Continuous Improvement in Management Accounting Continuous Improvement in Management Accounting C H A P T E R 24

Learning Objective 1 Explain the fundamentals of building a balanced scorecard.

Define the Balanced Scorecard

Describe the Balanced Scorecard Framework CustomerInternal Process Learning/Growth Financial Vision & Strategy

What does leading measures of customers focus on?

Performance Measures of Customer Satisfaction Leading Performance Measures CostQualityTime Reliable Delivery Fastest Delivery nPurchase cost to customer nReturns by customer nPercentage of on-time delivery nAverage response time to service call nDelivery cost to customer nQuality rankings by other agencies nNumber of production interruptions nTime to complete contract nSetup cost to customer nProduction cycle time nMaintenance & repair cost to customer

Performance Measures of Customer Satisfaction Outcome Performance Measures Customer Retention Customer Acquisition Market Share nRetention ratesnAcquisition rates nPercent of total number of customers nNumber of Defecting Customers nNumber of new customers nPercent of total dollars spent by customers nCosts to retain customers nCost to recruit customers nPercent of total units sold to customers

Performance Measures for Internal Processes Innovation ProcessesOperations Processes Service-After- Sale Processes Cost Measures  R&D costs per new product  Unit-level costs  Batch-level costs  Costs per service incidence  Payback on R&D costs  Product-level costs  Cost of replacement parts Quality Measures  Number of modifications required per design  Defects-per-million opportunities (six sigma)  Customer requests handled on first call  Percent of sales from new products  Errors in customer service  Satisfaction survey responses Time Measures  Lead time (from ideas to working model)  Lead time (from order to delivery)  Lead time (from request to fulfillment  Design cycle time  Product cycle time  Repair cycle time

List Performance Measures of Learning and Growth y Leading Performance Measures Employee Capabilities Info. System Capabilities Op. Structure Capabilities Cost Measures On-site training exp. per employee Total costs invested in computer systems in the organization Cost invested in assessing & building new communication structures Off-site ed. exp. per emp. Systems R&D exp. per total systems exp. Costs invested in activities to align goals in the company Quality Measures Number of new cert. or degrees Systems capabilities compared to competitor systems Assessment of effective communication % of emp. partic. in educ. activities % of emp. with access to personal computers

List Performance Measures of Learning and Growth y Leading Performance Measures Employee Capabilities Info. System Capabilities Op. Structure Capabilities Time Measures  Average yearly training or education hours per employee  Average life cycle time of personal computers (e.g. how often are machines upgraded?)  Amount of time spent in team work versus individual work  Time required to complete a training module  Time required to complete a system upgrade  Average time to disseminate information or to receive employee feedback

List Performance Measures of Learning and Growth y Leading Performance Measures Employee RetentionEmployee SatisfactionEmployee Productivity  Employee turnover rate  Survey of employee satisfaction  Output per employee  Average employee years with company  Percent of employees having leadership opportunities  Billable hours per consultant  Number of female managers  Management positions filled by inside versus outside recruits  New ideas, patients per employee  Average age of employees  Recognition of employees by customers

Describe Performance Measurement Linkages in a Balanced Scorecard

Scorecard for a Biotechnology Firm Strategic ObjectivesPerformance Measures Financial Perspective  Growth  Percent increase in revenue in top line products  Profitability  Return on equity; earnings per share  Industry leadership  Percent of sales recorded by early purchase date Customer Perspective Outcome  New products  Percent of sales from new products  Early purchase of seasonal products  Percent of sales recorded by early purchase date

Scorecard for a Biotechnology Firm Strategic ObjectivesPerformance Measures Leading  Early payment  Percent of customers who pay early  Product quality  Product performance vs. industry quality standards  Customer satisfaction  Customer satisfaction surveys Internal Process Perspective Service-After-Sale  Accurate invoices  Percent of error free invoices Operations  Low-cost producer  Unit cost vs. competitors  Reduce inventory  Inventory as a percent of sales

Scorecard for a Biotechnology Firm Strategic ObjectivesPerformance Measures Innovation  New products  Number of actual introductions vs. target  New active ingredients  Number of new ingredients identified by research program  Proprietary positions  Number of patents that create exclusive marketing rights Learning and Growth Perspective Outcome  Employee retention  Average years employee with company  Employee satisfaction  Employee satisfaction surveys

Scorecard for a Biotechnology Firm Strategic ObjectivesPerformance Measures Leading  Employee capabilities  Training costs invested per employee; percent of employees participating annually in training  Organization structure capabilities  Average weekly hours in teamwork settings; survey of effective teamwork

Learning Objective 2 Anticipate that both management accounting and financial accounting are poised for important changes.

Describe the Future of Financial Accounting in Public Reports

Managerial Accounting Chapter Ten Complete