• Better Strategic Planning
  The Balanced Scorecard provides a powerful framework for building and communicating strategy. The business model is visualized in a Strategy Map which forces managers to think about cause-and-effect relationships. The process of creating a Strategy Map ensures that consensus is reached over a set of interrelated strategic objectives. It means that performance outcomes as well as key enablers or drivers of future performance (such as the intangibles) are identified to create a complete picture of the strategy.
• Improved Strategy Communication & Execution
  The fact that the strategy with all its interrelated objectives is mapped on one piece of paper allows companies to easily communicate strategy internally and externally. We have known for a long time that a picture is worth a thousand words. This „plan on a page‟ facilities the understanding of the strategy and helps to engage staff and external stakeholders in the delivery and review of strategy.
• Better Management Information
  The Balanced Scorecard approach forces to design key performance indicators for their various strategic objectives. This ensures that companies are measuring what actually matters. Research shows that companies with a Balanced Scorecard approach tend to report higher quality management information and gain increasing benefits from the way this information is used to guide management and decision making.
• Improved Performance Reporting
  Companies using a Balanced Scorecard approach tend to produce better performance reports than without such a structured approach to performance management. Increasing needs and requirements for transparency can be met if companies create meaningful management reports and dashboards to communicate performance both internally and externally.
• Better Strategic Alignment
  Balanced Scorecard enables better alignment of the organization’s strategic objectives. In order to execute a plan well, organization need to ensure that all business and support units are working towards the same goals.
• Better Alignment of Projects and Initiatives
  The Balanced Scorecard help organisations map their projects and initiatives to the different strategic objectives, which in turn ensures that the projects and initiatives are tightly focused on delivering the most strategic objectives.

• It does not provide a single overall view of performance. Measures like ROCE are popular because they conventionally summarise how things are going into one convenient measure.
• There is no clear relation between the balanced scorecard and shareholder analysis
• Measures may give conflicting signals and confuse management. For instance, if customer satisfaction is falling along with one of the financial indicators, which should management sacrifice?
• It often involves a substantial shift in corporate culture in order to implement it.

The balanced score card approach is an approach to the provision of information to management to assist strategic policy formulation and achievement. The information provided may include both financial and non-financial elements, and cover areas such as profitability, customer satisfaction, internal efficiency and innovation.
The scorecard offers four perspectives on performance

• Financial
• Customer
• Innovation and learning
• Internal business processes
• Using Financial Perspective to Monitor and Measure Performance
  How do should Adama Group look to shareholders. Financial performance measures indicate whether the company’s strategy, implementation, and execution are contributing to bottom-line improvement. Typical financial goals have to do with profitability, growth, and shareholder value. Adama group’s financial goals could simply be: to survive, to succeed, and to prosper. Survival can be measured and monitored by cash flow, success by quarterly sales growth and operating income by division, and prosperity by increased market share by segment and return on equity.
• Customer Perspective: How Do Customers See Adama Group
  Customers’ concerns tend to fall into four categories: time, quality, performance and service, and cost. To put the balanced scorecard to work, Adama Group should articulate goals for time, quality, and performance and service and then translate these goals into specific measures. Senior managers at Adama Group should therefore be assessed and monitored by percentage of sales from new products, on time delivery to customer (defined by customers), improvement on the company’s Total Quality Management, become customers’ supplier of choice through partnerships with them, and development innovative products tailored to customer needs.
• Internal Business Perspective: What Must Adama Group Excel at?
  Customer-based measures are important, but they must be translated into measures of what the company must do internally to meet its customers’ expectations. The internal measures for the balanced scorecard should stem from the business processes that have the greatest impact on customer satisfaction—factors that affect cycle time, quality, employee skills, and productivity.
  Managers of Adama Group should attempt to identify and measure their company’s core competencies, the critical technologies needed to ensure continued market leadership, decide what processes and competencies they must excel at and specify measures for each.
• Innovation and Learning Perspective: Can Adama Group Continue to Improve and Create Value?
  The customer-based and internal business process measures on the balanced scorecard identify the parameters that the company considers most important for competitive success.
  Adama Group innovation measures should focus on the group’s ability to develop and introduce standard products rapidly, products that the company expects will form the bulk of its future sales. Its manufacturing improvement measure should focus on new products; the goal is to achieve stability in the manufacturing of new products rather than to improve manufacturing of existing products. Adama Group should use the percent of sales from new products as one of its innovation and improvement measures. If sales from new products are trending downward, managers can explore whether problems have arisen in new product design or new product introduction.
  In addition to measures on product and process innovation, Adama Group should overlay specific improvement goals for their existing processes.

