Sie sind auf Seite 1von 29

Testing Strategy with Multiple

Performance Measures
Evidence from a Balanced
Scorecard at Store24
Presented By

8/2/2010 1
• Introduction
• Objective
• Process
• Analysis
• Results
• Conclusion
• References/Credentials
• Q&A

8/2/2010 2

What the study is about?

Who did the study?
Why ?

8/2/2010 3
What the study is about?
Store24, a privately held convenience store retailer in New England, the 4th largest in the
region. Whose primary product categories include cigarettes, beverages, snacks, prepared
foods, and lottery tickets. It operates in a mature environment with competition from
convenience stores, gasoline retailers, and drug stores. During FYs 1998 and 1999, Store24
formulated a strategy aimed at increasing sales and margins. To achieve this, Store24
changed its strategy to creating entertaining in-store atmospheres that would differentiate its
stores from those of competitors. To implement the same Store24 used BSC & Strategy Map,
but the strategy was unsuccessful .

This study is a follow up research to analyze the failure of above strategy focusing on
following points:

 investigate the role of the balanced scorecard in generating useful information for testing
and validating an organization's strategy.

 Testing and validation of assumption underlying BSC.

 Finding the gap through statistical tests of the hypotheses underlying the firm's balanced
scorecard and strategy map

8/2/2010 4
Who did the study?
Name Designation/Organisation Paper Publish
Dennis Campbell associate professor in the Accounting and
Management unit at Harvard Business School
Srikant M. Datar Arthur Lowes Dickinson Professor of
Accounting at Harvard Business School
V.G. Narayanan the Thomas D. Casserly, Jr. Professor of
Business Administration at Harvard Business
Susan L. Kulp Assistant Professor of Accountancy “Organizational Control Mechanisms: The Next
Phase of Procurement Efficiency," Interfaces, May-
June 2006

“Manufacturer Benefits from Information Integration

with Retail Customers," Management Science, April

“Supply-Chain Coordination: How Companies

Leverage Information Flows to Generate Value," The
Practice of Supply Chain Management: Where
Theory and Application Converge, 2003

8/2/2010 5
Understand to what extent do balanced
scorecards (BSC) provide useful information
for testing and validating an organization's

Understanding the role of balance scorecard

in the potential learning and feedback

8/2/2010 6
• to explore whether, when, and how information about
problems with strategy of Store24 was captured in
Store24’s balanced scorecard.

• Find evidence that performance measurement of BSC

provide useful and timely information for testing the
efficacy of an organization's strategy.

• To stimulate new theories about the role of

multidimensional performance measurement systems
in the strategic feedback and learning processes of

8/2/2010 7
 Strategy
 Balance Scorecard (BSC)
Performance Measurement
 Strategy Map
 Hypotheses Underlying the BSC
8/2/2010 8
Strategy of Store24
 Traditional Strategy
 cleanliness,
 efficiency,
 freshness
 Differentiation Strategy
 Greater Loyalty
 “end-caps”- contained high margin product
 Fun & Entertainment

8/2/2010 9
Balanced Scorecard Performance
Measurement System
Performance measures were organized around
the four traditional balanced scorecard
– financial
– customer
– internal
– learning & growth

8/2/2010 10
Balance Scorecard
Financial Perspective Sales Revenue
Controllable Contribution
Customer Perspective Transaction Volume
In-store Comment Card

Process Perspective Audit Score

Learning & Growth Perspective Managerial Skill

Crew Skill

8/2/2010 11
Balance Scorecard of Store24
Pa ra me te r Me a sure me nt Le ve l Fre que ncy

Return on Capital EBITDA divided by value of

Deployed equipment and leaseholds Corporate Quarterly
G&A Overhead Average G&A cost per store Corporate Quarterly
Controllable contribution less
EBITDA rental or lease cost Store Quarterly
Controllable Gross profit less utilities and
Contribution labor expense Store Quarterly

Growth in gross profit from same

Gross Profit Growth quarter in prior year Store Quarterly
Growth in sales from same
Sales Growth quarter in prior year Store Quarterly
Days inventory for general
Inventory Turnover merchandise and cigarettes Store Quarterly

