Business Performance Management Balanced Scorecard Framework 2 — Questions and Answers
Question 1: What is a 'strategic objective' in the Balanced Scorecard framework?
- A broad mission statement for the entire company
- A concise statement describing what must be achieved within a specific perspective to execute strategy (Correct answer)
- A financial target set by the board of directors
- A quarterly operational task assigned to a department
Correct answer: A concise statement describing what must be achieved within a specific perspective to execute strategy
Strategic objectives are specific, actionable statements within each BSC perspective that describe what the organization must accomplish.
Question 2: In Balanced Scorecard terminology, what is an 'initiative'?
- A new product launch plan
- A key action program undertaken to achieve strategic objectives (Correct answer)
- An annual employee performance review
- A quarterly financial variance report
Correct answer: A key action program undertaken to achieve strategic objectives
Initiatives are the specific projects and programs that an organization undertakes to close the gap between current and target performance on strategic objectives.
Question 3: Which of the following BEST describes 'strategic alignment' in the Balanced Scorecard?
- Ensuring all financial reports use the same accounting standards
- Linking individual, department, and business unit scorecards to the overall corporate strategy (Correct answer)
- Aligning the fiscal year with the calendar year
- Matching the number of KPIs across all four perspectives
Correct answer: Linking individual, department, and business unit scorecards to the overall corporate strategy
Strategic alignment ensures that every level of the organization is working toward the same overarching strategy through cascaded scorecards.
Question 4: What does 'cause-and-effect linkage' mean in the Balanced Scorecard framework?
- Tracking how financial losses cause employee disengagement
- Identifying how improvements in one perspective lead to improvements in another (Correct answer)
- Linking customer complaints to specific product defects
- Connecting budget overruns to departmental performance reviews
Correct answer: Identifying how improvements in one perspective lead to improvements in another
Cause-and-effect linkages show how improving learning and growth leads to better internal processes, which improves customer outcomes, which drives financial results.
Question 5: A technology company includes 'percentage of revenue from new products' in its Balanced Scorecard. Which perspective does this KPI belong to?
- Customer perspective
- Internal process perspective
- Financial perspective (Correct answer)
- Learning and growth perspective
Correct answer: Financial perspective
Revenue from new products is a financial outcome measure, placing it firmly in the financial perspective of the Balanced Scorecard.
Question 6: Which of the following is a common pitfall when implementing the Balanced Scorecard?
- Including too few financial KPIs
- Treating it as a measurement-only tool rather than a strategic management system (Correct answer)
- Updating strategy maps too frequently
- Having more than four perspectives
Correct answer: Treating it as a measurement-only tool rather than a strategic management system
Organizations often fail with the BSC by focusing solely on measurement and reporting rather than using it to drive strategy execution and organizational learning.
Business Performance Management Balanced Scorecard Framework 2
What is a 'strategic objective' in the Balanced Scorecard framework?