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Performance Measurement to
Support Business Strategy
Chapter 18

PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA

McGraw-Hill/Irwin

Copyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

LO
18-1

Strategy and Performance

LO 18-1

Explain why management accountants should know the

business strategy of their organization.

Business Strategy
A companys specific approach for deploying the
organizational assets and capabilities required to
meet its customers needs competitively, while
delivering the desired returns to stakeholders.

18-3

LO
18-1

Strategy and Performance

Value Proposition
How the organization will create value for all stakeholders.
Mission
Why an organization exists; its purpose and goals.
Mission Statement
Description of an organizations values, definition of its
responsibilities to stakeholders, and identification of its
major strategies.

18-4

LO
18-1

The Foundation of a Successful

Business Strategy
Identify Core Resources and Capabilities

Methods of Achieving Success

Cost
Leaders

Product
Differentiators

Focused
Competitors

18-5

LO
18-2

Beyond the Accounting

Numbers
LO 18-2

Explain why companies use nonfinancial performance

measures.

Financial performance measures are useful for

motivating employees to improve the companys
profits, but they do have several flaws.
Often not useful in identifying the cause
of operational problems
Commonly reported only on a monthly,
quarterly, or annual basis
Many people in the organization do not see
how their work translates into financial results
18-6

LO
18-3

Responsibilities According
to Level of Organization
LO 18-3

Understand the reasons why performance measures

differ across levels of the organization.

Business Model
Description of how different levels and employees in
the organization must perform for the organization
to achieve its goals.

18-7

LO
18-4

Balanced Scorecard
LO 18-4

Understand how the balanced scorecard helps organizations

recognize and deal with their opposing responsibilities.

Balanced Scorecard
Set of performance targets and results that show
how well an organization has performed in meeting
its objectives relating to its stakeholders

18-8

LO
18-3

Multiple Measures or a
Single Measure of Performance?

Single Measure

Profit

Multiple Measures
Employee satisfaction

Customer satisfaction

Employee learning

Regulatory violations

Branch costs

Branch profitability

18-9

LO
18-5

Continuous Improvement
and Benchmarking
LO 18-5

Understand how to apply the methods involved in

an effective performance measurement system.

Continuous Improvement
Continuous reevaluation and improvement of
the efficiency of the organizations activities
Benchmarking
Continuous process of measuring a companys
own products, services, and activities against
competitors performance

18-11

LO
18-6

Nonfinancial Measures
LO 18-6

Identify examples of nonfinancial performance measures

and discuss the potential for improved performance
resulting from improved activity management.

Customer Satisfaction Measures

Quality Control
Delivery Performance
Bookings and Purchase Orders
Market Share
18-12

LO
18-6

Nonfinancial Measures
Productivity focuses on the efficient
conversion of inputs into outputs.
Partial productivity measures
express the relation between
output and only one input.

18-13

LO
18-7

Employee Involvement
LO 18-7

Explain why employee involvement is important

in an effective performance measurement system.

Many managers believe that when workers

take on real decision-making authority, their
commitment to the organization and its
objectives increases.

18-14

LO
18-7

Employee Involvement
When decision-making responsibility lies
with workers closer to the customer, workers
are more responsive to customer concerns
and can make informed decisions.
Giving decision-making responsibility to
workers uses their skills and knowledge and
motivates them to further develop those skills
and knowledge in an effort to improve the
organizations performance.

18-15

End of Chapter 18

18-16