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Balance Scorecard
Balance Scorecard
Introduction
“The balanced scorecard provides managers with the instrumentation they need to
navigate to future competitive success .....The balanced scorecard translates an organisation’s
mission and strategy into a comprehensive set of performance measures that provides the
framework for strategic measurement and management systems (Kaplan and Norton, 1996,
p.2). this chapter discuss this revolutianory performance measurement philosophy, which has
gained prominence in management, accounting and operations management literature.
Linking balanced scorecard measures to size and market factors: the Hoque and James
(2000) study
Hoque and james (2000) consider the size of organisations, product life-cycle stage
and market position as potential contextual factors of BSC usage, and explore how
organisational performance is affected by different uses of BSC in different settings. Each of
the potentially contingent factors will now be considered in turn.
Figure 12.1 Key performance indicators within the BSC at a housing authority
Financial Perspective
Goals Measures
Survive Provit and loss
Cash flow
Financially viable Loans approved
Collection efficiency
Sales of houses/plots
Customer Perspective
Goals Measures
Responsive supply Average loan processing time
FNPF receipts
Customer satisfaction Customer queries/problems/
complaints to be attended and
resolved to customer satisfaction
within 5 working days
FNPF refers to the Fiji National Provident Found. Both the employer and employee
contribute 8% of the basic salary of the employee. The FNPF provides its members with two-
thirds of their savings towards home deposits at the Housing Authority. The FNPF receipts
refer to the collection of these two-third savings from each of their homebuyers.
Chapter summary
Each firm is unique and so directs its own course for building a balanced scorecard
(BSC). As a result of this process, an entirely new information system that links top
management objectives down through to the plant floor and particular site operational
measures could be developed. Its primary benefit is its ability to join together manufacturing
capabilities in a strategic environment and financial control. It could be seen to be a bridge
between financial and manufacturing goals.
The exercise of creating a BSC forces companies to integrate their vision and strategic
objectives into measures that will be support short and long-term goals. A BSC creates a
framework for managing an organisation’s operations to gain competitive advantage. Before
jumping onto this “bandwagon”, management should ask one key question. Do we need a
BSC?
What is benchmarking?
In recent years benchmarking has become increasingly popular in many organisations
worldwide. The concept of benchmarking originated in Rank Xerox in 1979 and it became a
company-wide effort in 1981. Rank Xerox defined benchmarking as a continuous systematic
process of evaluating companies recognised as industry leaders, to determine business and
work processes that represent best practices and establish rational performance goals. It is a
search for industry best practices that lead to superior performance. It illustrates how good a
company currently is in comparison to its competitors, that is benchmarking analysis
demonstrates what others are doing as well as what others are achieving.
Types of benchmarking
Benchmarking activities may be divided into three major groups: internal benchmarking,
external benchmarking and best-practice benchmarking.
- Internal benchmarking is a process of comparing performance within the company or
division, that is it looks for internal comparisons (comparing yourself to the best). A
comparison is made across internal operations and parameters, such as purchasing,
marketing, research and development, administration and so on.
- External benchmarking focuses on external comparisons, that is performance is
compared with a spread of ‘look-alike’ businesses in similar positions experiencing
similar market growth, fluctuations and circumstances.
- Best-practice benchmarking requires seeking out the undisputed leader in a particular
process that is critical to the entire business process – regardless of sector, industry or
location – and comparing it with your own.
It has been suggested that good benchmarking combines a measurement of quantitative and
qualitative data and management accounting can play an important role in this process. Note
that it is best to collect as much data as possible and gradually draw out and emphasise that
which is most meaningful.
Chapter summary
As discussed above, benchmarking supports companies in their efforts to improve
their competitive situation. Benchmarking should not be throught of as a one-time event; it’s
a continuous performance assessment process in at least two different environments – the
company’s own and the reference object. Most of the activities discussed above involve
organisational change and a benchmarking process benefits from dynamic cross-functional
organisational structures (Hansen and Riis, 1996).
Benchmarking is an important element of the company’s total quality management
programme. Benchmarking helps a company to be competitive with the ‘best of the best’ and
it needs to be understood that this is a dynamic and continuous process (Swift, Gallwey and
Swift, 1996).
