should not assume the cause-and-
effect linkages are precise: they are merely
hypotheses
26
Embrace participation and empowerment
Link to rewards
27
Compensation
28