(c) 2012 NELSON EDUCATION (CAN)

15-1

THE BALANCED
SCORECARD:
STRATEGIC-BASED
CONTROL

15

15-2

Activity-Based versus StrategicBased Responsibility Accounting

The Responsibility Accounting Model; It has four

essential elements:
1)
2)
3)
4)

Assigning responsibility
Establishing performance measures or benchmarks
Evaluating performance
Assigning rewards

Financial based responsibility accounting model

emphasizes financial performance of organizational
units and evaluates and rewards performance using
static financial-oriented standards
15-3

Activity-Based versus StrategicBased Responsibility Accounting

The activity-based
system adds a process
perspective to the
financial perspective of
the functional based
responsibility
accounting system

A strategy-based
responsibility
accounting system
translates the
strategy of the
organization into
operational
objectives and
measures
15-4

Activity-Based versus StrategicBased Responsibility Accounting

The Balanced Scorecard is a

strategic-based performance
management system that
typically identifies objectives
and measures for four
different perspectives.
The Financial Perspective
The Customer Perspective
The Process Perspective
The Learning and Growth
Perspective
15-5

Activity-Based versus StrategicBased Responsibility

Accounting

Responsibility Assignments Compared

15-6

Activity-Based versus StrategicBased Responsibility Accounting

Performance Measures Compared

15-7

Basic Concepts of the

Balanced Scorecard

The Balanced Scorecard permits an

organization to create a strategic focus by
translating an organizations strategy into
operational objectives and performances
measures for four different perspectives:
1. The financial perspective
2. The customer perspective
3. The internal business process
perspective
4. The learning and growth perspective

15-8

Basic Concepts of the

Balanced Scorecard

What is strategy?
Strategy is choosing the market and customer
segments the business unit intends to serve,
identifying the critical internal and business
processes that the unit must excel at to deliver
the value propositions to customers in the
targeted market segments , and selecting the
individual and organizational capabilities required
for the internal, customer, and financial objectives

15-9

Basic Concepts of the

Balanced Scorecard

Strategy Translation Process

15-10

Basic Concepts of the

Balanced Scorecard

Manufacturing Cycle Efficiency

MCE = Processing time / (Processing time + Move time +
Inspection time + Waiting time + Other non-value-added time)

In this equation, processing time is the efficient or

ideal time it takes to convert materials into a finished
good.
The other activities and their times are viewed as
wasteful and the goal is to reduce those times to
zero.

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Basic Concepts of the

Balanced Scorecard

Summary of Objectives and Measures: Financial Perspective

15-12

Basic Concepts of the

Balanced Scorecard

Summary of Objectives and Measures: Customer Perspective

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Basic Concepts of the

Balanced Scorecard

Customer Value: the difference between realization

and sacrifice, where realization is what the

customer receives and sacrifice is what is given
up
Responsiveness is the time it takes a company to
respond to a customer order
Cycle time is the length of time it takes to produce
a unit of output from the time materials are received
until the good is delivered to finished goods inventory
Velocity is number of units of output that can be
produced in a minute hours or a given period of
time
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Basic Concepts of the

Balanced Scorecard

Summary of Objectives and Measures: Process Perspective

15-15

Basic Concepts of the

Balanced Scorecard

Summary of Objectives and Measures: Learning and Growth Perspective

15-16

Linking Measures to Strategy

Strategy Map for Cornerstone 13-3

15-17

Linking Measures to Strategy

Single loop feedback emphasizes effectiveness

and implementation and the variances may

result from Strategic standards and actual
implementation.
Double loop feedback emphasizes both
effectiveness of strategy implementation and
validity of the assumptions built in the strategy.
Hypothesis testing makes possible to adapt and
change strategy
Strategy map graphically illustrates cause-effect
linkages of strategy and operating activities
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Strategic Alignment

Targets and Weighting Scheme Illustrated

15-19

Strategic Alignment
Objectives, targets, initiatives, allocation of

resources must follow strategy and be

aligned to it.
Scorecard objectives need to ne articulated
and communicated to all employees
Linkages must be established between
personal and organizational goals to achieve
goal congruence
Performance expectations need to be
established too
1-20

End of
Chapter
15

15-21