Testing Strategy with Multiple Performance Measures: Evidence from a Balanced Scorecard at Store24

2015 ◽  
Vol 27 (2) ◽  
pp. 39-65 ◽  
Author(s):  
Dennis Campbell ◽  
Srikant M. Datar ◽  
Susan L. Kulp ◽  
V. G. Narayanan

ABSTRACT This study investigates the idea that business strategies can be tested and validated based on statistical analysis of a firm's internal performance measures. The strategy literature describes business strategies using the concepts of formulation, implementation, and fit. The management accounting literature links these strategy concepts with the selection and use of performance measures. Building on these two streams we examine whether and how a multidimensional performance measurement system can be used to distinguish between strategic problems related to strategic inputs, customer-oriented strategic outputs, and financial performance. We use data from the performance measurement system of a field site that formulated, implemented, and subsequently abandoned an innovative operating strategy. Managers learned the strategy was ineffective over a two-year period. We find that the company's internal performance measures systematically reveal more timely information about problems with the strategy. Furthermore, the performance measures can help identify where and why the strategy failed. The results are consistent with strategy inputs leading to positive customer experiences but poor financial performance because of a poor fit between the strategy and the firm's internal capabilities and skills. These results provide evidence that strategically linked firm-specific performance measures can be used (1) to evaluate strategy on a timely basis, and (2) to distinguish between problems, such as strategy formulation, implementation, and fit, that cause strategies to fail.

2004 ◽  
Vol 16 (1) ◽  
pp. 107-131 ◽  
Author(s):  
Lisa Bryant ◽  
Denise A. Jones ◽  
Sally K. Widener

There has been an emphasis in recent years on understanding how value is created within the firm. To understand what drives value, managers must have in place performance measurement systems designed to capture information on all aspects of the business, not just the financial results. Many firms are implementing a Balanced Scorecard (BSC) performance measurement system that tracks measures across four hierarchical perspectives: learning and growth, internal business processes, customer, and financial perspectives. Although BSCs should ideally be tailored to each firm's unique strategy, evidence shows that managers tend to rely on generic measures, particularly as measures of the outcome of each perspective. We use cross-sectional data on seven archival measures from 125 firms over a five-year period to proxy for typical outcome measures of the four BSC perspectives. We find that a model that allows each outcome measure to be associated with outcome measures in all higherlevel BSC perspectives captures the value-creation process better than a relatively simple model that allows each measure to be a driver of only the next perspective in the BSC hierarchy. We also find differences in the relations among performance measures when firms implement a performance measurement system that contains both financial and nonfinancial measures versus one that relies solely on financial measures.


Author(s):  
Mojca Marc ◽  
Darja Peljhan ◽  
Nina Ponikvar ◽  
Aleksandra Sobota ◽  
Metka Tekavcic

The prevailing literature and empirical studies on management of organizational performance stress the increasing importance of non-financial performance measures and propose companies to implement some kind of integrated performance measurement system. The purpose of our study is to investigate the characteristics of performance measurement and management in large Slovenian companies, focusing also on the progress made in the 5-year period. The analysis is based on two surveys conducted in the spring 2003 and summer of 2008. We investigate what do companies understand by “successful performance”, what are the most and the least important performance measures for companies, and what performance measurement systems do companies use. By answering these questions we discuss the impact of our results on the future development and growth of firms. The research results show that large Slovenian companies consider “successful performance” mostly in terms of implementing the strategy, followed by pursuing the goals of the owners and achieving the goals of different stakeholders. Most large Slovenian companies perceive financial performance measures as more important than non-financial, although they claim they measure both perspectives of their business. Our research results also suggest that 68% of large Slovenian companies in our sample use balance scorecard or some other integrated performance measurement system. These findings are generally in line with the existing theory and empirical evidence from other countries. Our main conclusion is that the prevailing role of financial key performance indicators in large Slovenian companies is appropriate for monitoring the effects of the current financial crisis but if companies want to succeed in the long-run they have to base their decisions also on non-financial measures that enable monitoring of many important capabilities for achieving long-term strategic goals.


