• Submit Assignment 3: (Read the Theory in Action on page 123. Write a 7 page paper in APA format.) The research paper should include the following sections. You will also need to create a sample Balance Scorecard to support your research and recommendations.
Cover page
Introduction – (Thesis statement and Purpose of paper)
Background – Background and History on the concept
Discussion – Discuss current issues, innovation, and future use. Support the topic with any necessary sources. Be sure to include in-text citations.
Conclusion – Summary of main points
References – Formatted using APA
Theory in Action The Balanced Scorecard page 124
Robert Kaplan and David Norton point out that a firm’s methods of measuring performance will strongly influence whether and how the firm pursues its strategic objectives. They argue that effective performance measurement must be more than simple reliance on financial indicators; it must be a coherent and integral part of the management process. They proposed a method, the “balanced scorecard,” that they argue can motivate breakthrough improvements in product, process, customer, and market development.
a The balanced scorecard (see Figure 6.6) emphasizes four perspectives the firm should take in formulating goals that target critical success factors and in defining measures: FIGURE 6.6The Balanced Scorecard Source: Reprinted by permission of Harvard Business Review. Exhibit from “Putting the Balanced Scorecard to Work,” by R. Kaplan and D. Norton, September–October 1993. Copyright © 1993 by the Harvard Business School Publishing Corporation; all rights reserved. Financial perspective. Goals might include such things as “meet shareholder’s expectations” or “double our corporate value in seven years.” Measures might include return on capital, net cash flow, and earnings growth. Customer perspective. Goals might be to “improve customer loyalty,” “offer best-in-class customer service,” or “increase customer satisfaction.” Measures might include market share, percentage of repeat purchases, customer satisfaction surveys, and so on. Internal perspective. Goals might include such things as “reduce internal safety incidents,” “build best-in-class franchise teams,” or “improve page 125inventory management.” Measures might include the number of safety incidents per month, franchise quality ratings, stockout rates, and inventory costs. Innovation and learning perspective. Goals might include such things as “accelerate and improve new product development” or “improve employee skills.” Measures might include the percentage of sales from products developed within the past five years, average length of the new product development cycle, or employee training targets. Kaplan and Norton acknowledge that the balanced scorecard model often has to be adapted to fit different markets and businesses, but many firms (including IBM, Philips Electronics, Apple, and Advanced Micro Electronics) in many different industries (including electronics, petrochemicals, and health care) are finding the balanced scorecard useful.
b In fact, a 2002 survey by Bain & Company found that approximately 50 percent of Fortune 1,000 companies in the United States and 40 percent in Europe use some version of the balanced scorecard.
c a R. Kaplan and D. Norton, “Putting the Balanced Scorecard to Work,” Harvard Business Review, September–October 1993, pp. 134–47; and R. Kaplan and D. Norton, “The Balanced Scorecard—Measures That Drive Performance,” Harvard Business Review, January–February 1992, pp. 71–80. b Kaplan and Norton, “Putting the Balanced Scorecard to Work.” c A. Gumbus and B. Lyons, “The Balanced Scorecard at Philips Electronics,” Strategic Finance 84, no. 5 (2002), pp. 45–49. FIGURE 6.7Identifying the Resource and Capability Gap Once the strategic intent has been articulated, the company should be able to identify the resources and capabilities required to close the gap between the strategic intent and the current position (see Figure 6.7). This includes identifying any technological gap. Articulating the company’s strategic intent enables the company to focus its development efforts and choose the investments necessary to develop strategic technologies and incorporate them into the company’s new products.22 Many companies are now pairing the articulation of their strategic intent with a multidimensional performance measurement system, such as the balanced scorecard, as discussed in the Theory in Action section.
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