Performance Measurement and Balance Scorecard“There are only three measurements that tell you nearly everything you need to know about your organization’s overall performance: employee engagement, customer satisfaction, and cash flow. It goes without saying that no company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.”— Jack Welch
What is the strategic nature of performance measures? Frustrated by the inadequacies of traditional performance measurement systems, some managers have abandoned financial measures like return on equity and earnings per share. “Make operational improvements and the numbers will follow,” the argument goes. But managers do not want to choose between financial and operational measures. Executives want a balanced presentation of measures that allow them to view the company from several perspectives simultaneously. During a year-long research project with 12 companies at the leading edge of performance measurement, the authors developed a “balanced scorecard,” a new performance measurement system that gives top managers a fast but comprehensive view of the business. The balanced scorecard includes financial measures that tell the results of actions already taken.
results of actions already taken. And it complements those financial measures with three sets of operational measures having to do with customer satisfaction, internal processes, and the organization’s ability to learn and improve—the activities that drive future financial performance. Managers can create a balanced scorecard by translating their company’s strategy and mission statements into specific goals and measures. To create the part of the scorecard that focuses on the customer perspective, for example, executives at Electronic Circuits Inc. established general goals for customer performance: get standard products to market sooner, improve customers’ time-to-market, become customers’ supplier of choice through partnerships, and develop innovative products tailored to customer needs. Managers translated these elements of strategy into four specific goals and identified a measure for each.The Balanced Scorecard: Measures That Drive PerformanceBy Robert S. Kaplan and David P NortonWeekly Learning OutcomesAt the end of this module you will be able to: • Identify and understand the relationship between organisational goals, organisational strategies and performance management. • Understand the nature and qualities required of performance measures. • Explain how performance measures and executive compensation schemes are used to align managerial interests to organisational goals. • Explain why finance measures are used to assess organisational performance. • Explain and evaluate the use of non-financial measures of performance. • Understand what is meant by the term ‘balanced scorecard’ and its four perspectives.
What is Woolworths’ remuneration strategy and what are the goals the strategy is designed to achieve?What are the principles embodied in Woolworths’ remuneration framework?How will Woolworths apply these remuneration principles in terms of the use of external data, the setting of targets and the awarding of incentives to KMP?What is the structure of the remuneration package offered to KMP?Focusing on the at-risk short-and long-term rewards offered by Woolworths to KMP, identify, review and comment on the components of the incentives, the weightings allocated to each component and the performance measures (or hurdles) used to determine whether an incentive will be awarded.Review the performance measures Woolworths uses for the awarding of short-term annual cash incentive for the KMP identified in the Remuneration Report.What are those financial and non-financial measures?How would you assess the balance between financial and non-financial measures?Why would the financial and non-financial measures for individual KMP be different in terms of applicability and weighting? Question 3 — Indicate, for each of the following independent casers, whether they are best structured as cost, profit or investment centres: 1. Kellee is head of the marketing and public relations department at Satellite University. The department receives funding from the central administration for teaching and research. The department is allocated funds based on projected expenditures. Kellee is responsible for 10 academic staff and 2 general staff.Leigh is head of the school of business located on the campus at Planet University. The school enrols only full-fee-paying students and is responsible for all operating costs and a share of the university’s overheads. The university provides a building and teaching venues. Leigh is responsible for 30 academic staff and 10 general staff.Troy is head of the division of business at Universe University. The division is located in its own building in the city as part of a strategic move by the university. The division enrols only full-fee-paying students and it also conducts short courses for businesses in the CBD. The division is responsible for all capital and operating costs.Question 5 — You are a director of a credit union and you have been appointed to the remuneration subcommittee. One of your first tasks is to consider a bonus for the general manager. You believe that a bonus should be paid based on performance. The credit union has 10,000 members and total assets of $50 million, with $40 million in loans to members. It operates four branch locations and a head office and employs a total of 30 people. You are familiar with using KPIs such as return on assets as a measure of performance. However, the board of directors has a policy of not aiming to maximise profit as the credit union exists for the benefit of its members. Therefore, you consider it to be inappropriate to use return on assets as a measure of the performance of the general manager.RequiredWhat other financial and non-financial measures of performance could be used to assess the performance of the general manager?Question 6 — List three performance measures that would be appropriate for the following centres: 1. An academic department in a university established as a cost centre.A branch of a bank established as profit centre. 3. A division of a large steel company established as an investment centre.s-:c” AssessmentsProgress your “Manual Accounting Practice Set” by Perdisco with your teacher.The post BUS502 Performance Measurement and Balance Scorecard appeared first on My Assignment Online.