Balanced Scorecard

MENILAI KINERJ

Using Balanced Scorecard as a Holistic Measure of

Performance

04/10/23 BUS 351...Balanced Scorecard 2

BAGAIMANA MENILAI PERUSAHAAN

Market share. Financial performance…

• Sales• Profitability• Ratios

Stock price.


Problems

Too simple or too narrow. Biased toward financial results.

• Many believe emphasis is on short-term results (quarterly earnings).

• Difficult to see what actions firm is taking for future.

Operational activities left out.


Balanced Scorecard – What is it?

Helps “balance” the way company’s look at performance by using four perspectives or lenses: Learning and Growth Business Processes Customer Financial


Learning and Growth

This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. (Balanced Scorecard Institute)


Business Processes

This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). (Balanced Scorecard Institute)


Customer

This perceptive refers to how customers are being satisfied by products and services being provided by the firm. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.


Financial

This perceptive focuses on the traditional measures of ROI, profitability, stock price etc.

Financial

Internal Business Processes

Learning and Growth

CustomersVision and

Strategy

Basic Design of Balanced Scorecard System

From “A Balancing Act” by Howard Rohm in Perform magazine.


Balanced Scorecard

You can see this idea from simulation:• Financial performance• Marketing performance• Marketing effectiveness• Investment in future• Wealth• Asset management• Manufacturing productivity


Balanced Scorecard

You can see this idea from simulation:• Financial performance• Marketing performance• Marketing effectiveness• Investment in future• Wealth• Asset management• Manufacturing productivity

Customers

Learning & Growth

Business Processes

Financial


Benefits

Long-term planning is valued. Cumulative impact of building shareholder

wealth is valued over short-term earnings. Highlights areas of weakness and

strength. …It’s a more complete picture of the

firm’s performance.


Criticisms

Unnecessarily complex. Takes time and effort

Included variables are (a) somewhat arbitrary and (b) simply what’s available.


Criticisms

All information in BSC is reflected in stock price anyway.

• Assumes you buy the traditional view of firm value.

• Depends on good dissemination of information.• But not appealing to HR, mgmt, engineers and

others who feel alienated with financials.


Application to Crucible

Financial performance:• Net profit from current operations / total shares

issued• This is operating profit with R&D and quality

improvements added back in



Market performance:• Average market share in targeted segments /

percent of demand actually served• So this accounts for stock outs and customer ill

will• Between 0.0 and 1.0; good score around .4 or .5.



Marketing effectiveness:• Average market share in targeted segments /

percent of demand actually served• So this accounts for stock outs and customer ill

will• Between 0.0 and 1.0; good score around .4 or .5.



Investments in future:• (Current expenditures aimed at future / net

revenues) * 10+1• => 1.0 and good score is > 3.0



Creation of wealth:• Net equity / total stockholder’s equity• = (retained earnings + common stock) / common

stock• = (retained earnings + $5,000,000) / $5,000,000• < 1 means equity is paying for operational

expenses• > 1 means firm is adding to wealth• <= 0 means bankruptcy



Asset management:• Asset turnover * penalty for excess inventory• Good score should be around 3.0



Manufacturing productivity:• Reliability judgment * % of operating capacity

used in production• Score between 0.0 and 1.0, with good score

around 0.80



Total business performance:• The individual measurements multiplied together

into an index• Compare quarter-to-quarter to see improvement• Compare with competitors and industry average


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