Study Note 2 : Performance

Evaluation & Improvement Tools

CMA Ram
Cost & Management Accountant
Performance Evaluation & Improvement Tools
1. Balanced Score Card
2. Du Pont Analysis
3. Benchmarking & Bench trending
4. Statistical Quality Control (SQC)
5. Management Information System
6. On-Line Analytical Processing Tools
7. Tools to Improve Productivity and Profitability - MRP I, MRP II and ERP
8. Total Productivity Management (TPM)
9. Total Quality Management (TQM)
Performance Evaluation & Improvement Tools
Balanced Score Card

Overview

“ The Balanced Scorecard is a management system. It’s a way of looking at your organization that focuses on yo
ur big-picture strategic goals. It also helps you choose the right things to measure so that you can reach those g
oals.”

The name “balanced scorecard” comes from the idea of looking at strategic measures in addition to traditional f
inancial measures to get a more “balanced” view of performance.
Stacking the Perspectives
Performance Evaluation & Improvement Tools

Perspectives: - A balanced scorecard looks at your organization from four different perspectives to
measure its health. Each of these perspectives focuses on a different side of your company, creating
a balanced view of your organization.
01 :- Learning and Growth –
The learning and growth perspective looks at your overall corporate culture. Are people aware of the latest industry trends? I
s it easy for employees to collaborate and share knowledge, or is your company a mess of tangled bureaucracy? Does everyon
e have access to training and continuing education opportunities?
Technology plays a major role in learning and growth. Are people able to use the latest devices and software, or are your arch
aic systems stuck running yesterday’s tech? What are you doing to make sure your organization is staying ahead of your comp
etition?
Performance Evaluation & Improvement Tools

02 :- INTERNAL BUSINESS PROCESSES–

The internal business processes perspective looks at how smoothly your business is running. Efficiency is important here. It’s
all about reducing waste, speeding things up, and doing more with less. Are there unneeded obstacles standing between new i
deas and execution? How quickly can you adapt to changing business conditions?
This perspective also encourages you to take a step back and get a little philosophical about your company. Are you providing
what your customers actually want? What should you be best at?
Performance Evaluation & Improvement Tools

03 :- CUSTOMER –
The customer perspective focuses on the people who actually buy your products and services. Are you winning new business?
How about keeping your existing customers happy? How are you viewed in your industry compared to your competitors?

Customer satisfaction is a great forward-looking indicator of success. The way you treat your customers today directly impac
ts how much money you’ll make tomorrow.
Performance Evaluation & Improvement Tools

04 :- FINANCIAL–
Just because we’re taking a balanced look at your organization doesn’t mean that we want to ignore traditional financial mea
sures. Quite the contrary, the financial perspective is a major focus of the balanced scorecard.

Are you making money? Are your shareholders happy? The financial health of your organization may be a lagging indicator sh
owing the result of past decisions, but it’s still incredibly important. Money keeps companies alive, and the financial perspecti
ve focuses solely on that.
Stacking the Perspectives
In the early years of the balanced scorecard, each of the four perspectives were s
hown as being independent of the others. Over time, however, people began to dis
cover that these perspectives affect each other in surprising ways. It turns out th
at the way we order them matters.

Modern balanced scorecards show how each perspective builds on the previous
one. If you train your employees and build a culture of information sharing (Learn
ing and Growth), they’ll make your company run more smoothly (Internal Busines
s Processes). A better running business takes better care of its customers (Custo
mer), and happy customers buy more of what you’re selling (Financial).
Strategic objectives for each perspective
Strategy Map of Objectives
 Measures
The final building blocks of a balanced scorecard are measures. Every strategic objective should have one or t
wo things that you measure to determine how it’s performing. These measures need goals and should be meas
ured on a regular schedule.

For example, if a strategic objective were “Increase Acquisitions,” a good measure might be “Number of New A
cquisitions.” If the strategic objective were “Increase Employee Expertise,” a good measure might be “Total De
partmental Training Hours.”

It’s important to choose a very small number of measures to track. By limiting each strategic objective to one o
r two measures, you’re able to focus on the things that matter most. Tracking too many measures often means
that nothing improves.

Finally, notice how we waited until the very end of building our balanced scorecard to choose measures. That’s
because it’s very important to figure out your overall strategy first. If you choose measures earlier in the proce
ss, you’ll almost certainly end up measuring the wrong things.
BSC Development
Measures
Performance Evaluation & Improvement Tools
Summery of BSC
Performance Evaluation & Improvement Tools
02. Du Pont Analysis
Performance Evaluation & Improvement Tools
02. Du Pont Analysis
Performance Evaluation & Improvement Tools
02. Du Pont Analysis
Performance Evaluation & Improvement Tools
02. Du Pont Analysis
Performance Evaluation & Improvement Tools
02. Du Pont Analysis
Benchmarking
Benchmarking
Benchmarking
Benchmarking
Benchmarking
Difficulties in implementation of Bench Marking

a) Time consuming

b) Lack of management Support

c) Resistance from employees

d) Paper Goals

e) Copy-paste attitude