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Balanced Scorecard MCQs

Balanced Scorecard is an approach to the provision of information to management to assist strategic policy formulation and achievement.

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Balanced Scorecard MCQs

Balanced Scorecard MCQs

Balanced Scorecard is an approach to the provision of information to management to assist strategic policy formulation and achievement. Here on MCQs.club we have prepared Multiple-Choice Questions (MCQs) on Balanced Scorecard that wholly covers courses such as balanced scorecard in strategic management, its model, approach, measures, framework, method, objectives, implementation, types with examples. These also covers financial and non-financial measures MCQs. Our designed MCQs are beneficial for Professional accountancy exams, Business management exams and Competitive exams.

The advantages of financial measures of performance include:

1. Culturally expected, Cheap
2. Focus on financial objectives and comparable across companies
3. Established framework for preparation in many causes
4. Tend to focus onto resource generation and so survival in the long term
5. All of the above

The disadvantages of financial measures of performance include:

1. Inflation distortion, lack comparability
2. Leads to suboptimal and short-term behavior
3. Subjectivity can exist in calculation e.g. depreciation.
4. All of the above

Advantages of non-financial measures include:

1. Wider view, easier to calculate
2. Easy to understand, Not distorted by inflation
3. Can emphasize broad spectrum management
4. Positive motivation implications
5. All of the above

Disadvantages of non-financial measures include:

1. Can be difficult to calculate, costly
2. Subjectivity exists in design, interpretation and calculation
3. Can lead to indicator overload, culture clash implications
4. Constant change requires constant monitoring
5. All of the above

Fitzgerald and Moon adopted a framework for the design and analysis of performance management systems. Their analysis is based on which of the following building blocks:

1. Dimensions
2. Standards
3. Rewards
4. All of the above

Dimensions –:

1. Are the goals for the business and suitable measures must be developed to measure each performance dimension. There are six dimensions in the building block model.
2. Are the measures used. To ensure success it is vital that employee view standards as achievable, fair and take ownership to them
3. Both A&B
4. None

Standards –:

1. Are the goals for the business and suitable measures must be developed to measure each performance dimension. There are six dimensions in the building block model.
2. Are the measures used. To ensure success it is vital that employee view standards as achievable, fair and take ownership to them
3. Both A&B
4. None

The dimension in the building block model of Fitzgerald and Moon are:

1. Financial performance (CSF financial objectives), competitiveness
2. Resource utilization, quality issues
3. Innovation and Flexibility
4. All of the above

Different measures will be required, and appropriate, for different businesses. What preliminary investigations will be required determining which measures are used in a particular case:

1. The objectives/mission of the organisation must be clearly formulated so that when the factors critical to the success of the mission have been identified they can be translated into performance indicators.
2. Measures must be relevant to the way the organisation operates. Managers themselves must believe the indicators are useful.
3. The costs and benefits of providing resources (people, equipment and time to collect and analyse information) to produce a performance indicator must be carefully weighed up.
4. All of the above

Identify the ways where financial modelling might assist in performance evaluation:

1. Identifying the variables involved in performing tasks and the relationships between them.
2. Setting targets for future performance – The most obvious example of this is the budgetary control system.
3. Monitoring actual performance – A flexible budget is a good example of a financial model that is used in this way.
4. Co-ordinating long-term strategic plans with short-term operational actions – Modelling can reflect the dynamic nature of the real world and evaluate how likely it is that short-term actions will achieve the longer-term plan, given new conditions.
  1. All of the above
  2. (IV) only
  3. (III) and (IV) only
  4. None

Identify the possible points of reference for measurement.

1. Profitability
2. Activity
3. Productivity
4. All of the above

Ratios are a useful way of measuring performance for a number of reasons. Identity which of the following is correct.

1. It is easier to look at changes over time by comparing ratios in one time period with the corresponding ratios for periods in the past.
2. Ratios are often easier to understand than absolute measures of physical quantities or money values.
3. Ratios relate one item to another, and so help to put performance into context.
4. Ratios can be used as targets. In particular, targets can be set for ROI, profit/sales, asset turnover, capacity fill and productivity. Managers will then take decisions which will enable them to achieve their targets
5. Ratios provide a way of summarising an organisation’s results, and comparing them with similar organisations.
  1. (IV) and (V) only
  2. (I) (IV) and (V) only
  3. All of the above
  4. None

Identify examples of non-financial performance measures.

1. Service quality – (Number of complaints, Proportion of repeat bookings, Customer waiting time, On-time deliveries)
2. Production performance – (Set-up times, Number of suppliers Days’, inventory in hand)
3. Marketing effectiveness – (Trend in market share, Sales volume growth, Customer visits per salesperson)
4. Personnel – (Number of complaints received, Staff turnover, Days lost through absenteeism)
5. All of the above

The development of a good system of performance measurement requires activity in:

1. The information architecture must be developed. This requires the identification of performance measures that relate to strategy and the gradual, iterative development of systems to capture the required data.
2. An appropriate information technology strategy must be established.
3. The company’s incentives system must be aligned with its performance measures. Eccles proposes that qualitative factors should be addressed by the incentive system.
4. External influences must be acknowledged and used. For example, benchmarking against other organisations may be used, while providers of capital should be persuaded to accept the validity of non-financial measures.
5. Manage the implementation of the four areas above by appointing a person to be responsible overall as well as department agents.
  1. All of the above
  2. (I) only
  3. (I) and (IV) only
  4. None

Which of the following is correct regarding Value for money (VFM) audits?

