Role of Technical Analysis As A Management Tool Most investors fall somewhere in the middle of the spectrum leveraging elements of both “technical” analysi | Homework Answers

Role of Technical Analysis As A Management Tool Most investors fall somewhere in the middle of the spectrum leveraging elements of both “technical” analysis (focusing on market data, psychology and trends) AND “fundamental” analysis (focusing on moat strength and long-term financial health). As financial managers and business operators, what are the risks and/or benefits of using technical analyses to guide financial management practices in our own organizations (using Salesforce.com as an example)? How does the use of technical analyses as a management tool compare with the framework offered by a “Balanced Scorecard” approach as introduced in Week 5 of this course? www.hbrreprints.org
BEST OF HBR
Using the Balanced
Scorecard as a Strategic
Management System
by Robert S. Kaplan and David P. Norton
•
Included with this full-text Harvard Business Review article:
1 Article Summary
The Idea in Brief—the core idea
The Idea in Practice—putting the idea to work
2 Using the Balanced Scorecard as a Strategic Management System
14 Further Reading
A list of related materials, with annotations to guide further
exploration of the article’s ideas and applications
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This document is authorized for use only by Ryan Bradley in Financial Management II at Strayer University, 2019.
BEST OF HBR
Using the Balanced Scorecard as a Strategic
Management System
The Idea in Brief
The Idea in Practice
Why do budgets often bear little direct
relation to a company’s long-term strategic
objectives? Because they don’t take
enough into consideration. A balanced
scorecard augments traditional financial
measures with benchmarks for performance in three key nonfinancial areas:
The balanced scorecard relies on four processes
to bind short-term activities to long-term
objectives:
• a company’s relationship with its
customers
• its key internal processes
• its learning and growth.
COPYRIGHT © 2005 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
When performance measures for these
areas are added to the financial metrics, the
result is not only a broader perspective on
the company’s health and activities, it’s also
a powerful organizing framework. A sophisticated instrument panel for coordinating
and fine-tuning a company’s operations
and businesses so that all activities are
aligned with its strategy.
identify the most influential “drivers” of the
desired outcomes and then set milestones
for gauging the progress they make with
these drivers.
1. TRANSLATING THE VISION.
By relying on measurement, the scorecard
forces managers to come to agreement on
the metrics they will use to operationalize
their lofty visions.
Example:
A bank had articulated its strategy as providing “superior service to targeted customers.” But the process of choosing operational
measures for the four areas of the scorecard
made executives realize that they first
needed to reconcile divergent views of
who the targeted customers were and
what constituted superior service.
2. COMMUNICATING AND LINKING.
4. FEEDBACK AND LEARNING.
By supplying a mechanism for strategic feedback and review, the balanced scorecard
helps an organization foster a kind of learning
often missing in companies: the ability to reflect on inferences and adjust theories about
cause-and-effect relationships.
Feedback about products and services. New
learning about key internal processes. Technological discoveries. All this information can
be fed into the scorecard, enabling strategic
refinements to be made continually. Thus, at
any point in the implementation, managers
can know whether the strategy is working—
and if not, why.
When a scorecard is disseminated up and
down the organizational chart, strategy becomes a tool available to everyone. As the
high-level scorecard cascades down to individual business units, overarching strategic
objectives and measures are translated into
objectives and measures appropriate to
each particular group. Tying these targets to
individual performance and compensation
systems yields “personal scorecards.” Thus,
individual employees understand how their
own productivity supports the overall strategy.
3. BUSINESS PLANNING.
Most companies have separate procedures
(and sometimes units) for strategic planning
and budgeting. Little wonder, then, that typical long-term planning is, in the words of one
executive, where “the rubber meets the sky.”
The discipline of creating a balanced scorecard forces companies to integrate the two
functions, thereby ensuring that financial
budgets do indeed support strategic goals.
After agreeing on performance measures for
the four scorecard perspectives, companies
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BEST OF HBR
Using the Balanced
Scorecard as a Strategic
Management System
COPYRIGHT © 2007 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
by Robert S. Kaplan and David P. Norton
Editor’s Note: In 1992, Robert S. Kaplan and
David P. Norton’s concept of the balanced scorecard revolutionized conventional thinking about
performance metrics. By going beyond traditional measures of ?nancial performance, the
concept has given a generation of managers a
better understanding of how their companies are
really doing.
These non?nancial metrics are so valuable
mainly because they predict future ?nancial
performance rather than simply report what’s
already happened. This article, ?rst published in
1996, describes how the balanced scorecard can
help senior managers systematically link current
actions with tomorrow’s goals, focusing on that
place where, in the words of the authors, “the
rubber meets the sky.”
As companies around the world transform
themselves for competition that is based on
information, their ability to exploit intangible assets has become far more decisive
than their ability to invest in and manage
physical assets. Several years ago, in recogni-
harvard business review • managing for the long term • july–august 2007
tion of this change, we introduced a concept
we called the balanced scorecard. The balanced scorecard supplemented traditional
?nancial measures with criteria that measured performance from three additional
perspectives—those of customers, internal
business processes, and learning and growth.