2018 ◽  
Vol 11 (2) ◽  
pp. 127-138
Author(s):  
Tomi Hardi

ABSTRAK Pengukuran kinerja adalah hal yang penting bagi manajemen dalam melakukan evaluasi performa dan perencanaan perguruan tinggi. Salah satu metode untuk mengukur kinerja tersebut adalah dengan balanced scorecard. Fakultas Sains dan Teknologi  sebagai sebuah fakultas yang memiliki visi dan misi belum memanfaatkan Sistem Pengukuran Kinerja (SPK) untuk mengetahui sudah sejauh mana visi dan misi itu terlaksana. SPK yang baik haruslah terintegrasi untuk semua unit dan aktivitas di fakultas . Indikator kinerja yang terbentuk tidak hanya berupa indikator kinerja finansial (keuangan) tetapi juga indikator kinerja nonfinansial. Oleh karena itu peneliti mencoba merancang system pengukuran kinerja dengan melibatkan indikator kinerja financial dan nonfinansial. Prores perancangan SPK menggunakan model Balanced Scorecard , yaitu keseimbangan antara finansial dan nonfinansial dengan didasarkan pada langkah-langkah (framework) yaitu penetapan arsitek pengukuran, penentuan tujuan strategis (strategic objectives) dari masing-masing perspektif (finansial, pelanggan, proses bisnis internal, belajar dan tumbuh), penentuan Key Performance Indicators (KPI) dan penentuan target. Untuk melakukan penilaian kinerja adalah menggunakan lembar kerja pengukuran kinerja yang dirancang sedemikian rupa sehingga dapat memberikan gambaran mengenai kinerja. hasil dari penelitian ini yaitu implementasi  dalam bentuk software diharapkan mampu mempercepat proses analisis Balanced Scorecard itu sendiri dan memberikan nilai tambah yaitu berupa competiteve advantage dalam persaingan bisnis, sehingga dapat dijadikan sebagai salah satu sistem pendukung keputusan di tingkat manajerial. ABSTRACT Performance measurement is important for management to evaluate the performance and college planning. One method is to measure the performance of the Balanced Scorecard. Faculty of Science and Technology as a faculty that has the vision and mission have not been utilizing the Performance Measurement System (DSS) to determine the extent to which the vision and the mission was accomplished. Good SPK be integrated to all units and activities in the faculty. Performance indicators are formed not only in the form of financial performance indicators (financial) but also non-financial performance indicators. Therefore, researchers tried to design a performance measurement system involving financial and non-financial performance indicators. ProRes DSS design using a model of the Balanced Scorecard, which is a balance between the financial and nonfinancial measures are based on the (framework) that the determination architect measurements, determination of strategic objectives (strategic objectives) of the respective perspectives (financial, customer, internal business processes, learning and growing), the determination of Key Performance Indicators (KPI) and the determination of the target. To conduct performance appraisal is to use performance measurement worksheets are designed such that it can provide a picture of performance. the results of this study are in the form of software implementation is expected to accelerate the analysis process itself and the Balanced Scorecard provide added value in the form of competiteve advantage in a competitive business, so it can be used as a decision support system at the managerial level.  


2001 ◽  
Vol 16 (4) ◽  
pp. 569-601 ◽  
Author(s):  
Chris Moore ◽  
Beverly J. Rowe ◽  
Sally K. Widener

The purpose of this case is to enable you to design a performance measurement system using a balanced scorecard. This case is based on factual issues and decisions faced by the real-world managers and employees of Holloway Consulting Services (HCS) (names and dollar amounts have been changed). HCS is a service firm that provides its customers with managed business solutions, i.e., integrating outsourcing options with systems design and support. Currently, HCS collects several financial and operational performance measures; however, Sharon Holloway, owner of HCS, is concerned that these measures are not adequate for a firm that competes using intangible assets, especially human capital. Therefore, she plans to implement a balanced scorecard in which performance measures are linked to the firm's strategy. This case provides you with the opportunity to develop a balanced scorecard that incorporates both traditional and nontraditional performance measures within the strategic context of a knowledge-based firm.


Author(s):  
Wim Van Grembergen ◽  
Isabelle Amelinckx

The Balanced Scorecard (BSC) initially developed by Kaplan and Norton is a performance measurement system that supplements traditional financial measures with the criteria that measure performance from three additional perspectives: customer perspective, internal business perspective, and innovation and learning perspective. In recent years, the Balanced Scorecard has been applied to information technology in order to ensure that IT is fairly evaluated. The proposed methodology can also be applied to e-business initiatives. In this chapter, it is illustrated how the BSC can be used to measure and manage e-business initiatives. A generic e-business Balanced Scorecard is proposed and its development and implementation is discussed.


2002 ◽  
Vol 2 (4) ◽  
pp. 181-187
Author(s):  
K. Johnson

Performance measurement can be an effective tool in driving organization improvement to enable your utility to become more competitive, or improve customer satisfaction. WERF Project #99-WWF-7, Developing and Implementing a Performance Measurement System, is developing performance measurement systems by investigating a number of “best practices” in other industries and implementing selected practices at various water/wastewater utilities nationwide to determine how these practices can be adapted and applied. This joint WERF/AWWARF research project has been underway since mid-1999 to provide methods and tools that enable the utility to develop and implement a performance measurement system based on a demonstrated, proven approach. The Volume I Report summarizes the secondary research and project approach. Well designed, properly implemented performance measurement systems can enable utilities to achieve new levels of performance in terms of efficiency, quality, and effectiveness. Interest in performance measurement is increasing in all competitive businesses and industries today, and has been advanced through concepts such as the Balanced Scorecard. Utilities can employ these same concepts and learn “best practices” from other industries' experiences. While a performance measurement system alone does not improve performance or make a utility competitive, when combined with an appropriate business strategy and performance improvement initiatives, it can drive a cycle of change. A successful performance measurement system combines a holistic approach around improved business practices and effective human/organizational strategies in addition to actual performance information for operational decision-making.


