Term
| Why relying solely on financial measures can be dysfunctional (4) |
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Definition
1. May encourage s/t actions that are not in the company's l/t interests. (errors of commission).
2. B/u mgrs may not undertake useful l/t actions to obtain s/t profits (errors of omission).
3. Can distort communication between b/u mgr and senior management.
4. Tight financial control may motivate mgrs to manipulate measures, non financial as well as financial. |
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Term
| Business units should be assigned goals and then measured from the following 4 perspectives: |
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Definition
1. Financial (profit margin, ROA, cash flow).
2. Customer (market share, CSI)
3. Internal business processes/internal operations (employee retention, cycle timer reduction).
4. innovation and learning. (% of sales from new products) |
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Term
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Definition
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Term
| In creating the BSC, choose a mix of measurements that (3) |
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Definition
1. Accurately reflect the critical factors that will determine the success of the company's strategy.
2. Show relationships among individual measures in a cause-and-effect manner, indicating how nonfinancial measures affect l-t financial results.
3. Provide a broad-based view of the current status of the company. |
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Term
| Performance measurement system attempts to address the needs of different stakeholders of the organization by creating a blend of strategic measures (3) |
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Definition
1. Outcome and driver measures
2. Financial and non financial
3. Internal and external |
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Term
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Definition
| indicate the result of a strategy. typically a lagging indicator - tell mgmt what has happened |
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Term
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Definition
| indicate incremental changes that will ultimately affect the outcome. leading indicators - show progress of key areas in implementing a strategy. ex. cycle time. |
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Term
| Key success factors have two categories |
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Definition
1. customer-focused key variables
2. Internal business process key variables |
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Term
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Definition
1. Bookings: sale volume, not revenues, bookings precede revenues.
2. Backorders: indication of imbalance between sales and production.
3. Market share: deterioration of a unit's competitive position.
4. Key account orders: can reveal information about marketing strategy's success.
5. Customer satisfaciton
6. Customer retention
7. Customer loyalty. |
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Term
| Internal business process (5) |
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Definition
1. Capacity utilization
2. On-time delivery
3. Inventory turnover
4. Quality: # of defective units
5. Cycle time |
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Term
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Definition
| processing time + storage time + movement time + inspection time. Only the processing one is value added. Try to reduce cycle time by reducing the other 3. |
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Term
| Four steps in implementing a performance measurement system. Each step is iterative. |
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Definition
1. Define strategy
2. Define measures of strategy
3. Integrate measures into management system. Integrate formal and informal.
4.Review measures and results frequently |
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Term
| Difficulties in implementing performance measurement systems (5) |
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Definition
1. Poor correlation between nonfinancial measures and results
2. Fixation on financial results
3. Measures are not updated
4. Measurement overload
5. Difficulty establishing trade-offs (between financial and nonfinancial) |
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Term
| Fundamental difference between CSF and SU |
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Definition
CSF are derived from chosen strategies, and they support the implementation of strategies for current products and markets.
Strategic uncertainties are the basis for the firm to search for new strategies, they help in developing new business |
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Term
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Definition
| Alert managers to strategic uncertainties - either troubles or opportunities |
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Term
| Subsystem should have the following before it can be used as an interactive control system (3) |
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Definition
1. Data contained in the subsystem should be unambiguous and simple to understand and interpret.
2. Subsystem must contain data on strategic uncertainties
3. Data in the subsystem should help the firm develop new strategies |
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Term
| Interactive controls have the following characteristics (5) |
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Definition
1. A subset of the MC information that has a bearing on the strategic uncertainties facing the business becomes the focal point.
2. Senior executives take such information seriously
3. Mgrs at all levels of the organization focus attention on the information produced by the system.
4. Superiors, subordinates, and peers meet face-to-face to interpret and discuss the implications of the information for future strategic information.
5. The face-to-face meetings take the form of debate and challenge the underlying data, assumptions, and appropriate actions. |
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