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CA Intermediate · Financial Management and Strategic Management · Strategy Implementation and Evaluation

Kaveri Foods Ltd. finds that its Balanced Scorecard shows strong financial results this year, but employee training hours, customer retention and process quality are all declining. Which feature of the Balanced Scorecard does this illustrate?

The scenario shows that the Balanced Scorecard links financial results with non-financial drivers such as customer, process and learning measures. Good current profits can hide weakening drivers, and the scorecard exposes these early, warning management that future financial performance may suffer.

  1. AIt measures only lagging financial indicators
  2. BIt links financial outcomes with non-financial drivers across perspectives, so future risk to results can be seen earlyCorrect
  3. CIt replaces the need for any strategic control
  4. DIt focuses only on internal processes

Explanation

The Balanced Scorecard uses four perspectives: financial, customer, internal business process, and learning and growth. Non-financial measures act as drivers of future financial results, so declines in them warn of later problems. The first option is wrong because the scorecard goes beyond financial measures.

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