When benchmarking is used as a performance improvement tool, it is important to
process a wide range of both financial and non-financial information to assess the
effectiveness of benchmarking and to understand that management accountants can play a
significant role in this matter. Thus benchmarking companies benefit from a dynamic
management accounting system. Probably the most significant focus in the management
accounting system should be the redirection of the reference point from an internal focus to
an external one.
Jenis Benchmarking
Aktivitas benchmarking dapat dibagi menjadi tiga kelompok utama: benchmarking
internal, benchmarking eksternal dan benchmarking praktek terbaik.
- Benchmarking internal adalah proses membandingkan kinerja dalam perusahaan atau
divisi, yaitu yang terlihat untuk perbandingan internal (membandingkan diri Anda
dengan yang terbaik). Pembandingan dilakukan di seluruh operasi internal dan
parameter, seperti pembelian, pemasaran, penelitian dan pengembangan, administrasi
dan sebagainya.
- Benchmarking Eksternal berfokus pada perbandingan eksternal, yaitu kinerja
dibandingkan dengan penyebaran bisnis 'mirip' dalam posisi yang sama, mengalami
pertumbuhan pasar yang sama, fluktuasi dan keadaan.
- Benchmarking praktek terbaik memerlukan mencari pemimpin yang tak terbantahkan
dalam proses tertentu yang sangat penting untuk seluruh proses bisnis - terlepas dari
sektor, industri atau lokasi - dan membandingkannya dengan Anda sendiri.
Proses benchmarking
Proses benchmarking dapat dibagi menjadi tahap-tahap berikut (Codling, 1996):
- Tahap 1: Perencanaan.
a. Pilih luas fungsi atau wilayah prosedural yang akan di benchmark - manufaktur,
pergudangan, pemasaran, dll
b. Mengidentifikasi perbandingan perusahaan atau pusat kegiatan.
c. Menentukan metode pengumpulan data dan mengumpulkan data.
- Tahap 2: Benchmark partners.
Identifikasi potensi mitra benchmarking dari tiga lokasi, internal, eksternal dan praktek
terbaik global.
- Tahap 3: Analisis data.
Kumpulkan data dan dari mengkonfirmasi mitra patokan yang paling mungkin untuk
kontak. Menentukan kesenjangan kinerja saat ini dan tingkat kinerja proyek di masa
depan.
- Tahap 4: Aksi.
Mengembangkan rencana aksi, mengkomunikasikan tujuan dan hasil benchmark seluruh
organisasi dan perusahaan lainnya; melaksanakan tindakan-tindakan spesifik dan
memantau kemajuan.
- Tahap 5: Review dan daur ulang.
Memantau kinerja, meninjau dan menganalisa kemajuan dan penyesuaian peningkatan
dan target kinerja.
Ringkasan Bab
Sebagaimana dibahas di atas, benchmarking mendukung perusahaan dalam upaya
mereka untuk memperbaiki situasi kompetitif mereka. Benchmarking tidak boleh dianggap
sebagai peristiwa satu kali, melainkan sebuah proses penilaian kinerja yang
berkesinambungan dalam setidaknya dua lingkungan yang berbeda - perusahaan sendiri dan
obyek referensi. Sebagian besar kegiatan yang dibahas diatas melibatkan perubahan
organisasi dan manfaat proses benchmarking dari dinamika struktur organisasi lintas-
fungsional (Hansen dan Riis, 1996).
Benchmarking adalah elemen penting dari program TQM perusahaan. Benchmarking
membantu perusahaan untuk dapat bersaing dengan 'terbaik dari yang terbaik’ dan perlu
dipahami bahwa ini adalah proses yang dinamis dan berkesinambungan (Swift, Gallwey dan
Swift, 1996).
Bila benchmarking digunakan sebagai alat peningkatan kinerja, penting untuk
memproses berbagai informasi baik keuangan dan non-keuangan untuk menilai efektivitas
benchmarking dan untuk memahami bahwa akuntan manajemen dapat memainkan peran
penting dalam hal ini. Jadi benchmarking perusahaan bermanfaat dari sistem akuntansi
manajemen yang dinamis. Mungkin fokus yang paling signifikan dalam sistem akuntansi
manajemen harus mengalihkan titik rujukan dari fokus internal ke yang eksternal.