Academic journal article Management Accounting Quarterly

Balanced Scorecard Applications and Model Building: A Survey and Comparison of the Manufactured Homes and Motor Homes Industries: An Analysis of the Performance Measurement Practices in the Manufactured and Motor Homes Industries Focuses on the Development of a Balanced Scorecard Methodology That Would Enhance Measurement Accuracy and Increase Productivity and Efficiency

Academic journal article Management Accounting Quarterly

Balanced Scorecard Applications and Model Building: A Survey and Comparison of the Manufactured Homes and Motor Homes Industries: An Analysis of the Performance Measurement Practices in the Manufactured and Motor Homes Industries Focuses on the Development of a Balanced Scorecard Methodology That Would Enhance Measurement Accuracy and Increase Productivity and Efficiency

Article excerpt

EXECUTIVE SUMMARY This article examines the current measurement practices of companies in the manufactured homes industry and the motor homes industry and checks for the applicability of balanced scorecards. An analysis of survey results shows how much the balanced scorecard is understood and applied in these two industries. The analysis also compares the similarities and differences of scorecard knowledge based on company size, sales, number of employees, educational level, and experience of executives. Extending beyond that, a scorecard methodology that quantifies the intuitive understanding most managers have about the relationships between and among performance measures is discussed. Applying the methodology to project possible results yields explicit bottom-line results--both financial and nonfinancial--that enable a strategy to be managed and validated. An example is provided that can be expanded so the chain of cause and effect could pervade all four elements of the balanced scorecard.

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The balanced scorecard is a customer-based planning and process-improvement system aimed at focusing and driving the change process. It translates strategy into an integrated set of financial and nonfinancial measures that communicates the organizational strategy to employees and provides them with feedback on which they can take action to achieve their objectives. Traditionally, balanced scorecards include both objective and subjective measures addressing four major areas: Financial Perspective, Customer Perspective, Internal Business Process, and Learning Process and Growth Perspective. (1)

According to Tim Fielden, corporations across the world have begun leveraging the power of balanced scorecards for converting vision and strategy into measurable targets. (2) Introduced as a management tool in 1991 by Robert S. Kaplan and David P. Norton, balanced scorecards provide executives and managers with the ability to develop measures that accurately forecast the health and wealth of an organization. (3) In 1998, the Gartner Group estimated that at least 40% of Fortune 1,000 companies would implement balanced scorecards by 2000. (4) A 1998 survey commissioned by Business Intelligence, in association with Renaissance Worldwide, found that 54% of surveyed companies use a balanced scorecard to manage and measure performance. (5) Providing the ability to translate strategy into action--rapidly, measurably, and knowledgeably--a balanced scorecard aligns organizational structure with strategic plans, which helps tap into hidden assets and knowledge. Moreover, by connecting both internal and external people with these strategies, continual learning and growth can be achieved.

According to Allan Bailey, Chee Chow, and Kamal Haddad, companies such as AT&T, Brown and Root, Intel, 3Com, Elf Atochem, the AM&R division of Mobil Oil, and Tenneco use balanced scorecards. In the service sector, scorecard adopters include KPMG Peat Marwick and Ernst & Young. (6)

The authors said that balanced scorecards have many benefits. They:

* Promote the active formulation and implementation of organizational strategies.

* Make organizational strategies updated and highly visible.

* Improve communication within the organization.

* Improve alignment among divisional or individual goals and the organization's goals and strategies.

* Align annual or short-term operating plans with long-term strategies.

* Align performance evaluation measurement and long-term strategies. (7)

PREPARATION OF THE BALANCED SCORECARD

One of the main features of the balanced scorecard is the set of measures that addresses the company's business performance and success in strategy implementation. For a balanced scorecard to be effective, the relationships among the objectives and measures must be explicit so that they can be managed and validated. …

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