BFT 509 Accounting for Business

Performance
Measurement
System
Prepared by
Nurul Ain Fathieha Binti Samsor 1633430309
Siti Solehah Binti Mohamad Tajuddin
1633430314
Thum Chooi Sin 1633430331
OUTLINE
Performance Measurement
Balance Scorecard
Balance Scorecard Perspective
Why Use a Balanced Scorecard?
How to Implement Balance Scorecard?
Steps to Develop Balance Scorecard
Limitations of Balance Scorecard
Example:Case Study
Conclusion
References
Performance Measurement
Performance measurement systems play a key role in
developing strategy, evaluating the achievement of
organizational objectives and compensating
managers.
Consider the design of performance measurement
systems to ensure that measures are aligned to
strategy, and that the system is working effectively in
monitoring, communicating, and driving performance.
Performance measurement has been towards a
broader view of performance, covering both financial
and non-financial indicators. The most well-known of
these approaches is the Balanced Scorecard (BSC)
proposed by Kaplan and Norton.
Balance Scorecard
BSC is a strategic performance measurement system
and to guide organization to achieve breakthrough
results by embedding strategy at the heart of the
organization (Budi, Hasnida & Alexander, 2009).
BSC was developed by Kaplan and Norton in 1992, as
a way to align an organization's performance
measures with its strategic plan and goals, thus
improving managerial decision making.
BSC:
A system of corporate appraisal which looks at

financial and nonfinancial elements from a variety

of perspectives.
An approach to the provision of information to

management and to assist strategic policy

formation and achievement.
A set of measures that gives top managers a fast
Balance Scorecard
Perspective Internal
Processes
To satisfy our
stakeholders and
customers, what
business processes
must we excel at?

Customer Financial
Perspective Perspective
Vision
To achieve our and To succeed
vision, how should Strategy financially, how
we appear to our should we appear to
customers? our stakeholders?

Learning and
Growth
To achieve our
vision, how will we
sustain out ability
to change and
improve?
Financial Perspective
Covers the revenue and profit targets of commercial
companies as well as the budget and cost-saving
targets of not-for-profit organisations
The financial health of an organisation is a critical
perspective for managers to track.
It is important to note that financial performance is
usually the result of good performance in the other
three scorecard perspectives.
Examples (measurable indicators):
Cash flow
Sales growth
Operating income
Return on Equity (RoE)
Return On Investment (ROI)
Customer Perspective
Focuses on performance targets as they relate to
customers and the market
Covers customer growth and service targets as well as
market share and branding objectives
Examples (measurable indicators):
Customer satisfaction
Service levels
Net promoter scores
Market share
Brand awareness
On time delivery
Internal Process Perspective
Internal business process objectives address the
question of which processes are the most critical for
satisfying customers and shareholders
Focuses on the intangible drivers of future such as
Human Capital (skills, talent), Information Capital
(databases, information systems, networks),
Organisation Capital (leadership, employee
alignment, teamwork and knowledge management)
Examples (measurable indicators):
Staff engagement
Skills assessment
Performance management scores
Corporate culture audits
Innovative Learning &
Growth Perspective
Focuses on internal operational goals and covers
objectives as they relate to the key processes
necessary to deliver the customer objectives.
Here, companies outline the internal business
processes goals and the things the organisation has to
do really well internally in order to push performance.
Examples (measurable indicators):
Quality optimisation
Improvements
Capacity utilisation
Training/ learning opportunities
Why Use a Balanced
Scorecard?
Work as a strategic initiative that follow best practices
that suits within the organization environment
Enhanced creativity and boost of ideas within an
individual who works in an organization
Helps to align and synchronize key performance
measures with strategies that impelemented within the
organization
Helps in facilitating communications within the
organization and understanding of business goals
 Enhanced teamwork and cooperation between the team
members in the organization to help the organization to
achieve the goals
Strategic initiative will be evaluated and measured
against the industry
Provides useful strategic feedback and learning process
throughout the performance measurement process
Act as unique competitive advantage for the company
Reduce time frames
Improved decisions and better solutions
Improved process

