Performance Measurement to Support Business Strategy

Chapter 18

Performance Measurement to
Support Business Strategy

Matching

_____ 1.        Description of how different levels and employees in the organization must perform for the organization to achieve its goals.

_____ 2.         Why an organization exists; its purpose and goals..

_____ 3.         Description of an organization’s values, definition of its responsibilities to stakeholders, and identification of its major strategies..

_____ 4.         A company’s specific approach for deploying the organizational assets and capabilities required to meet its customers’ needs competitively, while delivering the desired returns to shareholders. .

_____ 5.         Groups or individuals, such as employees, suppliers, customers, shareholders, and communities, who have an interest in what the organization does.

_____ 6.         Continuous reevaluation and improvement of the efficiency of an organization’s activities.

_____ 7.         Performance measurement system relying on multiple financial and nonfinancial measures of performance.

_____ 8.         The time involved in processing, moving, storing, and inspecting products and materials.

_____ 9.         Continuous process of measuring a company’s own products, services, or activities against competitors’ performance.

_____ 10.         Measures of the efficiency of the total manufacturing cycle; equals processing time divided by the manufacturing cycle time.

_____ 11.         Measure that expresses the relation between output and a single input.

_____ 12.         How the organization will create value for all stakeholders.

_____ 13.         Ratio of the value of output to the value of all key inputs.

_____ 14.         A measure that expresses the conversion of inputs into output.

_____ 15.         A visual device to communicate an organization’s strategy.

Matching Answers

1. C

1. H

1. I

1. D

1. L

1. E

1. A

1. G

1. B

1. F

1. J

1. O

1. N

1. K

1. M

Multiple Choice

1. Which of the following is a nonfinancial measure?

1. Number of customer complaints.
2. Return on investment.
3. Prevention cost.
4. Opportunity cost.

1. Which of the following statements is correct?

1. The business model can suggest ways to evaluate performance that makes sense to the organization.
2. A single measure of performance typically evaluates the result.
3. Multiple measures emphasize how the result was achieved.
4. All of the above.

1. A balanced scorecard:

1. Emphasizes financial performance.
2. Caters to the needs of employees.
3. Tries to meet the organization’s responsibilities to stakeholders.
4. Is just a set of multiple performance measures.

1. Manufacturing cycle time is an example of a balanced-scorecard measure of:

1. Financial performance.
2. Customer perspective.
3. Internal business process.
4. Learning and growth.

1. Continuous improvement:

1. Is a philosophy of running the business.
2. Is independent of benchmarking.
3. Is looking to improve the efficiency of activities.
4. Both a and c.

1. Which of the following can be used to measure customer satisfaction?

1. Number of customer complaints
2. Number of service calls
3. Number or returns
4. All of the above

Use the following information to answer questions 7 and 8:

A manufacturing company has the following average times.

1. What is the average manufacturing cycle time (in hours)?

1. 14.00
2. 13.75
3. 13.50
4. 10.00

1. What is the manufacturing cycle efficiency?

1. 15%
2. 25%
3. 35%
4. 45%

1. Which of the following is an example of subjective measurement?

1. Economic conditions of the city where a branch is located
2. Employee turnover
3. Branch profits
4. Defect rates

1. Which of the statements regarding employee involvement is not correct?

1. When workers take on real decision-making authority, their commitment to the organization increases.
2. When decision-making responsibility lies with workers farther away from the customer, workers are more responsive and make informed decisions.
3. Management must create a system that conveys the organization’s objectives to all members.
4. Management must ensure that the performance measures are applied consistently and accurately.

1. Which of the statements is not correct?

1. People at different levels in the organization have different responsibilities.
2. At the lower levels, financial measures are critical.
3. At the middle levels, it is important to coordinate ongoing activities.
4. At the top levels, performance measures focus on meeting stakeholders’ needs.

12. Which of the following performance measures are appropriate for a regional manager?

1. Profitability
2. Employee turnover
3. Customer and employee satisfaction
4. All of the above

Multiple Choice Answers

1. a        (LO1)

1. d        (LO2, LO3)

1. c        (LO4)

1. c        (LO4, LO6)

1. d        (LO5)

1. d        (LO6)

1. a        (LO6)

0.25 + 3.5 + 0.25 + 10 = 14 hours

1. b        (LO6)

[pic 1] × 100% = 25%

1. a        (LO6)

1. b        (LO7)

1. b        (LO2)

1. d        (LO3)

Demonstration Problem

ChemUSA operates two highly automated chemical processing plants: East Plant and West Plant. The same production process takes place in the two plants and turns material X into chemical compound Y.

In order to evaluate their productivity measures, the managers of ChemUSA have the accounting department gather comparative operating and financial data in the follow table.