Databases Reference
In-Depth Information
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The flexibility to create new products
Management effectiveness
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Productivity of research
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Risk of bankruptcy
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Quality
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Accounting professionals and academics, including Robert S. Kaplan, Baker Foundation Professor
at Harvard Business School, have developed methodologies for measuring many elements in busi-
ness that were previously thought of as immeasurable in the performance of companies. Kaplan and
David Norton proposed the concept of a Balanced Scorecard (BSC) as a means of measuring the
performance of a business strategy. The BSC encapsulates the following four main areas that capture
performance metrics:
Financial
Measures of profitability and market value to satisfy owners and shareholders
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Internal business processes
Measures of efficiency and effectiveness for producing a
product or service
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Customer satisfaction
Measures of perceived quality, low cost, and other related factors to
show how well a company satisfies its customers
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Innovation and learning
Measures of a company's ability to develop and utilize human
resources to meet strategic goals in the present and future
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These areas can be referred to as Finance, Operations, Sales, and Human Resources. Or, to con-
dense even further, you can refer to them simply as
FOSH metrics
.
Additional perspectives can include community and social impact, government relations, and
others. These measures of success are sometimes called critical success factors. The BSC and other
methodologies, such as Six Sigma,
1
help companies to follow the pattern shown in Figure 1-2.
FIGURE 1-2
From company vision to key performance indicators.
A
company vision statement
or
mission statement
is important for getting a company to focus on
what makes it successful. There is an old saying, “You must stand up for something, or you will fall
for everything.” The vision statement helps a company filter which voices it will listen to, because
the vision defines its purpose and reason for existence. Typically, upper management communicates the
vision or mission statement to the company.
1
Originators of Six Sigma:
http://web.archive.org/web/20051106025733/http://www.motorola.com/content/0,,3079,00.
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