Page 1 - MCS August Day 2 Suggested Solutions

Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

CHAPTER EIGHT

SUGGESTED SOLUTIONS

TASK 1 BALANCED SCORECARD

To: Senior Financial Manager

From: Financial Manager

Date: Today

Subject: Balanced scorecard

Use of critical success factors (CSFs) and key performance indicators (KPIs)

The aim of a balanced scorecard should be to ensure that every area within a business is working
towards the overall goals of the business.

In order to do this, the overall goals of the business must first be determined. These will be high
level objectives covering the long‐term success of the business. In Montel’s case two of the CSFs
are technical innovation and high product quality.

These will then be filtered down to the various areas within the business so that objectives can be
set for those areas that, if each area achieves its objectives, will lead to the achievement of the
overall business goals.

In order to set appropriate objectives, each area should look at the areas that are critical to its
contribution towards the success of the business as a whole.

For instance, if one of the business’s overall goals is to keep cost rises to a minimum over a year,
then to be deemed successful, the various departments should all have objectives tied into cost
reductions and efficiency improvements.

Once these critical success factors have been determined for the business, then objectives need
to be set for their achievement. Measuring achievement of the objectives will make use of key
performance indicators.

For instance, if an objective for the production team was to reduce defective product levels to
zero in the current year then a key performance indicator would be the measure of the number of
defective products found.

Only by having objectives that tie into the CSFs and KPIs that can adequately measure
achievement of the objectives can the balanced scorecard be used to measure the area’s
contribution to the overall success of the business.

KAPLAN PUBLISHING 85