Ch.10 Full Test Bank The Balanced Scorecard and Strategy Map

Chapter 10

The Balanced Scorecard and Strategy Map

Learning Objectives―Coverage by question type

LO1 – Explain why both financial and nonfinancial measures are required to evaluate and manage a company’s strategy.

True / False Multiple Choice Exercises, Problems & Short Answer

1 1-4 1

LO2 – Understand how a balanced scorecard (BSC) can represent cause-and-effect hypotheses of a company’s strategy across financial, customer, process, and learning and growth perspectives.

True / False Multiple Choice Exercises, Problems & Short Answer

2-7 5-15 2-4

LO3 – Explain why a clear strategy is vital for a company.

True / False Multiple Choice Exercises, Problems & Short Answer

8, 9 16-22 3, 4, 7

LO4 – Appreciate the role for a strategy map to translate a strategy into financial, customer, process, and learning and growth strategic objectives.

True / False Multiple Choice Exercises, Problems & Short Answer

10-12 23-34 3, 4

LO5 – Select measures for the strategic objectives in the four perspectives of a company’s balanced scorecard and strategy map.

True / False Multiple Choice Exercises, Problems & Short Answer

None 35-38 5-7

LO6 – Extend the balanced scorecard framework to nonprofit and public-sector organizations.

True / False Multiple Choice Exercises, Problems & Short Answer

13-15 39-42 8

LO7 – Recognize problems that companies may experience when implementing the balanced scorecard and suggested ways to overcome them.

True / False Multiple Choice Exercises, Problems & Short Answer

16-20 43-53 9, 10

Chapter 10: The Balanced Scorecard and Strategy Map

True / False

LO1

Terms: Database and information systems

Difficulty: 1

1. Database and information systems are physical assets which create distinctive value for companies.

Difficulty: 2

1. The financial perspective addresses which processes must we excel at to meet our customer and shareholder expectations.

Difficulty: 1

1. The Balance Scorecard measures organizational performance across five different but linked perspectives.

Difficulty: 1

1. The learning and growth perspective addresses what employee capabilities, information systems, and organizational capabilities we need to continually improve.

Difficulty: 2

1. The customer perspective of the balanced scorecard focuses on excellence in processes which satisfy customers.

Difficulty: 2

1. An important financial metric in the balanced scorecard is return on investment.

Difficulty: 2

1. Important measures in the customer perspective usually include the percentage of repeat customers and growth in sales to existing customers.

Difficulty: 1

1. A properly constructed balanced scorecard tells the story of a business unit's strategy.

Difficulty: 1

1. Strategy creates a competitive advantage by positioning the company in its external environment where its internal resources and capabilities deliver something to its customers better than or different from its competitors.

Difficulty: 2

1. Once the company selects and defines its objectives for the four balanced scorecard perspectives, it can select measures for each objective.

Difficulty: 2

1. To create the balanced scorecard, first measures are identified and then translated into objectives.

Difficulty: 2

1. The focus of the learning and growth perspective of the balanced scorecard includes employee capabilities that continually improve customer relationships.

Difficulty: 2

1. Nonprofit and government organizations success must be measured by their effectiveness in providing benefits to constituents.

Difficulty: 1

1. Outcomes, rather than activities, primarily drive the strategy of nonprofit and government organizations.

Difficulty: 2

1. Nonprofit and government organizations generally place an objective related to their social impact and mission at the top of their scorecard and strategy map.

Difficulty: 1

1. CEOs and senior leadership can effectively implement a company's strategy by themselves.

Difficulty: 2

1. Key performance indicator scorecards will typically use common measures, such as customer satisfaction, process quality, cost, and employee satisfaction and morale.

Difficulty: 2

1. If the link to strategy is not clearly established, key performance indicator cards will lead to local but not to global or strategic improvements.

Difficulty: 1

1. Poor scorecard design, rather than a poor organizational process, is the biggest threat to successful balanced scorecard implementation.

