STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard

Companies must mobilize and deploy intangible assets to create and sustain competitive advantage.

Intangible assets: Product and service franchises Motivated and skilled employees Distinctive internal capabilities Satisfied and loyal customers

It is often difficult, if at all possible, to place an accurate value on the above assets.

Yet these are critical values for success.

STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard

The Balanced Scoreboard communicates the multiple, linked objectives that companies must achieve to compete based on their intangible capabilities and innovation.

It translates mission and strategy into goals and measures organized into four perspectives: Financial Customer Internal business process Learning and growth

STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard

Building a Balanced Scoreboard

Step 1:

Develop goals and measures for Critical FINANCIAL Performance Variables Revenue Cost Operating Profit Growth ROCE ROE

STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard

Building a Balanced Scoreboard

Step 2:

Develop goals and measures for Critical CUSTOMER Performance Variables.

Identify target customer and market segments. Develop measures and tracks of the business’ ability to create satisfied and loyal customers.

Measures can include: Customer satisfaction Customer Retention Customer Loyalty

STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard

Building a Balanced Scoreboard

Step 2: (continued)

Attributes that organize the value proposition:

Product/service attributes (product features, price, quality)

Customer relationship (distribution, delivery, customer buying experience-assessed through mystery shopping)

Image and reputation (strength of brand name, price premiums, retailers willingness to stock)

STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard

Building a Balanced Scoreboard

Step 3:

Attributes that organize the value proposition:

Product/service attributes (product features, price, quality)

Customer relationship (distribution, delivery, customer buying experience-assessed through mystery shopping)

Image and reputation (strength of brand name, price premiums, retailers willingness to stock)

STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard

Building a Balanced Scoreboard

Step 3:

Develop goals and measures for Critical INTERNAL PROCESS PERFORMANCE Performance Variables.

These ensure that: Deliver values that will attract and retain customers Satisfy shareholder expectations

Each business has a unique set of processes for creating value for customers.

STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard

Building a Balanced Scoreboard

Step 3 (continued):

The internal VALUE CHAIN encompasses three principal business process: Innovation process (research the needs of customers and create suitable products/services)

Operations process (which produce and deliver these existing products and services to customers)

Post-sales service process (customer services after the original sale or delivery of service)

STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard

Building a Balanced Scoreboard

Step 4:

Develop goals and measures for Critical LEARNING AND GROWTH Performance Variables.

The infrastructure that the organization must build to create long-term growth and improvement. People Systems Organizational Procedures

STRATEGIC MANAGEMENT ACCOUNTING

The Balanced Scoreboard