Author(s):  
David Barnes ◽  
Matthew Hinton

This chapter investigates how organizations have been adapting their performance measurement practices in response to their adoption of e-business in their business operations. It aims to identify the features and benefits of an effective e-business performance measurement system. Twelve organizations known to have had some success in developing performance measurement systems suitable for the online environment were studied. The researchers found that these organizations adopted an incremental rather than a radical approach to changing their performance measurement system for e-business, thereby avoiding the costs and disruption associated with the introduction of more complex performance metrics. Secondly, they eschewed the use of best practice recipes (such as the balanced scorecard). The study concludes that although these results may be at odds with the prescriptive generic performance measurement literature, they may be appropriate for the current state of development of e-business.


2003 ◽  
pp. 52-65 ◽  
Author(s):  
Abdus S. Chaudhry

This chapter provides an overview of performance measurement in the area of knowledge management. Salient features of main measures have been described and their role in determining the return on knowledge management work highlighted. While Balanced Scorecard and Intangible Assets Monitor provide comprehensive coverage, several other measures are also in use. A recent study and review of applications of main KM performance measures in selected organizations showed several areas of commonality in the objectives of performance measurement and revealed differences in approaches to the application and presentation of various performance measures. Developing a measurement system for knowledge management is considered the key to the competitive success of the organization.


2015 ◽  
Vol 5 (4) ◽  
pp. 395-423 ◽  
Author(s):  
Mohamed Hegazy ◽  
Myada Tawfik

Purpose – The purpose of this paper is to investigate challenges facing auditing firms in designing and measuring their performance and discusses why and how the balance scorecard (BSC) could support the auditing firms overcome such challenges. The paper contributes to the existing literature by identifying the peculiarity of the auditing firms in designing and implementing performance measurement systems including the need for sound and advanced information systems, subjectivity embedded in measuring customer satisfaction, growth and success of the firms and restrictions imposed by regulations and auditing standards for the provision of non-audit services which may increase the firms’ revenues and profits to help maintain high-quality outputs. Also, the paper provided evidence for the use of non-financial measures in service industry in particular for customers and finance. The unique dilemma in the auditing firms to provide services to satisfy customers yet maintaining distance and independence from them represent an important research question requiring investigation and study. Design/methodology/approach – A review of the literature for performance evaluation in general and in particular BSCs in service industries was made to identify challenges facing auditing firms when measuring their performance. Data were collected using case study approach; two auditing firms, one of the Big 4 and a medium size auditing firm with international affiliation operating in the Egyptian market were selected. Interviews, document analysis and participant observations were used in the analysis of each firm performance measurement system. Findings – The paper suggests that major challenges face auditing firms in measuring their performance mainly the size of the firm and its affiliation with international auditing firm, the qualification and experience of partners and audit managers needed for the design and implementation of a BSC or similar performance measures, the resources required for the introduction of such performance measure and the peculiarity of the auditor and client relationship with the need to maintain independence and confidentiality while providing high-quality services. Although both auditing firms being studied have formal performance measurement systems, they differ in their degree of comprehensiveness. In particular, the performance measurement system of the larger firm is more elaborate than that of the smaller one and both place more emphasis on qualitative measures such as learning and growth and internal business processes than financial measures. Research limitations/implications – Overall, the results have implications for understanding the performance measurement process of auditing firms in general and in particular in an emerging economy such as Egypt. The identification of the challenges facing auditing firms in measuring their performance and how the implementation of BSC can help partners and employees to overcome those challenges will add to the literature for performance evaluation in service companies. Future research should be carried to compare and assess differences between the behavioural aspects of performance measures in auditing firms and possible application of BSC in such firms and those used in services industry. Also, the practicality of implementing a BSC measures for different auditing firms should be investigated further in future research. Originality/value – The research among the first to investigate the challenges facing auditing firms in designing and operating a performance measurement system and to discuss, using case studies, how a BSC could support the auditing firms to overcome such challenges. Further, the research provides insights into performance measures in auditing firms in developing economies like Egypt which are sparse since most studies have been conducted in developed economies. Also, the paper enriches the literature of performance measurement systems in service rather than the manufacturing sector especially for medium and small size firms.


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