Difficulty: 1

1. If a balanced scorecard's implementation team is really committed, they can initially develop the perfect scorecard.

Difficulty: 2

1. The roles of performance measurement systems in organizations include all of the following except:

A) motivate employees to help the organization achieve its strategic objectives.

B) help managers with resource allocation.

C) create value from intangible assets as well as their physical and financial assets.

D) communicate the company's strategic objectives.

Difficulty: 2

1. Many intangible assets:

A) do not appear on the balance sheet since it is difficult to place a reliable financial value on them.

B) should be evaluated with ROI and other performance measures.

C) can be measured and managed with current financial control systems.

D) are unimportant because they have no physical substance.

Difficulty: 1

1. Intangible assets that are currently reported on the balance sheet include:

A) loyal and profitable customer relationships.

B) organizational culture.

C) employee skills and motivation.

D) the cost of a patent giving exclusive rights to a process.

Difficulty: 1

1. The saying "what gets measured gets done" refers to measuring performance:

A) so that appropriate disciplinary actions can be taken.

B) to ensure that employees perform equally in all dimensions of their jobs.

C) so that essential tasks get accomplished.

D) to ensure that the ethical code of conduct is also being enforced.

Difficulty: 1

1. The use of multiple-performance measures in the balanced scorecard would be expected to lead to all of the following EXCEPT:

A) more extensive use of financial measures such as cost and profit.

B) employees recognizing the various dimensions of their work.

C) the use of new performance measures such as customer satisfaction and employee morale.

D) group-level performance measures.

Difficulty: 2

1. The balanced scorecard's objectives are in balance when:

A) debits equal credits.

B) financial performance measurements are less than the majority of the performance measurements.

C) the measurements are fair.

D) the measurements reflect an improvement over the previous year.

Difficulty: 1

1. The balanced scorecard is said to be "balanced" because it measures:

A) short-term and long-term objectives.

B) financial and nonfinancial objectives.

C) internal and external objectives.

D) All of the above are correct.

Difficulty: 1

1. ____________ translate(s) an organization's mission, vision, and strategy into a comprehensive set of performance measures that provide the framework for implementing its strategy.

A) Critical success factors

B) The value proposition

C) Objectives

D) The balanced scorecard

Difficulty: 2

1. The ____________ perspective of the balanced scorecard asks, "How is success measured by our shareholders?"

A) learning and growth

B) customer

C) financial

D) shareholder

Difficulty: 1

1. The ____________ perspective of the balanced scorecard focuses on creating value for customers.

A) Value

B) Financial

C) Stakeholder

D) Customer

Difficulty: 1

1. Measures of employees' skills and capabilities are included in the _________ perspective of the balanced scorecard.

A) financial

B) internal

C) customer

D) learning and growth perspective

Difficulty: 2

1. A chain of cause-and-effect relationships that appropriately link the four balanced scorecard perspectives is:

A) a high return on investment causes customer loyalty that results in skilled production workers that improve process quality.

B) skilled production workers help to produce process quality that results in customer loyalty that helps to increase return on investment.

C) customer loyalty results in a high return on investment that results in the ability to attract skilled production workers that improve process quality.

D) improved process quality results in a high return on investment that causes customer loyalty that results in the ability to attract skilled production workers.

Difficulty: 2

1. Defect rates for products and yield percentages in manufacturing are measures of quality included in the ____________ perspective of the balanced scorecard.

A) financial

B) production

C) process

D) internal

Difficulty: 2

1. If a performance measure in the customer perspective of the balanced scorecard was customer loyalty, then a driver from the process perspective would MOST likely be:

A) implementing cutting-edge technology.

B) repeat sales.

C) high-quality production processes.

D) increased profits.

Difficulty: 3

1. If process perspective measure from the balanced scorecard was shorter cycle times, then a driver from the learning and growth perspective would MOST likely be to:

A) lower cost of acquiring materials.

B) achieve just-in-time supplier capability.

