Scorecard 2: benefits and criticisms

Accounting Ahead | Original study resource | accountingahead.com.au

Scorecard 2: benefits and criticisms

MODULE 5 | PART B.3.2 | STUDENT COMPANION

Benefits and criticisms

Benefits

Summarises complex information

Focuses attention on key variables

Supports management by exception

Balances short-term and sustainable performance

Limits the number of measures

Criticisms

Hard to balance measures in different units

Cause and effect may not hold

Objectives vague, measures subjective

Predictive models partial; ability to act constrained

Risk of control without learning

Testing a cause-and-effect assumption

Assumed link Why it might fail

More training -> better processes Newly skilled staff leave for competitors

Higher satisfaction -> higher profit Satisfaction bought with discounts that erode margins

More advertising -> more sales Market saturated; competitors respond

Rules to remember

Item Rule

Balance You cannot maximise all four perspectives at once - seek the best combination

Predictive model The assumptions behind the strategy - test and revise them

Otley and Berry Vague, changing goals; subjective measures; partial models held differently by

different people; limited ability to act

Extra perspectives Donors (not-for-profit), social outcomes (public sector), quality (health),

environment

Use As a learning tool, not just a feedback control

STRATEGIC MANAGEMENT ACCOUNTING | M5 PART B.3.2 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Question 1

A charity uses a four-perspective scorecard copied from a retailer. Identify two weaknesses of this approach and

suggest how the scorecard should be adapted.

STRATEGIC MANAGEMENT ACCOUNTING | M5 PART B.3.2 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Worked answers

MODULE 5 | PART B.3.2 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - Worked answer

Weakness Adaptation

Financial perspective treated as the goal Make finance a constraint; lead with mission outcomes

Customer perspective ignores donors and

beneficiaries separately

Add donor and beneficiary perspectives

Retail cause-and-effect assumptions Map the charity's own predictive model (how activities create

outcomes)

Add a volunteer or learning measure (volunteer retention, training) and test the assumed links each year.

STRATEGIC MANAGEMENT ACCOUNTING | M5 PART B.3.2 | WORKED ANSWERS

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