(Prostatis, 2010)
How to Implement BSC?
Translate and transform all strategic initiative into
operational terms. All activities must be linked and
mutually reinforcing through the organisational strategy
Align all the organisation to the strategy. Organisation
must include these two themes:
Reflect what must be done internally to achieve identified
strategic outcomes
Provide way of segmenting the strategy into several general
categories or projects
 Make strategy everyones job. Ensure that all employees
understand the strategy and conduct the business in a way
that contributes to its mission and objectives
Make the implemented strategy and measurement process
as a continual process. Try to implement strategy
management which integrates the management of tactics
and put those management strategy into a continual process

(CIMA,2005)
Steps to Develop BSC
Determine the vision

Set of strategic priorities or

themes and strategic results

Add perspectives and

objectives

Strategy map - Cause and

effect links.

Performance measures

Set action plan and initiatives

Limitations of BSC
Due to problems in the implementation of the strategy is
difficult to achieve a balance between financial and non-
financial measures
BSC does not monitor competition or technological
developments.

BSC provides no mechanism to maintain the relevance of

the initially defined measures

BSC makes invalid assumptions about causal relationships

between performance indicators.
Not all stakeholders were included in the BSC, in particular,
suppliers and public authorities, which can be decisive for
many organizations .
Example: Case Study

Transforming society through the provision of ultra-high

Vision speed mobile information services
The number one provider of ultra-high speed mobile
Mission networks and content to the United Kingdom

Strategi
c Content
Customer Service Brand Awareness
Prioritie partnerships
s Strong supply Clarify in offering Reinvigorated
Strategi chain for content that surpasses brand based on
c and information anything in the successes, attract
Results services, exclusive market today, best a wider and
agreements user interface younger audiences
Example: Case Study (Cont.)
Business Objectives
Financial Perspective
Decrease
Increase Increase operating
revenue profitability costs

Customer Perspective
Improve Improve Improve
clarify of market end user
offering perception experience

Internal Processes
Improve
Improve Improve
ease of use
offering information
for end
selection services
users

Learning and Growth

Improve Improve
Improve
knowledge content
technology
& skills supply
Example: Case Study (Cont.)
Business Objectives
Financial Perspective
Decrease
Increase Increase operating
revenue profitability costs

Customer Perspective
Improve Improve Improve
clarify of market end user
offering perception experience

Internal Processes
Improve
Improve Improve
ease of use
offering information
for end
selection services
users

Learning and Growth

Improve Improve
Improve
knowledge content
technology
& skills supply
Example: Case Study (Cont.)
Conclusion

Helps align key performance measures with

strategy at all levels of an organization
It enables executives to truly execute their
strategies by identifying what should be
done and measured.
References
Suprapto, B., Wahab, H. A., Wibowo, A. J., 2009. The Implementation of
Balance Score Card for Performance Measurement in Small and Medium
Enterprises: Evidence from Malaysian Health Care Services. The Asian Journal
of Technology Management, 2(2), 7687.
Balanced Scorecard: The Four Perspectives | AP Institute. (n.d.). Retrieved
from https://www.ap-institute.com
Introduction, B. S. (n.d.). Retrieved from
https://www.tutor2u.net/business/reference/balancedscorecardintroductionove
rview
Gomes, J., and Romo, M. (2014). Advantages and Limitations of Performance
Measurement Tools: The Balanced Scorecard. In proceedings of IS2014 - 7th
IADIS International Conference, 19-26, Madrid, Spain. ISBN 978-989-8704-04-
7. IADIS Press.
Balanced Scorecard: The Four Perspectives | AP Institute. (n.d.). Retrieved
from https://www.ap-institute.com
Introduction, B. S. (n.d.). Retrieved from
https://www.tutor2u.net/business/reference/balancedscorecardintroductionove
rview
Benefits of Using the Balance Scorecard. (2010). Retrieved from
thebalancedscorecard.com
Effective Performance Management with the Balanced Scorecard (2005).
Retrieved from researchgate.net
Thank
You