Question 1

Which of the following is NOT one of the four perspectives of a balanced scorecard?
A) Financial perspective
B) Customer perspective
C) Technological perspective
D) Learning and growth perspective

Accepted Answer

The four perspectives of a balanced scorecard are financial, customer, learning and growth, and internal business processes. Technological perspective is not a recognized perspective in the balanced scorecard framework.

Question 2

A good balanced scorecard focuses only on leading indicators, because lagging indicators that relate to past performance are not important for the scorecard.

Accepted Answer

A good balanced scorecard should include both leading and lagging indicators. Leading indicators can provide insight into future performance while lagging indicators provide valuable feedback on past performance and help measure progress towards goals. A combination of both types of indicators is necessary for a comprehensive view of organizational performance.

Question 3

The performance measurement system must ensure that managers know the specific goals and targets for the subunits. This statement reflects which of the following performance measurement goals?
A) Motivating unit managers
B) Communicating expectations
C) Providing feedback
D) Motivating managers

Accepted Answer

The statement emphasizes the importance of communicating specific goals and targets for subunits, which falls under the goal of communicating expectations.

Question 4

Which one of the following is NOT a goal of a performance evaluation system?
A) Communicating expectations
B) Benchmarking
C) Motivating unit managers
D) Issuing stock to investors

Accepted Answer

Issuing stock to investors is not a goal of a performance evaluation system. The other options, communicating expectations, benchmarking, and motivating unit managers, are all common goals of performance evaluation systems.

Question 5

Financial performance metrics are considered to be a lead indicator, providing signs of future performance.

Accepted Answer

Financial performance metrics are typically lag indicators, reflecting past performance rather than predicting future outcomes.

Question 6

One part of the balanced scorecard helps management answer the question: "How do we look to shareholders?" Which of the four perspectives is being described here?
A) Financial perspective
B) Customer perspective
C) Internal business perspective
D) Learning and growth perspective

Accepted Answer

The financial perspective focuses on financial metrics such as revenue, profitability, and return on investment, which are important indicators of a company's performance and attractiveness to shareholders.

Question 7

The performance measurement system should provide incentives for coordinating activities of the subunits and focusing them toward the overall company objectives. This statement reflects which of the following performance measurement goals?
A) Motivating unit managers
B) Promoting goal congruence
C) Providing feedback
D) Benchmarking

Accepted Answer

The statement reflects the goal of promoting goal congruence, which means aligning the subunit goals with the overall company objectives. This helps in achieving coordination among the subunits and focus on the common goal.

Question 8

If a manager's performance is evaluated solely on the ability to control costs, he or she may sacrifice quality for savings, thus endangering customer satisfaction.

Accepted Answer

If a manager is solely evaluated on cost control, there is a risk that they may prioritize cost-cutting measures over quality, potentially leading to a decrease in customer satisfaction.

Question 9

From the shareholders' point of view, performance measurement should focus on financial performance only.

Accepted Answer

Shareholders may be interested in non-financial performance measures such as customer satisfaction, employee satisfaction, and corporate social responsibility, as these factors can also impact the long-term financial success of the company.

Question 10

Companies benchmark their performance against the performance of their competitors and also against their own past performance.

Accepted Answer

Companies often use benchmarking to assess their standing in the market and to identify areas for improvement. Comparing their performance to that of their competitors and their own past performance allows them to set goals for the future and make strategic decisions.

Question 11

In a balanced scorecard system, the key performance indicators (KPIs) are ways to measure whether the company is meeting its goals.

Accepted Answer

KPIs are specific metrics used to evaluate the performance of an organization in achieving its strategic objectives. They are an essential component of a balanced scorecard system, which helps companies align their daily activities with their long-term goals. By using KPIs, organizations can track their progress, identify areas for improvement, and make data-driven decisions that drive success.

Question 12

Which one of the following is NOT a goal of a performance evaluation system?
A) Communicating expectations
B) Formulating a budget
C) Motivating unit managers
D) Providing feedback

Accepted Answer

Formulating a budget is not a goal of a performance evaluation system. While a performance evaluation system may provide information that can be useful for budgeting purposes, it is not the primary purpose of such a system. The primary goals are to communicate expectations, motivate unit managers, and provide feedback.

Question 13

Decentralization increases the difficulty of achieving goal congruence among managers.

Accepted Answer

Decentralization involves giving decision-making power to lower-level managers, which can result in conflicting goals and priorities among managers. This can make it more difficult to achieve goal congruence, or alignment of individual goals with organizational goals, across the organization.

Question 14

Which of the following goals of a performance evaluation system is accomplished when targets are compared to actual results?
A) Communication of a company's expectations
B) The promotion of goal congruence
C) Motivation of assembly line employees
D) Providing feedback to management

Accepted Answer

Providing feedback to management is a goal of a performance evaluation system that is accomplished when targets are compared to actual results. This allows management to understand how well the company or specific departments are performing against the set targets.

