Strategic Management Accounting · Module 5: Performance management
Four Questions a Scorecard Asks
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Chapters
- 0:00Why
- 0:15Four questions
- 0:30Strategy map
- 0:48Lead & lag
- 1:08Recap
In short
The balanced scorecard measures performance from four perspectives: financial, customer, internal process, and learning and growth. Read from the bottom up they form a strategy map of cause and effect, where learning, process and customer measures lead and financial results lag.
- Four perspectives, not one profit figure.
- Lower perspectives are leading indicators; financial results lag.
- In a not-for-profit the mission sits at the top.
Transcript
0:00Why
Profit tells you how last year went. It can't tell you how next year will go. The balanced scorecard asks four questions instead of one.
0:15Four questions
Financial: how do we look to shareholders? Customer: how do customers see us? Internal process: what must we be excellent at? Learning and growth: can we keep improving?
0:30Strategy map
Quokka Hotels reads them from the bottom up. Train the front desk, and check-in gets faster. Faster check-in means happier guests. Happier guests book again, and revenue grows. That chain of cause and effect is the strategy map.
0:48Lead & lag
Pause. Which measure warns you first that something's wrong? The lower measures lead. Profit lags. By the time revenue falls, the cause is months old. In a not-for-profit, the mission sits at the top instead of profit.
1:08Recap
Four questions, one chain of cause and effect. Next: the formula that trips up residual income. Subscribe so you catch it.
Try a question on this lesson
From the EstatePass Strategic Management Accounting bank. Answer it, then read the explanation.
Mallee Community Health is a not-for-profit clinic funded by government grants and donations. It is building a balanced scorecard. In Kaplan and Norton's adaptation of the scorecard for not-for-profit and public sector organizations, what is placed at the top as the ultimate objective?
Sources
- Kaplan and Norton (1992, 1996), The Balanced Scorecard
- CPA question bank: cpa-sma-0421, 0422
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