91Ó°ÊÓ

Following is a random-order listing of perspectives, strategic objectives, and performance measures for the balanced scorecard. $$\begin{array}{ll} \text { Perspectives } & \text { Performance Measures } \\ \hline \text { Internal business process } & \text { Percentage of defective- product units } \\ \text { Customer } & \text { Return on assets } \\ \text { Learning and growth } & \text { Number of patents } \\ \text { Financial } & \text { Employee turnover rate } \\ \text { Strategic 0bjectives } & \text { Net income } \\ \hline \text { Acquire new customers } & \text { Customer profitability } \\ \text { Increase shareholder value } & \text { Percentage of processes with real-time feedback } \\ \text { Retain customers } & \text { Return on sales } \\ \text { Improve manufacturing quality } & \text { Average job-related training-hours per employee } \\ \text { Develop profitable customers } & \text { Return on equity } \\ \text { Increase proprietary products } & \text { Percentage of on-time deliveries by suppliers } \\ \text { Increase information-system capabilities } & \text { Product cost per unit } \\ \text { Enhance employee skills } & \text { Profit per salesperson } \\ \text { 0n-time delivery by suppliers } & \text { Percentage of error-free invoices } \\ \text { Increase profit generated by each salesperson } & \text { Customer cost per unit } \\ \text { Introduce new products } & \text { Earnings per share } \\ \text { Minimize invoice-error rate } & \text { Number of new customers } \\ & \text { Percentage of customers retained } \end{array}$$ For each perspective, select those strategic objectives from the list that best relate to it. For each strategic objective, select the most appropriate performance measure(s) from the list

Step by step solution

01

List the perspectives

First, we will list out all the perspectives: 1. Internal Business Process 2. Customer 3. Learning and Growth 4. Financial

02

Match Strategic Objectives to Perspectives

Now, we will assign strategic objectives to each perspective: 1. Internal Business Process: - Improve manufacturing quality - On-time delivery by suppliers - Minimize invoice-error rate 2. Customer: - Acquire new customers - Retain customers - Develop profitable customers - Increase profit generated by each salesperson 3. Learning and Growth: - Increase proprietary products - Increase information-system capabilities - Enhance employee skills - Introduce new products 4. Financial: - Increase shareholder value

03

Assign Performance Measures to Strategic Objectives

Lastly, we will assign appropriate performance measures for each strategic objective: 1. Improve manufacturing quality: - Percentage of defective-product units 2. On-time delivery by suppliers: - Percentage of on-time deliveries by suppliers 3. Minimize invoice-error rate: - Percentage of error-free invoices 4. Acquire new customers: - Number of new customers 5. Retain customers: - Percentage of customers retained 6. Develop profitable customers: - Customer profitability 7. Increase profit generated by each salesperson: - Profit per salesperson 8. Increase proprietary products: - Number of patents 9. Increase information-system capabilities: - Percentage of processes with real-time feedback 10. Enhance employee skills: - Average job-related training-hours per employee 11. Introduce new products: - Earnings per share 12. Increase shareholder value: - Return on assets - Return on sales - Return on equity - Net income

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Strategic Objectives

In the context of a balanced scorecard in cost accounting, strategic objectives are the specific, critical targets a company sets to achieve its long-term goals. They translate the organization’s vision into actionable and measurable steps that address various aspects of performance. For each perspective of the balanced scorecard—internal business processes, customer, financial, and learning and growth—strategic objectives are tailored to promote efficiency, value creation, and competitive advantage.

For example, within the internal business process perspective, objectives such as 'Improve manufacturing quality' and 'Minimize invoice-error rate' focus on enhancing operational efficiencies and reducing mistakes that can lead to cost overruns and customer dissatisfaction. These objectives connect directly to process improvements and quality assurance initiatives. On the customer side, strategic objectives like 'Acquire new customers' and 'Retain customers' emphasize the importance of market growth and customer loyalty, which are vital for revenue stability and expansion.

Performance Measures

Performance measures are the quantifiable indicators used to assess how well an organization is achieving its strategic objectives. These metrics provide a way to track progress, identify areas for improvement, and ensure accountability within each balanced scorecard perspective.

Performance measures should be carefully selected to align closely with the corresponding strategic objectives. They can include financial metrics like 'Net income' or 'Return on assets,' customer-centric indicators such as 'Customer profitability' or 'Percentage of customers retained,' internal operation measures like 'Percentage of on-time deliveries by suppliers,' or learning and growth metrics such as 'Average job-related training-hours per employee.' Properly devised performance measures offer actionable insight, allowing for targeted strategies to enhance overall performance and achieve the strategic objectives set by the company. These measures need to be regularly reviewed and updated to remain relevant as company objectives and market conditions evolve.

Internal Business Process Perspective

The internal business process perspective is one of the four pillars of the balanced scorecard framework. This perspective focuses on the internal processes that are critical to creating value for customers and shareholders. By analyzing and optimizing these processes, an organization seeks to improve quality, increase efficiency, reduce waste, and foster innovation. Strategic objectives in this category might involve streamlining operations, minimizing error rates, and enhancing supply chain management.

Performance measures related to the internal business process perspective offer insights on the effectiveness and efficiency of these critical internal operations. Metrics such as 'Percentage of defective-product units' or 'Percentage of error-free invoices' are used to evaluate the quality and reliability of internal processes. These allow for real-time feedback and continuous improvement in the day-to-day activities that support the company's strategic vision. Aligning internal processes with strategic objectives helps ensure that the organization operates like a well-oiled machine, setting the foundation for achieving broader business goals.