Question 15

Each one of the four perspectives of a strong balanced scorecard should have as many KPIs as management can devise, to create a more effective and efficient system.

Accepted Answer

While it is important to have a sufficient number of KPIs for each perspective, it is also important to focus on the most critical ones and avoid overwhelming management with too many metrics. It is recommended to limit the number of KPIs to around 5-10 per perspective to ensure that they can be effectively tracked and used to guide decision-making.

Question 16

Which of the following statements reflects the use of benchmarking in a performance evaluation system?
A) A company uses internal controls to prevent theft and wastage.
B) A company initiates innovative production technology.
C) A company compares its performance metrics with other companies in its industry.
D) A company attracts top talent from other companies using stock options and other financial rewards.

Accepted Answer

Benchmarking involves comparing a company's performance metrics with those of other companies in the same industry. Option A describes internal controls aimed at preventing theft and wastage but does not involve benchmarking. Option B refers to innovation and not performance evaluation. Option D involves the use of stock options and other financial rewards to attract talent from other companies, but this does not relate to benchmarking in performance evaluation.

Question 17

In designing a balanced scorecard, the company begins with company goals, then develops KPIs, and finally, based on the KPIs that are established, the company identifies the company's critical factors.

Accepted Answer

In designing a balanced scorecard, the process typically begins with identifying the company's vision and strategy, then moves on to developing objectives across four perspectives (financial, customer, internal process, learning and growth), from which KPIs are derived, and finally, critical success factors are identified to support achieving those objectives. The statement's sequence is incorrect.

Question 18

The performance measurement system should compare the company's performance against the best practices in the industry. This statement reflects which of the following performance measurement goals?
A) Motivating unit managers
B) Promoting goal congruence
C) Providing feedback
D) Benchmarking

Accepted Answer

Benchmarking involves comparing the company's performance with the best practices in the industry. This goal helps identify areas for improvement and sets targets for the company's performance. A, B, and C are also important goals of a performance measurement system, but they do not directly involve comparing performance with industry best practices.

Question 19

The performance measurement system lets upper management know whether the subunits are achieving their goals and targets or not. This statement reflects which of the following performance measurement goals?
A) Motivating unit managers
B) Communicating expectations
C) Providing feedback
D) Motivating managers

Accepted Answer

The statement refers to the goal of providing feedback to upper management regarding the performance of subunits.

Question 20

A company that uses a balanced scorecard has established a KPI for employee turnover. If the KPI is negative, that implies a very low rate of employee turnover.

Accepted Answer

A negative KPI for employee turnover does not necessarily imply a very low rate of turnover. It could indicate that the actual turnover rate is worse than the target or expected rate. KPIs are indicators of performance relative to a goal, and negative or positive values depend on the context and definition of the KPI.

Quiz 24: Performance Evaluation and the Balanced Scorecard

Which of the following is NOT one of the four perspectives of a balanced scorecard?

A good balanced scorecard focuses only on leading indicators, because lagging indicators that relate to past performance are not important for the scorecard.

The performance measurement system must ensure that managers know the specific goals and targets for the subunits. This statement reflects which of the following performance measurement goals?

Which one of the following is NOT a goal of a performance evaluation system?

Financial performance metrics are considered to be a lead indicator, providing signs of future performance.

One part of the balanced scorecard helps management answer the question: "How do we look to shareholders?" Which of the four perspectives is being described here?

The performance measurement system should provide incentives for coordinating activities of the subunits and focusing them toward the overall company objectives. This statement reflects which of the following performance measurement goals?

If a manager's performance is evaluated solely on the ability to control costs, he or she may sacrifice quality for savings, thus endangering customer satisfaction.

From the shareholders' point of view, performance measurement should focus on financial performance only.

Companies benchmark their performance against the performance of their competitors and also against their own past performance.

In a balanced scorecard system, the key performance indicators (KPIs) are ways to measure whether the company is meeting its goals.

Which one of the following is NOT a goal of a performance evaluation system?

Decentralization increases the difficulty of achieving goal congruence among managers.

Which of the following goals of a performance evaluation system is accomplished when targets are compared to actual results?

Each one of the four perspectives of a strong balanced scorecard should have as many KPIs as management can devise, to create a more effective and efficient system.

Which of the following statements reflects the use of benchmarking in a performance evaluation system?

In designing a balanced scorecard, the company begins with company goals, then develops KPIs, and finally, based on the KPIs that are established, the company identifies the company's critical factors.

The performance measurement system should compare the company's performance against the best practices in the industry. This statement reflects which of the following performance measurement goals?

The performance measurement system lets upper management know whether the subunits are achieving their goals and targets or not. This statement reflects which of the following performance measurement goals?

A company that uses a balanced scorecard has established a KPI for employee turnover. If the KPI is negative, that implies a very low rate of employee turnover.