Solution 13.10
 
 

a) Discuss the value of using a balanced scorecard approach to evaluate the performance of the new division

The balanced scorecard system is based on the belief that managers need a broad range of performance measures in order to manage their business. The balanced scorecard would provide the supermarket chain / new division with a framework that translates the aims and objectives of a business into a series of performance targets that can be measured. The balanced scorecard would measure a supermarket’s performance from different perspectives; the financial perspective, the customer perspective, the internal business processes perspective and the innovation and learning perspective. The term 'balanced' is used because managerial performance is assessed under all four headings and it implies that each quadrant is of equal importance and deserves equal weighting. This can help senior management evaluate whether lower level managers have improved one area at the expense of another. The balanced scorecard will recognize the improvement in financial performance but will also reveal that this was achieved by sacrificing ‘on-time’ performance targets. Issues in relation to the new services and logistics would also be highlighted.

 

b) Suggest two critical success factors and accompanying performance indicators

BSC perspective Critical success factors Performance measures
Financial

Profitability

Budgetary control

 

Gross / net operating profit

Sales achieved or meeting financial targets

Customer

Quality of service

Customer relationship management

Customer satisfaction surveys

Customer retention rate

Internal

Delivery times

Route planning

 

Number of deliveries on time

Average kilo per kilometre travelled.
Innovation & learning

Staff as drivers of innovation

Encouraging staff

Number new delivery areas / clients

Level of multi-skills / new tasks / initiative taken

 

c) Explain the advantage of a balanced scorecard approach to divisionalised performance measurement

The advantages of the approach can be summarised as:

  1. It measures performance in a variety of ways, rather than relying on one figure.
  2. Managers are unlikely to be able to distort the performance measure as bad performance is difficult to hide if multiple performance measures are used.
  3. It takes a long-term, strategic approach to business performance.
  4. Success in the four key areas should lead to the long-term success of the organisation.
  5. It is flexible, as what is measured can be changed over time to reflect changing priorities.
  6. 'What gets measured gets done'. If managers know they are being appraised on various aspects of performance, they will pay attention to these areas, rather than simply paying 'lip service' to them.