(See the exhibit “Translating Vision and
Strategy: Four Perspectives.”) It therefore enabled companies to track ?nancial results
while simultaneously monitoring progress
in building the capabilities and acquiring
the intangible assets they would need for
future growth. The scorecard wasn’t a replacement for ?nancial measures; it was
their complement.
Recently, we have seen some companies
move beyond our early vision for the scorecard to discover its value as the cornerstone
of a new strategic management system. Used
this way, the scorecard addresses a serious
de?ciency in traditional management systems:
their inability to link a company’s long-term
strategy with its short-term actions.
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Using the Balanced Scorecard as a Strategic Management System •• •B EST OF HBR
Robert S. Kaplan is the Marvin Bower
Professor of Leadership Development
at Harvard Business School, in Boston,
and the chairman and a cofounder
of Balanced Scorecard Collaborative,
in Lincoln, Massachusetts. David P.
Norton is the CEO and a cofounder of
Balanced Scorecard Collaborative. They
are the coauthors of four books about
the balanced scorecard, the most recent of which is Alignment: Using the
Balanced Scorecard to Create Corporate
Synergies (Harvard Business School
Publishing, 2006).
Most companies’ operational and management control systems are built around ?nancial measures and targets, which bear
little relation to the company’s progress in
achieving long-term strategic objectives.
Thus the emphasis most companies place
on short-term ?nancial measures leaves a
gap between the development of a strategy
and its implementation.
Managers using the balanced scorecard do
not have to rely on short-term ?nancial measures as the sole indicators of the company’s
performance. The scorecard lets them introduce four new management processes that,
separately and in combination, contribute to
linking long-term strategic objectives with
short-term actions. (See the exhibit “Managing Strategy: Four Processes.”)
The ?rst new process—translating the vision—
helps managers build a consensus around
the organization’s vision and strategy. Despite the best intentions of those at the top,
lofty statements about becoming “best in
class,” “the number one supplier,” or an “empowered organization” don’t translate easily
into operational terms that provide useful
guides to action at the local level. For people
to act on the words in vision and strategy
statements, those statements must be expressed
as an integrated set of objectives and measures, agreed upon by all senior executives,
that describe the long-term drivers of success.
The second process—communicating and
linking—lets managers communicate their
strategy up and down the organization and
link it to departmental and individual objectives. Traditionally, departments are evaluated
by their ?nancial performance, and individual
incentives are tied to short-term ?nancial
goals. The scorecard gives managers a way of
ensuring that all levels of the organization understand the long-term strategy and that both
departmental and individual objectives are
aligned with it.
The third process—business planning—
enables companies to integrate their business
and ?nancial plans. Almost all organizations
today are implementing a variety of change
programs, each with its own champions,
gurus, and consultants, and each competing for
senior executives’ time, energy, and resources.
Managers ?nd it dif?cult to integrate those
diverse initiatives to achieve their strategic
goals—a situation that leads to frequent disap-
harvard business review • managing for the long term • july–august 2007
pointments with the programs’ results. But
when managers use the ambitious goals set
for balanced scorecard measures as the basis
for allocating resources and setting priorities,
they can undertake and coordinate only those
initiatives that move them toward their longterm strategic objectives.
The fourth process—feedback and learning—
gives companies the capacity for what we
call strategic learning. Existing feedback and
review processes focus on whether the company, its departments, or its individual employees have met their budgeted ?nancial
goals. With the balanced scorecard at the
center of its management systems, a company
can monitor short-term results from the three
additional perspectives—customers, internal
business processes, and learning and growth—
and evaluate strategy in the light of recent
performance. The scorecard thus enables
companies to modify strategies to re?ect
real-time learning.
None of the more than 100 organizations
that we have studied or with which we have
worked implemented their ?rst balanced
scorecard with the intention of developing a
new strategic management system. But in
each one, the senior executives discovered
that the scorecard supplied a framework and
thus a focus for many critical management
processes: departmental and individual goal
setting, business planning, capital allocations,
strategic initiatives, and feedback and learning. Previously, those processes were uncoordinated and often directed at short-term
operational goals. By building the scorecard,
the senior executives started a process of
change that has gone well beyond the original idea of simply broadening the company’s
performance measures.
For example, one insurance company—let’s
call it National Insurance—developed its ?rst
balanced scorecard to create a new vision for itself as an underwriting specialist. But once National started to use it, the scorecard allowed
the CEO and the senior management team not
only to introduce a new strategy for the organization but also to overhaul the company’s
management system. The CEO subsequently
told employees in a letter addressed to the
whole organization that National would
thenceforth use the balanced scorecard and
the philosophy that it represented to manage
the business.
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Using the Balanced Scorecard as a Strategic Management System •• •B EST OF HBR
Translating Vision and Strategy: Four Perspectives
Managing Strategy: Four Processes
harvard business review • managing for the long term • july–august 2007
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Using the Balanced Scorecard as a Strategic Management System •• •B EST OF HBR
National built its new strategic management
system step-by-step over 30 months, with each
step representing an incremental improvement. (See the exhibit “How One Company
Built a Strategic Management System…”) The
iterative sequence of actions enabled the
company to reconsider each of the four new
management processes two or three times
before the system stabilized and became
an established part of National’s overall management system. Thus the CEO was able to
transform the company so that everyone
could focus on achieving long-term strategic
objectives—something that no purely ?nancial
framework could do.