C) offer a complete product line.

D) expand product offerings.

Difficulty: 2

1. Which of the following statements is true?

A) Vision and mission statements set the general direction for the organization.

B) Strategy is a concise, internally-focused statement of how the organization expects to compete and deliver value to customers.

C) Mission is a concise, externally-focused statement that expresses how the organization wants to be perceived by the external world.

D) Vision is about selecting the set of activities to create a sustainable difference in the marketplace.

Difficulty: 2

1. The purpose of the balanced scorecard is BEST described as helping an organization:

A) develop customer relations.

B) mobilize employee skills for continuous improvements in processing capabilities, quality, and response times.

C) introduce innovative products and services desired by target customers.

D) translate an organization's mission, vision, and strategy into a set of performance measures that help to implement the strategy.

Difficulty: 2

1. The first step in developing strategic objectives for the balanced scorecard is:

A) defining the long-run financial objectives.

B) identifying the target customer.

C) articulating the organization's vision.

D) select objectives for the customer value proposition.

Difficulty: 3

1. Scarlet's value proposition is:

A) product innovation and leadership.

B) lowest total cost.

C) complete customer solutions.

D) employees recognizing customer needs.

Difficulty: 3

1. To further Scarlet's strategy, measures on the balanced scorecard would MOST likely include:

A) shorter cycle times.

B) manufacturing quality.

C) yield.

D) lowest cost supplier.

Difficulty: 3

1. Water Fun's value proposition is:

A) product innovation and leadership.

B) complete customer solutions.

C) employees recognizing customer needs.

D) lowest total cost.

Difficulty: 3

1. To further the company's strategy, measures on the balanced scorecard would most likely include:

A) number of process improvements.

B) first to market.

C) longer cycle times.

D) number of new products.

Difficulty: 2

1. ____________ are the basic, day-to-day processes that produce products and services and deliver them to customers.

A) Measures

B) The value proposition

C) Operations management processes

D) The balanced scorecard

Difficulty: 2

1. Identify the best description of the balanced scorecard's customer perspective. To achieve our firm's vision and strategy:

A) How do we lower costs?

B) How do we motivate employees?

C) How can we obtain greater profits?

D) How does the company intend to attract, retain, and deepen relationships with targeted customers by differentiating itself from competitors?

Difficulty: 2

1. All of the following questions relate to the balanced scorecard's learning and growth perspective except:

A) How do we achieve greater employee satisfaction?

B) How do we increase profits and return on capital?

C) How do we provide information systems with updated technology?

D) How will we sustain our ability to change and improve?

Difficulty: 2

1. Identify the best description of the balanced scorecard's learning and growth perspective.

To achieve our firm's vision and strategy:

A) How do we obtain a greater market share?

B) What do our noncustomers consider to be most important?

C) What new processes do our customers value?

D) How do we identify the objectives for the people, information technology, and organizational alignment that will drive improvement in the various process objectives?

Difficulty: 2

1. The return-on-investment ratio is an example of a balanced scorecard's measure of the:

A) internal perspective.

B) customer perspective.

C) learning and growth perspective.

D) financial perspective.

Difficulty: 2

1. The number of customer complaints about a product is an example of a balanced scorecard's measure of the:

A) process perspective.

B) customer perspective.

C) learning and growth perspective.

D) financial perspective.

Difficulty: 2

1. Manufacturing cycle efficiency is an example of a balanced scorecard's measure of the:

A) process perspective.

B) customer perspective.

C) learning and growth perspective.

D) financial perspective.

Difficulty: 2

1. Surveys of employees' satisfaction is an example of a balanced scorecard's measure of the:

A) process perspective.

B) customer perspective.

C) learning and growth perspective.

D) financial perspective.

Difficulty: 2

1. Measures of the balanced scorecard's learning and growth perspective include:

A) number of environmental and safety incidents.

B) number of on-time deliveries.

C) number of process improvements.

D) revenue growth.

