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Business Case - Scorecard

1. What problems with Chadwick's ROCE motivated consideration of a balanced scorecard?

2. How helpful is Greenfield's strategy statement likely to be in developing a balanced scorecard for the Norwalk Division of Chadwick? Explain

3. What specific measures would you propose for each of the four dimensions of the Norwalk Division's balanced scorecard? Be sure to describe linkages among the measures you propose.

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1. What problems with Chadwick's ROCE motivated consideration of a balanced scorecard?
The Balanced Scorecard is an approach to performance measurement that combines traditional financial measures with non-financial measures. This approach provides managers with richer and more relevant information about the activities they are managing, increasing the likelihood of organizational objectives being achieved. Whereas Dupont analysis is only a financial measure and under this system the management is more pressed to give better short term results and overlooks long term results in order to maintain the ROCE. This is also the case with Chadwick. The Chadwick's management is becoming risk averse and has become lethargic in introducing new products, product extensions and innovation. They are spending less than desired to maintain the ROCE of the organization.

2. How helpful is Greenfield's strategy statement likely to be in developing a balanced scorecard for the Norwalk Division of Chadwick? Explain

The Balanced Scorecard is one of many performance management measurement tools that have become very popular in recent years. The balance scorecard first came to prominence in the early 1990's. Dr Robert Kaplan and Dr David Norton of the Harvard Business School developed this system of performance management measurement.
Use of Balanced scorecard
The scorecard will help the Chadwick to measure the performance from the following perspectives:
* Financial perspective - measures reflecting financial performance, for example number of debtors, cash flow or return on investment.
* Customer perspective - measures having a direct impact on customers, for example time taken to process a phone call, results of customer surveys, number of complaints or competitive rankings.
* Business process perspective - measures reflecting the performance of key business processes, for example the time spent prospecting, number of units that required rework or process cost.
* Learning and growth perspective - measures describing the companies learning curve, for example number of employee suggestions or total hours spent on staff training.
As opposed to ROCE, the balanced scorecard didn't just focus on the financial perspective. The balanced scorecard aims to have a balance over the four areas rather than one area being much more focused upon "The BSC (Balanced Scorecard) divides the business environment into four key business areas" (Hepworth 1998) , e.g. a business putting most of their efforts into trying to gain short term profit.
One of the main advantages of the Balanced Scorecard is considered to be the opinion that it allows managers to view levels of performance all over an organisation at the same time "Primarily, the "balanced scorecard" gives managers the ability to view performance in several areas simultaneously" (Kippenberger 1996).

The Balanced Scorecard tends to focus more on critical performance indicators and missing out what can be considered less important indicators (Kippenberger 1996).
It is important that businesses implementing the balanced scorecard do not completely move away from financially driven targets or revenue may decrease dramatically, Neale & McElroy (2004) back up this point "The trick is to settle on a set of critical metrics which influence the financial results". They also argue that for the balanced scorecard to operate successfully there could be clear linkages between success drivers, e.g. Business growth and the achievement of financial goals. Only when there is a successful balance has the balanced scorecard been implemented properly.

Balancedscorecard.biz explains "it is most often the new and "missing measures" and their interplay with other indicators that drive the value emanating from a Balanced Scorecard. Many of the measures needed to tell the story of the strategy may already be present, but in the vast majority of cases they must be supplemented with new and innovative metrics to ensure the execution of strategy" this suggests that if new metrics are brought in to replace the "missing measures" then there should be no problems with implementing it. From the evidence it appears that the balanced scorecard covers nearly all of the important measurements and metrics and that with proper implementation there should be no required measures or metrics missing.
The balanced scorecard helps take the sole focus of organizations being high short term profit away by incorporating three other critical factors. "Most companies base strategic decision-making solely on financial measurements and reporting. However, the Balanced Scorecard links your organization's strategy to various key performance measures and avoids the traditional focus of only examining short-term financial factors" (iqpc.com). Thus it will be helpful to Chadwick in following manner:
? Clarify and update strategy
? Tracking progress towards achieving goals
? Communicate strategy throughout the company
? Align unit and individual goals with strategy
? Link strategic objectives to long term targets and annual budgets
? Identify and align strategic initiatives
? Conduct periodic performance reviews to learn about and ...

Solution Summary

What problems with Chadwick's ROCE motivated consideration of a balanced scorecard?

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