Balance Scorecard

AF431 ADVANCED MANAGEMENT ACCOUNTING

ASSIGNMENT 4

CASE STUDY G TEMPEST, INC

(The Balance Scorecard)

Reshika Chandra

Q1. How does the ‘balance scorecard’ approach described in Exhibit G. 1 differ from a more traditional discounted cash flow method of evaluating capital proposals? Which approach is better suited to Tempest’s situation? Why?

Traditional performance measurement has developed from a financial perspective view and has a control behavior whereas balanced scorecard (BSC) focuses on strategy and vision. Balanced Scorecard (BSC) provides clear prescription what needs to be measured in order to balance the financial perspective. Tempest traditionally focused in heavy investments in the latest manufacturing technology giving it a competitive edge over its competitors. Using experience and excellent reputation in the industry led Tempest to ignore critical factors that affected the company later in the years. The BSC approach provides an effective way of communicating priorities to all levels of organization and company’s subsidiary directors, and then all directors can see and understand how their work is related to the business and its success as a whole. BSC approach is better suited to Tempest as BSC focuses on financial, customer, internal business process and learning and growth. Using ranks from one to seven, projects which exceed all the friterias are funded. Using the BSC there is an increase in creativity and unexpected ideas and projects which did not add value both financially and non-financially were not funded. The BSC provides strategic feedback and learning for all the people involved in the decision making process. The Balanced Scorecard helps align key performance measures with strategy at all levels of an organization and provides management with a comprehensive picture of business operations.

2. Bill seems to feel that the logic of the proposal capital rationing system won over its detractors. Do you agree? What were the...