Translating the Vision
The CEO of an engineering construction
company, after working with his senior management team for several months to develop
a mission statement, got a phone call from a
project manager in the ?eld. “I want you to
know,” the distraught manager said, “that I
believe in the mission statement. I want to
act in accordance with the mission state-
ment. I’m here with my customer. What am
I supposed to do?”
The mission statement, like those of many
other organizations, had declared an intention
to “use high-quality employees to provide
services that surpass customers’ needs.” But
the project manager in the ?eld with his employees and his customer did not know how
to translate those words into the appropriate
actions. The phone call convinced the CEO
that a large gap existed between the mission
statement and employees’ knowledge of how
their day-to-day actions could contribute to realizing the company’s vision.
Metro Bank (not its real name), the result of
a merger of two competitors, encountered a
similar gap while building its balanced scorecard. The senior executive group thought it
had reached agreement on the new organization’s overall strategy: “to provide superior
service to targeted customers.” Research had
revealed ?ve basic market segments among
existing and potential customers, each with
different needs. While formulating the measures for the customer-perspective portion
How One Company Built a Strategic Management System…
harvard business review • managing for the long term • july–august 2007
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Using the Balanced Scorecard as a Strategic Management System •• •B EST OF HBR
of their balanced scorecard, however, it became apparent that although the 25 senior
executives agreed on the words of the strategy, each one had a different de?nition of
superior service and a different image of
the targeted customers.
The exercise of developing operational
measures for the four perspectives on the
bank’s scorecard forced the 25 executives to
clarify the meaning of the strategy statement. Ultimately, they agreed to stimulate
revenue growth through new products and
services and also agreed on the three most
desirable customer segments. They developed scorecard measures for the speci?c
products and services that should be delivered to customers in the targeted segments
as well as for the relationship the bank
should build with customers in each segment. The scorecard also highlighted gaps
in employees’ skills and in information systems that the bank would have to close in
order to deliver the selected value propositions to the targeted customers. Thus, creating a balanced scorecard forced the bank’s
harvard business review • managing for the long term • july–august 2007
senior managers to arrive at a consensus and
then to translate their vision into terms that
had meaning to the people who would realize the vision.
Communicating and Linking
“The top ten people in the business now understand the strategy better than ever before.
It’s too bad,” a senior executive of a major oil
company complained, “that we can’t put this
in a bottle so that everyone could share it.”
With the balanced scorecard, he can.
One company we have worked with deliberately involved three layers of management
in the creation of its balanced scorecard.
The senior executive group formulated the
?nancial and customer objectives. It then
mobilized the talent and information in the
next two levels of managers by having them
formulate the internal-business-process
and learning-and-growth objectives that
would drive the achievement of the ?nancial
and customer goals. For example, knowing
the importance of satisfying customers’ expectations of on-time delivery, the broader
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Using the Balanced Scorecard as a Strategic Management System •• •B EST OF HBR
group identi?ed several internal business
processes—such as order processing, scheduling, and ful?llment—in which the company had to excel. To do so, the company
would have to retrain frontline employees
and improve the information systems available to them. The group developed performance measures for those critical processes
and for staff and systems capabilities.
Broad participation in creating a scorecard
takes longer, but it offers several advantages:
Information from a larger number of managers is incorporated into the internal objectives;
the managers gain a better understanding of
the company’s long-term strategic goals; and
such broad participation builds a stronger
commitment to achieving those goals. But
getting managers to buy into the scorecard is
only a ?rst step in linking individual actions to
corporate goals.
The balanced scorecard signals to everyone
what the organization is trying to achieve for
shareholders and customers alike. But to
align employees’ individual performances
with the overall strategy, scorecard users generally engage in three activities: communicat-
ing and educating, setting goals, and linking
rewards to performance measures.
Communicating and educating. Implementing a strategy begins with educating those
who have to execute it. Whereas some organizations opt to hold their strategy close to
the vest, most believe that they should disseminate it from top to bottom. A broad-based
communication program shares with all
employees the strategy and the critical objectives they have to meet if the strategy is to
succeed. Onetime events such as the distribution of brochures or newsletters and the
holding of “town meetings” might kick off the
program. Some organizations post bulletin
boards that illustrate and explain the balanced
scorecard measures, then update them with
monthly results. Others use groupware and
electronic bulletin boards to distribute the
scorecard to the desktops of all employees
and to encourage dialogue about the measures. The same media allow employees to
make suggestions for achieving or exceeding
the targets.
The balanced scorecard, as the embodiment
of business unit strategy, should also be com-
…Around the Balanced Scorecard
harvard business review • managing for the long term • july–august 2007
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Using the Balanced Scorecard as a Strategic Management System •• •B EST OF HBR
municated upward in the organization—to
corporate headquarters and to the corporate
board of directors. With the scorecard, business
units can quantify and communicate their
long-term strategies to senior executives using
a comprehensive set of l…
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