Difficulty: 2

1. In the balanced scorecard, operating income and return on investment

A) indicate whether the company's strategy and its implementation are increasing shareholders' value.

B) are learning and growth measures.

C) are more important process measures than market share.

D) are direct measures of customer satisfaction.

Difficulty: 2

1. It is useful to think of the process perspective of the balanced scorecard within four groupings that include all of the following except:

A) operating management processes.

B) customer management processes.

C) innovation processes.

D) regulatory and social processes.

Difficulty: 2

1. Managers for the learning and growth perspective of the balanced scorecard must invest in all of the following except:

A) improve asset utilization.

B) improving the skills of their employees.

C) enhancing information technology and systems.

D) aligning employees to the company's objectives.

Difficulty: 2

1. ____________ describe(s) specifically how success in achieving objectives in a balanced scorecard is determined.

A) Measures

B) The value proposition

C) Targets

D) The balanced scorecard

Difficulty: 2

1. ____________ establish the level of performance or rate of improvement required for a measure in the balanced scorecard.

A) Critical success factors

B) The value proposition

C) The balanced scorecard

D) Targets

Difficulty: 2

1. ____________ are generally written as action phrases and may also include the means and desired results.

A) Mission statements

B) Objectives

C) Targets

D) Strategies

Difficulty: 2

1. The following statements are true regarding the customer perspective in the balanced scorecard except:

A) Customer satisfaction leads to customer retention

B) A customer target might be to reduce cash expenses by 3%.

C) Customer retention generally leads to increased customer profitability

D) Success in the customer perspective should lead to improvement in the financial perspective.

Difficulty: 2

1. Nonprofit and government organizations:

A) cannot use the balanced scorecard because they have no customers.

B) cannot use the balanced scorecard because they have no financial objective.

C) may use the balanced scorecard by adding a social impact perspective to the top of the strategy map.

D) may use the balanced scorecard by not linking it to mission and strategy.

Difficulty: 2

1. Success for nonprofit and government organizations is measured primarily by:

A) their financial performance.

B) their effectiveness in providing benefits to constituents.

C) whether they can raise money.

D) whether they can balance their budgets.

Difficulty: 2

1. To effectively use the balanced scorecard, nonprofit and government organizations:

A) must identify a clear strategy with outcomes identified.

B) must focus on financial success as their primary objective.

C) must shift thinking from what it plans to accomplish to what it plans to do.

D) These organizations cannot effectively use the balanced scorecard.

Difficulty: 2

1. Critical dimensions of the regulatory and social performance from the process perspective of the balanced scorecard include all of the following except:

A) community investment.

B) health and safety.

C) the environment.

D) All of the above are correct.

Difficulty: 2

1. The measurement of the objectives for the balanced scorecard:

A) creates focus for the future.

B) communicates an important message to all employees.

C) focuses the entire organization on strategic implementation of company's outcomes.

D) All of the above are correct.

Difficulty: 2

1. Translating a company's strategy to operational terms:

A) is an analytical exercise.

B) results in the benefit of having the end product of the balanced scorecard.

C) often results in team building and employees' commitment to the new strategy.

D) All of the above are correct.

Difficulty: 2

1. Which of the following statements regarding aligning the organization to strategic objectives is true?

A) Measures of individual business units must add up to the corporate measure, just like aggregating financial measures.

B) Support functions and shared units are exempt from the balanced scorecard's process perspective since they have no external customer.

C) High-level strategic objectives on the corporate balanced scorecard guide the development of balanced scorecards for the decentralized operating units.

D) All of the above are correct.

Difficulty: 2

1. Which of the following statements regarding the use of strategy in companies is correct?

A) All employees are challenged to develop individual personal objectives that support corporate objectives.

B) CEOs and senior leadership can implement a company's strategy by themselves.

C) It is safe to assume that the workforce is incapable of understanding these concepts and ideas.

D) All of the above are correct.

Difficulty: 2

1. To become a strategy-focused organization:

A) monthly management meetings should focus on variances between actual performance and what was planned.