1. Value for money audits can be seen as being of particular relevance in not-for-profit organisations.
2. Such an audit focuses on economy, efficiency and effectiveness.
3. Both A&B
4. None

Which of the following statement is correct with regard to the balanced scorecard?

1. It is an approach to the provision of information to management to assist strategic policy formulation and achievement.
2. It emphasizes the need to provide the user with a set of information which addresses all relevant issues of performance in an objective and unbiased fashion.
3. The information provided may include both financial and non-financial elements and cover areas such as profitability, customer satisfaction, internal efficiency and innovation.
4. All of the above

Paul McCunn offered some practical guidance and balanced scorecard. Identify the “DOs” as suggested by him:

1. Use the scorecard as an implementation pad for strategic goals
2. Ensure strategic goals are in place before the scoreboard is implemented
3. Ensure that a top level (non-financial) sponsor backs the scorecard and that relevant line manager are committed to the project
4. Implement a pilot before introducing the new scoreboard
5. Carryout and ‘entry review’ for each business unit before implementing the scorecard.
  1. All of the above
  2. (I) (III) (V) only
  3. (III) and (V) only
  4. None

Paul McCunn offered some practical guidance and balanced scorecard. Identify the “Don’ts” as suggested by him:

1. Use the scoreboard to obtain extra top-down control
2. Attempt to standardize the project – the scoreboard must be tailor made
3. Underestimates the need for training and communication in using the scorecard
4. Seek complexity or strive for perfection
5. Underestimate the extra administrative workload and costs of periodic scorecard reporting
  1. All of the above
  2. (II) (IV) and (V) only
  3. (II) and (IV) only
  4. None

The balanced scorecard focuses on different perspectives. Identify those perspectives:

1. Customer – Gives rise to targets that matter to customers: cost, quality, delivery
2. Internal operations – Aims to improve internal processes and decision making.
3. innovation and learning – Consider the business’s capacity to maintain its competitive position through the acquisition of new skills and the development of new products.
4. Financial – Covers traditional measures such as growth, profitability and shareholder value
5. All of the above

The scorecard is ‘balanced’ in the sense that managers are required to think in terms of all four perspectives, to prevent improvements being made in one area at the expense of another.

1. True
2. False

Problems can arise when the balanced scorecard is applied. Identify those:

1. Conflicting measures – Some measures in the scorecard such as research funding and cost reduction may naturally conflict. It is often difficult to determine the balance which will achieve the best results.
2. Selecting measures
3. Expertise – Measurement is only useful if it initiates appropriate action. Non-financial managers may have difficulty with the usual profit measures.
4. Interpretation – Even a financially-trained manager may have difficulty in putting the figures into an overall perspective.
5. All of the above

Important features of balanced scorecard include:

1. It looks at both internal and external matters concerning the organization
2. It is related to the key elements of a company’s strategy
3. Financial and non-financial measures are linked together
4. All of the above

Organisations use the balanced scorecard to:

1. Identify and align strategic initiatives
2. Link budgets with strategy and Align the organisation (structure and processes) with strategy
3. Conduct periodic strategic performance reviews with the aim of learning more about, and improving, strategy
4. All of the above

The stages of ‘strategy map’ are:

1. Identify objective. Identify the key objectives of the organisation.
2. Value creation. In the light of the key objectives, determine the main ways the organisation creates value.
3. Financial perspective: Identify financial strategies to support the overall objective and strategy.
4. Customer perspective. Clarify customer-oriented strategies to support the overall strategy.
5. Internal processes. Identify how internal processes support the strategy and help to create value.
6. Innovation and learning. Identify the skills and competences needed to support the overall strategy and achieve the objectives.
  1. All of the above
  2. (I) (III) and (IV) only
  3. (III) and (IV) only
  4. None

Identify the steps involved in successful implementation of scorecard:

1. Identify key outcomes – Identify the key outcomes critical to the success of the organisation (this is similar to identifying the organisation’s critical success factors).
2. Key processes – Identify the processes that lead to those outcomes.
3. KPIs – Develop key performance indicators for those processes.
4. Data capture – Develop systems for capturing the data necessary to measure those key performance indicators.
5. Reporting – Develop a mechanism for communicating or reporting the indicators to staff (for example, through charts, graphs or on a dashboard).
6. Performance improvement – Develop improvement programmes to ensure that performance improves as necessary.
  1. (II) and (VI) only
  2. (II) (V) and (VI) only
  3. All of the above
  4. None

The scorecard can be used both by profit and not-for-profit organisations because it acknowledges the fact that both financial and non-financial performance indicators are important in achieving strategic objectives.

