Balanced Scorecard

Financial measures have long held sway as the most important measures for a business. They provide us with a valuable means of summarising and evaluating business achievement and there is no real doubt about the continued importance of financial measures in this role. In recent years, however, there has been increasing recognition that financial measures alone will not provide managers with sufficient information to manage a business effectively. Non-financial measures

The balanced scorecard

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must also be used in order to gain a deeper understanding of the business and to achieve the objectives of the business, including the financial objectives. Financial measures portray various aspects of business achievement (for ex­ ample, sales, profits, return on capital employed and so on) that can help managers determine whether the business is increasing the wealth of its owners. These measures are vitally important, but in an increasingly competitive environment managers also need to understand what particular things drive the creation of wealth . These value drivers may be such things as employee satisfaction, cus­ tomer loyalty and the level of product innovation. Often they do not lend them­ selves to financial measurement, although non-financial measures may provide some means of assessment.

Activity 1.1.1.3
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H.ow might we

rn~asure:

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(i) .employee satisfaction? .(ij) custbmerloyalty?

.. (iii) the level. of product innovation?

Employe~satlsfacti6n may; bemeasur~d" thr6Ugl1 ' the. use of a:ilemploy~e .survey. This Gourd examine attitudes towards vari60s aspects of the job,the 'degreeof autonomy that is permitted, th'e level of recognition aiid'reward received, the level oi partic;jpati9r1in deci­ sion ma~ing, tM,degre.e of support received in carrying.outfasksanqsobn, less direct measures 0f sati~faCtioA may include employee turnover rates and employee productivity. However, other factors may have a sigFlifi.cant influence on .these measures. . . Customer loyalty may, be' measured tfrrough the proportion .of total sales generated from existing Customer-s , the number of repeat saleS' made to icu~tomers, the percel1ta~e of eustGmers renewing subseriptibns or other contractstlndso.on.,: Thel¢veLotproducUnnovation may,be measured through the !"lumber of -innovations c d\Jririga PElriod _omjJ.