Why is the balanced scorecard approach to performance measurement is more useful than a traditional approach using solely financial performance measures?

Question 32a - June 2017 Sample

The People’s Bank is a bank based in the country of Nawkrei. It has a total of 65 branches across the country and also offers online banking (access to services via computer) and telephone banking (access to customer service agents over the telephone) to its customers. Recently, The People’s Bank also began offering its customers a range of mobile banking services, which can be accessed from customers’ smartphones and tablet computers. Its customer-base is made up of both private individuals and business customers. The range of services it offers includes:

Current accounts
Savings accounts
Credit cards
Business and personal loans
Mortgages (loans for property purchases)

The People’s Bank’s vision is to be ‘the bank that gives back to its customers’ and their purpose is ‘to help the people and businesses of Nawkrei to live better lives and achieve their ambitions’. In order to achieve this, the bank’s values are stated as:

(1) Putting customers’ needs first, which involves anticipating and understanding customers’ needs and making products and services accessible to as many customers as possible. The People’ Bank has recently invested heavily in IT security to prevent fraud and also invested to make more services accessible to disabled and visually impaired customers

(2) Making business simple, which involves identifying opportunities to simplify activities and communicating clearly and openly

(3) Making a difference to the communities they serve, which involves primarily helping the disadvantaged and new homeowners but also supporting small and medium-sized businesses (SMEs) and acting fairly and responsibly at all times

Extracts from The People’s Bank’s balanced scorecard are shown below:

Required:
(a) Explain why the balanced scorecard approach to performance measurement is more useful to measure performance for The People’s Bank than a traditional approach using solely financial performance measures. (4 marks)

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Question 32b - June 2017 Sample

The People’s Bank is a bank based in the country of Nawkrei. It has a total of 65 branches across the country and also offers online banking (access to services via computer) and telephone banking (access to customer service agents over the telephone) to its customers. Recently, The People’s Bank also began offering its customers a range of mobile banking services, which can be accessed from customers’ smartphones and tablet computers. Its customer-base is made up of both private individuals and business customers. The range of services it offers includes:

Current accounts
Savings accounts
Credit cards
Business and personal loans
Mortgages (loans for property purchases)

The People’s Bank’s vision is to be ‘the bank that gives back to its customers’ and their purpose is ‘to help the people and businesses of Nawkrei to live better lives and achieve their ambitions’. In order to achieve this, the bank’s values are stated as:

(1) Putting customers’ needs first, which involves anticipating and understanding customers’ needs and making products and services accessible to as many customers as possible. The People’ Bank has recently invested heavily in IT security to prevent fraud and also invested to make more services accessible to disabled and visually impaired customers

(2) Making business simple, which involves identifying opportunities to simplify activities and communicating clearly and openly

(3) Making a difference to the communities they serve, which involves primarily helping the disadvantaged and new homeowners but also supporting small and medium-sized businesses (SMEs) and acting fairly and responsibly at all times

Extracts from The People’s Bank’s balanced scorecard are shown below:

Required:
(b) Using all of the information provided, including The People’s Bank’s vision and values, discuss the performance of The People’s Bank in 20X6.

Note: Use each of the four headings of the balanced scorecard to structure your discussion. (16 marks)

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MC Question 15 - September 2016 Specimen

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• E1e. Past Exam Question

Which of the following statements regarding Fitzgerald and Moon’s Building Blocks model are correct?

(1) The determinants of performance are quality, innovation, resource utilisation and competitiveness
(2) Standards are targets for performance and should be fair, achievable and controllable
(3) Rewards encourage staff to work towards the standards and should be clear, motivating and controllable
(4) It is a performance measurement framework particularly suitable for service organisations

A. (1), (2) and (3)
B. (2) and (3) only
C. (3) and (4)
D. (1), (2) and (4)

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Question 4a - December 2014

Jamair was founded in September 2007 and is one of a growing number of low-cost airlines in the country of Shania.

Jamair’s strategy is to operate as a low-cost, high efficiency airline, and it does this by:
– Operating mostly in secondary cities to reduce landing costs.
– Using only one type of aircraft in order to reduce maintenance and operational costs. These planes are leased rather than bought outright.
– Having only one category of seat class.
– Having no pre-allocated seats or in-flight entertainment.
– Focusing on e-commerce with customers both booking tickets and checking in for flights online.

The airline was given an ‘on time arrival’ ranking of seventh best by the country’s aviation authority, who rank all 50 of the country’s airlines based on the number of flights which arrive on time at their destinations. 48 Jamair flights were cancelled in 2013 compared to 35 in 2012. This increase was due to an increase in the staff absentee rate at Jamair from 3 days per staff member per year to 4·5 days.

The average ‘ground turnaround time’ for airlines in Shania is 50 minutes, meaning that, on average, planes are on the ground for cleaning, refuelling, etc for 50 minutes before departing again. Customer satisfaction surveys have shown that 85% of customers are happy with the standard of cleanliness on Jamair’s planes.

The number of passengers carried by the airline has grown from 300,000 passengers on a total of 3,428 flights in 2007 to 920,000 passengers on 7,650 flights in 2013. The overall growth of the airline has been helped by the limited route licensing policy of the Shanian government, which has given Jamair almost monopoly status on some of its routes. However, the government is now set to change this policy with almost immediate effect, and it has become more important than ever to monitor performance effectively.

Required:
(a) Describe each of the four perspectives of the balanced scorecard. (6 marks)

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Question 4b - December 2014

You could see this question fully worked through if you join the classroom

• E1e. Past Exam Question

Jamair was founded in September 2007 and is one of a growing number of low-cost airlines in the country of Shania.

Jamair’s strategy is to operate as a low-cost, high efficiency airline, and it does this by:
– Operating mostly in secondary cities to reduce landing costs.
– Using only one type of aircraft in order to reduce maintenance and operational costs. These planes are leased rather than bought outright.
– Having only one category of seat class.
– Having no pre-allocated seats or in-flight entertainment.
– Focusing on e-commerce with customers both booking tickets and checking in for flights online.

The airline was given an ‘on time arrival’ ranking of seventh best by the country’s aviation authority, who rank all 50 of the country’s airlines based on the number of flights which arrive on time at their destinations. 48 Jamair flights were cancelled in 2013 compared to 35 in 2012. This increase was due to an increase in the staff absentee rate at Jamair from 3 days per staff member per year to 4·5 days.

The average ‘ground turnaround time’ for airlines in Shania is 50 minutes, meaning that, on average, planes are on the ground for cleaning, refuelling, etc for 50 minutes before departing again. Customer satisfaction surveys have shown that 85% of customers are happy with the standard of cleanliness on Jamair’s planes.

The number of passengers carried by the airline has grown from 300,000 passengers on a total of 3,428 flights in 2007 to 920,000 passengers on 7,650 flights in 2013. The overall growth of the airline has been helped by the limited route licensing policy of the Shanian government, which has given Jamair almost monopoly status on some of its routes. However, the government is now set to change this policy with almost immediate effect, and it has become more important than ever to monitor performance effectively.

Required:
(b) For each perspective of the balanced scorecard, identify one goal together with a corresponding performance measure which could be used by Jamair to measure the company’s performance. The goals and measures should be specifically relevant to Jamair. For each pair of goals and measures, explain why you have chosen them. (9 marks)

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MC Question 8 - December 2014 Specimen

The following statements have been made about the balanced scorecard:

(1) It focuses solely on non-financial performance measures
(2) It looks at both internal and external matters concerning the organisation

Which of the above statements is/are true?

A. 1 only
B. 2 only
C. Neither 1 nor 2
D. Both 1 and 2

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