1. The above statement is true
2. The above statement is false

Which of the following is correct regarding Strategic Enterprise Management?

1. Strategic Enterprise Management (SEM) refers to the methods of management, and the related tools, that businesses can use when making high-level strategic decisions.
2. SEM focuses primarily on strategic management rather than operational management, with a view to allowing organisations to improve their business processes and procedures, and their business decision-making, in order to sustain a competitive advantage in a competitive business environment.
3. SEM can be seen as an extension of the BSC approach, because it encourages senior managers to combine financial and strategic measures when formulating business decisions.
4. All of the above are correct

Strategic scorecards are an advance on balanced scorecards because:

1. They normally include information on external factors that could affect the strategy
2. They explicitly consider risk factors
3. They are not confined to quantitative metrics
4. They are explicitly strategic whereas many balanced scorecards focus on operational performance
5. All of the above

Which of the following is correct regarding performance pyramid?

1. The performance pyramid clearly links the performance measures at the different hierarchical levels of the organisation (Anthony’s hierarchy), and encourages operational performance measures to be linked to strategic goals.
2. The performance pyramid derives from the idea that an organisation operates at different levels, each of which has different (but supporting) concerns.
3. Both A&B
4. None

Identify the practical problems that apply to the performance pyramid.

1. Applying it may significantly increase the cost of organisational control
2. Management effort, which could otherwise be devoted to running the business, could be used in devising performance measures and responding to reports
3. Measures may conflict. This could demotivate managers who feel they are in a ‘no win’ situation
4. Staff turnover may increase if staff feel they are being checked up on all the time or have to spend lots of time inputting data
5. All of the above

Identify the factors that are important in developing a performance measurement system:

1. Identify the key outputs required from an activity
2. Identify the key processes in providing the outputs
3. Identify the interfaces of the activity with other parts of the firm, or with other processes in the value chain
4. Develop KPIs for key processes
5. Identify data sources for KPI information
  1. All of the above
  2. (I) (II) only
  3. (I) (II) and (IV) only
  4. None

Identify the types of benchmarking:

1. Internal
2. Competitor
3. Process or activity
4. All of the above

Which of the following is correct with regard to internal benchmarking?

1. This is where another branch or department of the organization is used as the benchmark.
2. Used where conformity of service is the critical issue either threshold or once competence
3. Easily arranged, cheaper and culturally relevant
4. Culturally distorted and unlikely to provide innovative solutions
  1. All of the above
  2. (I) (III) and (IV) only
  3. (II) and (III) only
  4. None

Which of the following is correct with regard to competitor benchmarking?

1. Uses a direct competitor with the same or similar process
2. Essentially aims to render the competition more competence as threshold
3. Relevant for the industry and market
4. All of the above

Which of the following is correct with regard to process of activity benchmarking?

1. Focus upon a similar process in another company which is not a direct competitor.
2. Looks for new innovative ways to create advantages as well as solving threshold problems
3. Takes time and is expensive but resistance likely to be less and can provide the new basis for advantage
4. All of the above

What are the steps for implementing a benchmarking scheme?

1. Identifying what is wrong with the current organization
2. Identifying best practice elsewhere
3. Contracting, preparing for and undertaking a site visit
4. Gathering, evaluating and communicating the results
5. All of the above

Fitzgerald & Moon’s ‘the building block model’ attempts to overcome the perceived problems associated with performance measurement in service businesses. Identify the so-called building blocks of the model.

1. Dimensions
2. Standards and rewards
3. Both A&B
4. None

Dimensions –:

1. are the areas of performance which yield the specific performance metric for a company. These dimensions are then split into results and determinants (the factors which shape the results).
2. are the measures used to monitor an organisation’s performance in each of the dimensions chosen. (In effect, determinants in the building block model are CSFs, while standards are KPIs.)
3. are the motivators which encourage employees to work towards the standards set.
4. None

Standards –:

1. are the areas of performance which yield the specific performance metric for a company. These dimensions are then split into results and determinants (the factors which shape the results).
2. are the measures used to monitor an organisation’s performance in each of the dimensions chosen. (In effect, determinants in the building block model are CSFs, while standards are KPIs.)
3. are the motivators which encourage employees to work towards the standards set.
4. None

Rewards –:

1. are the areas of performance which yield the specific performance metric for a company. These dimensions are then split into results and determinants (the factors which shape the results).
2. are the measures used to monitor an organisation’s performance in each of the dimensions chosen. (In effect, determinants in the building block model are CSFs, while standards are KPIs.)
3. are the motivators which encourage employees to work towards the standards set.
4. None

Performance measurement in manufacturing is increasingly using non-financial measures. The measures for manufacturing environments include

1. Cost: cost behavior
2. Time: bottlenecks, inertia
3. Quality: factors inhibiting performance
4. Innovation: new product flexibility
5. All of the above

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