Acctg 533 - Woldclass Lighting - Making Balanced Scorecard Work

ACCTG 533 - Week 4 Case Study

Making Balanced Scorecard Work

Section 10 - Group 5

Submitted By

Ivan Rybachuk

Kelin Chand

Stephen Sperry

Guitar K. Kanungo

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ONLINE MBA PROGRAM

WASHINGTON STATE UNIVERSITY

February 2018

1. What was the value proposition for Worldclass to continue the balanced scorecard, i.e., what benefits were obtainable?

        Before world class initially implemented the balanced score card, it was hard to evaluate the overall business performance across the various internal business lines. There was no means of financial and non-financial performance measures based on the company vision and strategy. Although Wordclass began to see some issues with the implementation of the balanced score card after some time, it at least did provide some feedback that the company did not have visibility of before. In particular, the company now had a means of measuring Key Performance Indicators (KPIs) related to each perspective on the scorecard. This allowed the management to review these KPIs throughout the business and understand what other KPIs were important for the various groups.

        In addition, the balanced scorecard provided value in the sense of keeping everyone aligned to one goal.  The CEO himself mentioned that in the review meetings: they had management representatives from all aspects of the business reviewing the one scorecard. The balanced scorecard was a catalyst of having cross functional team members reviewing the company performance and having cross functional dialogues.

1. Assess and evaluate the scorecard in terms of economics of information properties. Using the properties of performance measures, explain which properties were implicated in the implementation and failure of the balanced scorecard.

        As mentioned before the balanced scorecard is thought of as a means of measuring financial and non-financial performance measures based on the company vision and strategy.   This key benefit of the balance scorecard is that it provides a means of considering the total intangible or soft factors in “value added” attributes of a firm that had previously been considered as immeasurable, and as such, of were considered little value. One of the thought processes behind the balanced scorecard is, “you manage what you measure”. If you don’t have a good means of measuring, how can you manage?  

        In the case of World Class Lighting, after some time there were issues with the implementation of the performance measures. In particular, World Class Lighting found it difficult to adequately measure KPIs. In the learning and growth area, the indicators became less meaningful over time because of the lack of detail (specifics) of the scorecard measurement. In the area of process, measurement problems occurred for audit results. The purpose of an audit was to help management recognize the issue of risk and check for non-compliance in the process. However, when the compliance results were indicators on the scorecard it created undue stress on managers to avoid non-compliant issues. In turn, to avoid being criticized, managers became less transparent and ultimately it undermined the effectiveness of the scorecard.