Accounting for Managers: Interpreting accounting information for decision-making

44 ACCOUNTING FOR MANAGERS

Customer

"To achieve Objectives Measures Targets Initiatives

our vision,

how should we

appear to our

customers?"

FinancialObjectives Measures Targets Initiatives

"To succeed

financially

how should we

appear to our

shareholders?"

Internal Business Process

"To satisfy our Objectives Measures Targets Initiatives

shareholders

and customers,

what business

processes must

we excel at?"

Learning and Growth

"To achieve Objectives Measures Targets Initiatives

our vision,

how will

we sustain our

ability to

change and

improve?"

Vision and

strategy

Figure 4.5 Translating vision and strategy: four perspectives
Reprinted by permission ofHarvard Business Review. From ‘Using the Balanced Scorecard as a strategic
management system’ by R. S. Kaplan and D. P. Norton, Jan – Feb 1996. Copyright 1996 by the Harvard
Business School Publishing Corporation; all rights reserved.

These measures are grounded in an organization’s strategic objectives and com-
petitive demands. The Balanced Scorecard is shown in Figure 4.5.
Kaplan and Norton (1996) argued that the Scorecard provided the ability to link
a company’s long-term strategy with its short-term actions, emphasizing that:

meeting short-term financial targets should not constitute satisfactory per-

formance when other measures indicate that the long-term strategy is either

not working or not being implemented well. (p. 80)

The Balanced Scorecard took as a starting point the goal to generate long-term
economic value, which required other than financial measures as drivers of
long-term performance and growth. Kaplan (1994) described how:

the new concepts and theories emerged from attempting to document, under-

stand and subsequently influence the management accounting practices at

innovating organizations. (p. 247)

There had been earlier attempts at non-financial performance measurement.
Eccles (1991) argued that ‘income-based financial figures are better at measuring
the consequences of yesterday’s decisions than they are at indicating tomorrow’s
performance’. Meyer (1994) proposed a ‘dashboard’ in contrast to Kaplan and