                                                                                                      MEMO
To: The Chief Executive Officer
From: Management Accountant
Date:
Subject: Balanced Scorecard
Introduction
This memo is to describe the four perspectives of the balanced scorecard and the major problems inherent in its application to corporate strategic management.
i. Description of the four perspectives of the balanced scorecard

• Financial perspective – The financial perspective of the balance scorecard answers the question, ‘how do we as an organisation look to shareholders?’ Thus, it addresses the question on how the organisation should create value for its shareholders in order to succeed financially. It covers traditional measures such as growth, profitability and shareholder value, with measures set through talking directly to the shareholders. Financial performance measures indicate whether the company’s strategy, implementation, and execution are contributing to bottom-line improvement.
• Customer perspective – The customer perspective of the balance scorecard is a means by which management translates its overall mission statement on customer service into specific measures that reflect the factors that really matter to customers. It answers the question of how the organisation should appear to its customers in order to achieve its vision. It helps management to pay attention to customers’ concerns such as cost, time, quality, performance, reliability and service.
• Internal business process perspective – This perspective addresses internal business processes for which the organisation must excel at in order to meet or exceed customer expectations and achieve financial objectives. Internal measures for the balanced scorecard should stem from the business processes that have the greatest impact on customer satisfaction – factors that affect quality, employee skills, and productivity. It also attempts to identify and measure the organisation’s core competencies and critical technologies needed to ensure continued market leadership.
• Innovation and learning perspective – This perspective is a means of recognising that the targets for success keep changing due to intense global competition and other environmental factors. Thus, it is an attempt to measure the continual improvement of the organisation with regards to existing products and processes. Thus, measures may include the ability of the company to introduce entirely new products with expanded capabilities as well as innovative processes that delivers better value to customers. It brief, it answers the question of how the organisation can continue to create value and maintain its competitive position through improvement and change.

• Conflicting measures – The balanced scorecard sometimes presents conflicting measures. A typical example is research funding and cost reduction. While research is a means of ensuring innovation and learning it leads to cost accumulation which may reflect in high prices for customers. Thus, it is often difficult to determine the balance which achieves the best results.
• Selecting measures – Not only do appropriate measures have to be devised but the number of measures used must be agreed. Care must be taken that the impact of the results is not lost in a sea of information. The innovative
• Expertise – Measurement is only useful if it initiates appropriate action. Non-financial managers may have difficulty with the usual profit measures. With more measures to consider, this problem will be compounded. Measures need to be developed by someone who understands the business processes concerned.
• Interpretation – Even a financially-trained manager may have difficulty in putting the figures into an overall perspective.
• Management commitment – The scorecard can only be effective if senior managers commit to it. If they revert to focusing solely on the financial measures they are used to, then the value of introducing additional measures will be reduced. In this context, do not overlook the cost of BSC. There will be costs involved in data-gathering and in measuring the performance of additional processes.
• Lack of aggregate performance measure – The balance scorecard doesn’t provide a single aggregate summary performance measure; for example, part of the popularity of ROI or ROCE comes from the fact that they provide a convenient summary of how well a business is performing.
• No direct link with shareholder value – In comparison to other measures used in value-based management (such as economic value added or EVA) there is no direct link between the scorecard and shareholder value.
• Culture – Introducing the scorecard may require a shift in corporate culture; for example, in understanding an organisation as a set of processes rather than as departments.
• Imbalance between short-term and long-term perspective – Implementing the scorecard will require an organisation to move away from looking solely at short-term financing measures, and focus on longer-term strategic measures instead. This usually leads to an imbalance between the long and short-term perspectives by management.
                                                                                                                                                                                               Signed
                                                                                                                                                                                  (Any 3 points)