Accounting Business Reporting for Decision Making

566 Accounting: Business Reporting for Decision Making

Internal business perspective Innovation and learning perspective

GOALS MEASURES GOALS MEASURES

Technology

capability

Manufacturing

excellence

Design productivity

New product

introduction

• Manufacturing geometry
  vs. competition
  • Cycle time
  • Unit cost
  • Yield
  • Silicon efficiency
  • Engineering efficiency
  • Actual introduction
  
  schedule vs plan

Technology

leadership

Manufacturing

learning

Product focus

Time to market

•    Time   to   develop    next    

generation

•    Process    time    to   maturity

•    Per     cent   of   products   that    

equal 80% sales

•    New    product introduction

vs. competition

Financial perspective Customer perspective

GOALS MEASURES GOALS MEASURES

Survive

Succeed

Prosper

•    Cash   flow

•    Quarterly  sales   growth  

and operating income by

division

•    Increased  market  share   and 

ROE

New products

Responsive supply

Preferred supplier

Customer

partnership

•    Per     cent   of   sales  from    

new products

•    Per     cent   of   sales  from    

proprietary products

•    On-time    delivery    (defined    by

customer)

•    Share  of   key     accounts’  

purchases

•    Ranking    by   key     accounts

•    Number of   cooperative    

engineering efforts

FIGURE 14.2 ECI’s   balanced    business    scorecard

Source: Kaplan, RS & Norton, DP 1992, ‘The balanced scorecard: measures that drive performance’, Harvard Business Review,
Jan–Feb, p. 76.

To ensure successful implementation of a balanced scorecard an entity needs to develop its strategy

first and ensure that top management are committed to its success. Not allowing appropriate resources,

including training, for its implementation or trying to use the scorecard as an extra level of top–down

control will undermine the value of the scorecard to the organisation (Lewy & du Mee 1998).

One of the main criticisms of the balanced scorecard is that the causal relationship between some of

the measures and their economic impact has never been empirically tested. For example, will an increase

in customer satisfaction or a decrease in cycle time lead to an economic benefit? Logically the relation-

ship may seem plausible, but it has not yet been empirically tested.

Illustrative example 14.1 demonstrates the development of a balanced scorecard.

ILLUSTRATIVE EXAMPLE 14.1

The development of a balanced scorecard

The  Fun     Hats   Company specialises in   manufacturing  hats.   Its  main   market  is   the     production of   hats   for 

companies. That is, corporate clients order hats with their company logo on them in whatever shape

and colour they choose. They use the hats for promotional purposes. This has been quite a lucrative

market  for  the     company.   Its  other  (older) markets include department  stores  and  specialty  stores  who 

want to buy hats. The company has grown quite rapidly, and proper planning and processes have fallen

by the wayside in the frenetic pace of everyday operations.