B) the budgeting process must protect long-term initiatives from the pressures to deliver short-term performance.

C) scorecards and priorities should be updated annually when preparing next year's budget.

D) All of the above are correct.

Difficulty: 2

1. Problems may arise when developing a balanced scorecard for all of the following reasons except:

A) poor organizational process for development and implementation of the balanced scorecard.

B) too few scorecard measures.

C) senior executives share the strategy and Scorecard with middle managers and employees on the front line.

D) none of the above

Difficulty: 2

1. Key performance indicator cards are scorecards that are developed:

A) with only a single measure for each of the balanced scorecard's perspectives.

B) without working from organizational strategy.

C) to be more effective than the balanced scorecard.

D) to define the compensation system for executives.

Difficulty: 2

1. Key performance indicator cards:

A) lead to local but not global or strategic improvements if they are not linked to strategy.

B) include only financial measures.

C) are organized into ten perspectives.

D) measure only a single balanced scorecard perspective.

Difficulty: 2

1. The greatest threat to successful balanced scorecard implementation is:

A) poor scorecard design.

B) a poor organizational process for development and implementation.

C) too few scorecard measures.

D) too many financial perspective measures.

Difficulty: 2

1. Using too few balanced scorecard measures:

A) will not balance desired outcomes with performance drivers of those outcomes.

B) is better than using too many scorecard measures.

C) results in a lack of linkage between drivers in the process and learning and growth perspectives

D) All of the above are correct.

Difficulty: 2

1. Successful implementation of the balanced scorecard:

A) may be completed by one important member of the senior management team, such as the chief financial officer.

B) involves everyone in the organization knowing and understanding the strategy.

C) should not begin until data are collected for all scorecard measures.

D) starts with a process to acquire a new data collection system.

Difficulty: 2

1. Give at least two examples of intangible assets. Are intangible assets critical for success? Explain.

Difficulty: 3

1. What is the primary purpose of the balanced scorecard?

Difficulty: 3

1. Mango Corporation plans to grow by offering a smart phone model that is superior and unique from the competition. Mango believes that putting additional resources into R&D and staying ahead of the competition with technological innovations are critical to implementing its strategy.

Required:

a. Is Mango's strategy one of product innovation and leadership, lowest total cost, or complete customer solutions? Briefly explain.

b. Identify at least one key element that you would expect to see included in the balanced scorecard:

• for the financial perspective;
• for the customer perspective;
• for the process perspective; and
• for the learning and growth perspective.

Difficulty: 3

1. Fan Fare Corporation manufactures college football banners. It plans to grow by producing high-quality college football banners at a low cost that are delivered in a timely manner. There are a number of other manufacturers who produce similar college football banners. Fan Fare believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy.

Required:

a. Is Fan Fare's strategy one of product innovation and leadership, lowest total cost, or complete customer solutions? Briefly explain.

b. Identify at least one key element that you would expect to see included in the balanced scorecard:

• for the financial perspective;
• for the customer perspective;
• for the process perspective; and
• for the learning and growth perspective.

Difficulty: 1

1. Draw a strategy map that identifies the cause-and-effect linkages of the following objectives:

• Process quality
• Customer loyalty
• Skilled production workers
• Return on investment

Difficulty: 1

1. Draw a strategy map that identifies the cause-and-effect linkages of the following objectives:

• Market share
• Strategic technology availability
• Grow revenues
• Design and develop new products

Difficulty: 3

1. What are the four key perspectives in the balanced scorecard? In a strategy map, what are the cause-and effect linkages among these four perspectives?

Difficulty: 3

1. How does a balanced scorecard for nonprofit and government agencies differ from a for-profit scorecard?

Difficulty: 3

1. What is the key ingredient to successful balanced scorecard implementation? Explain.

Difficulty: 3

1. What is a key performance indicator scorecard and how does it differ from the balanced scorecard? Which is more effective?