% would recommend Store24

Loyalty - Recommend and % will visit Store24 soon

Store24 based on telephone survey Corporate Quarterly


% stating Store24 as their

Primary Convenience primary convenience store based
Store on telephone survey Corporate Quarterly
% viewing Store24 as fun and/or
entertaining place to shop based
Enjoyable Experience on telephone survey Corporate Quarterly

Net gross profit $ from new

Concept Development concepts Corporate Quarterly

W alk-through audit and mystery

Operational shopper ratings of compliance

Excellence with basic operating standards Store Quarterly

W alk-through audit and mystery
shopper ratings of compliance
with Ban Boredom
Ban Boredom implementation standards Store Quarterly

Every 6-
Manager Skills Skill rating of store managers Store months
Learning & Growth

Average Skill rating of non- Every 6-

Crew Skills management store employees Store months
Number of years manager has
Manager Tenure been with Store24 Store Quarterly
Averge number of years with

Store24 for non-management

Crew Tenure store employees Store Quarterly
Gallup survey of employee Every 6-
Employee Satisfaction satisfaction on 5-point scale Corporate months
Regional manager evaluation of
Information System store utilization of front and back- Every 6-
Use office technology Regional months

8/2/2010 12
8/2/2010 13
Strategy Map

Financial Perspective EBITDA

Contribution Utilization

Gross Profit

Increase Sales

Differentiators Basic Requirement


Quality, Value,





Differentiation in-store Increase Customer Value

Enhance the Customer

Create Fun, entertaining in- experience with flawless

store atmospheres operation
Ban Boredome Walk-Through Audits Walk-Through Audits

Net Gross Profit From New Concepts Mystery Shoppers

Learning & Growth

Competencies Technology Climate for Action


Required competencies Focus on technology is Ability to implement

are build on capable on information system relies heavily on
employees use employee satisfaction

8/2/2010 14
8/2/2010 15
Hypotheses Underlying the BSC &
Strategy Map


8/2/2010 16
Explicit Hypotheses
 H1: Ceteris Paribus strategy inputs are positively related to
financial performance.

 H2: Ceteris Paribus strategy inputs are positively related to

strategy-specific customer outcomes.

 H3: Ceteris Paribus strategy-specific customer outcomes are

positively related to financial performance.

 H4: Ceteris Paribus measures of employee capabilities are

positively related to measures of strategy inputs.

8/2/2010 17
Implicit Hypotheses
H5: Ceteris Paribus the impact of increases in
strategy inputs on strategy-specific customer
outcomes is positively related to the level of
employee capabilities.

H6: Ceteris Paribus the impact of increases in

strategy-specific customer outcomes on
financial performance is positively related to
the level of employee capabilities.
8/2/2010 18
Summary of Hypotheses Underlying
the Scorecard and Strategy Map
Financial Performance


Customer H1
Perspective Strategy-Specific Customer Outcomes

H6 H2

Perspective Strategy Input

& Growth Employee Capabilities

8/2/2010 19
Financial Performance
Non Financial Performance
 Measure of Strategy Inputs
 Measure of Basic Operational Compliance
 Measure of Strategy –Specific Customer
 Employee Capability
Customers Performance Measure
8/2/2010 20
Strategy-Specific Input Measure
Walk Through Audit Score

Q1 FY99 Q2 FY99 Q3 FY99 Q4 FY99

8/2/2010 21
Strategy-Specific Customer Outcome

Enjoyable Experience Rating






Q1 FY99 Q2 FY99 Q3 FY99 Q4 FY99

8/2/2010 22

8/2/2010 23
• These results highlight that the hypothesized link in the scorecard between internal implementation of the
action plans related to the new strategy and financial performance does not exist (H1). However, it is
unclear whether the strategy was poorly formulated or poorly implemented.

• although the strategy was well implemented, the strategy formulation may have been flawed.

• suggest problems with the fit of the differentiation strategy with Store24’s employee capabilities. Crew
skills determine the magnitude of the relationship between strategy outcomes and financial performance,
but the relationship is only greater than zero for high levels of crew skills

• information in the scorecard reveals that the primary role of employee capabilities is not necessarily in
ensuring store-level execution of the strategy (e.g. H4), but rather in ensuring that even if executed well at
the local level, the differentiation strategy ultimately translated into the desired financial outcomes.
• Tables 3-5 offering evidence that formal analysis of the data generated by Store24's balanced scorecard
provides timely information about strategic problems relative to the firm's quarterly strategy review
• the operating standards which Store24 executives eventually abandoned were not, while those they
retained were, drivers of financial performance.

Overall, these results provide evidence that Store24 executives learned about the underlying drivers of
store performance despite a lack of reliance on formal statistical analysis of the assumed relationships
underlying their scorecard.

8/2/2010 24

8/2/2010 25
1. Aiken, L.S. and S.G. West. 1991. Multiple Regression: Testing and Interpreting interactions.
London: Sage Publications.
2. Banker, R. D., G. Potter, and D. Srinivasan. 2001. An Empirical Investigation of an Incentive Plan
that Includes Nonfinancial Performance Measures. The Accounting Review 75 (1).
3. Banker, R. D., H. Chang, and M. Pizzini. 2004. The Balanced Scorecard: Judgemental Effects of
Performance Measures Linked to Strategy. The Accounting Review 79 (1).
4. Campbell, D. and D. Lane. 2006. "China Resources Corporation (A): 6S Management."
Harvard Business School Case 107-013.
5. Campbell, D. 2008. Nonfinancial Performance Measures and Promotion-Based Incentives.
Journal of Accounting Research. Forthcoming.
6. Cstore News, 2000.
7. Fitzsimmons, J.A. and M.J. Fitzsimmons. 2001. Service Management: Operations, Strategy, and
Information Technology. New York: McGraw-Hill.
8. Goold, M. and Quinn, J. 1990. The Paradox of Strategic Controls. Strategic Management
Journal, 11 (1), 43-57
9. Ittner, C.D. and D.F. Larcker. 1998a. Innovations in Performance Measurement: Trends and
Research Implications. Journal of Management Accounting Research 6: 205-238. 32

8/2/2010 26
10. Ittner, C.D. and D.F. Larcker. 1998b. Are non-financial measures leading indicators of financial
performance?: An analysis of customer satisfaction. Journal of Accounting Research 36: 1-35.
11. Ittner, C.D. and D.F. Larcker. 2001. Assessing Empirical Research in Managerial Accounting: A
Value-Based Management Perspective. Journal of Accounting and Economics 32: 349-410.
12. Ittner, C., Larcker, D., and Meyer, M. 2003. "Subjectivity and the Weighting of Performance
Measures: Evidence From a Balanced Scorecard." The Accounting Review. 78(3) : 725-758
13. Ittner, C.D. and D.F. Larcker 2005. Moving from Strategic Measurement to Strategic Data Analysis.
Controlling Strategy: Management, Accounting, and Performance Measurement. Edited by C.
Chapman. Oxford University Press.
14. Kaplan, R.S. and D.P. Norton. 1992. The Balanced Scorecard – Measures that drive performance. Harvard
Business Review 70 (1): 71-79.
15. ___. 1996 The Balanced Scorecard: Translating Strategy into Action. Boston, MA: Harvard Business
School Press.
16. Kaplan, R. S. 1998 "Mobil USM&R (A): Linking the Balanced Scorecard." Harvard Business School
Case 197-025.
17. ___. 2000 The Strategy Focused Organization. Boston, MA: Harvard Business School Press.
18. ___. 2004 Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Boston:
Harvard Business School Publishing

8/2/2010 27
19. ___. 2006 Alignment: Using the Balanced Scorecard to Create Corporate
Synergies. Boston: Harvard Business School Press
20. ___. 2008 The Execution Premium: Linking Strategy to Operations for
Competitive Advantage. Harvard Business School Press
22. Mackinnon, J.G. and White, H. 1985. Some Heteroskedasticity Consistent
Covariance Matrix Estimators with Improved Finite Sample Properties.
Journal of Econometrics. 29: 53-57.
23. Selto, F. and M. Malina 2001. Communicating Strategy: An Empirical Study
of the Effectiveness of the Balanced Scorecard. Journal of Management
Accounting Research. 13: 47-90
21. Nagar, V. and M. V. Rajan. 2001. The Revenue Implications of Financial and
Operational Measures of Product Quality. The Accounting Review 76 (4):

8/2/2010 28

8/2/2010 29