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Chapter 24 – Exercises & Cases

Multiple Choice Questions​

  1. The Balanced Scorecard framework includes how many perspectives?
    a) Two
    b) Three
    c) Four
    d) Five
    Answer: c) The Balanced Scorecard includes four perspectives: Financial, Customer, Internal Business Process, and Learning & Growth.

  2. Which perspective of the Balanced Scorecard focuses on how shareholders view the company?
    a) Customer
    b) Internal Business Process
    c) Financial
    d) Learning & Growth
    Answer: c) The Financial perspective focuses on how shareholders view the company and measures profitability, growth, and shareholder value.

  3. Customer satisfaction is a measure in which Balanced Scorecard perspective?
    a) Financial
    b) Customer
    c) Internal Business Process
    d) Learning & Growth
    Answer: b) Customer satisfaction is a key measure in the Customer perspective.

  4. Which perspective measures the company's ability to innovate and improve?
    a) Financial
    b) Customer
    c) Internal Business Process
    d) Learning & Growth
    Answer: d) The Learning & Growth perspective measures the company's ability to innovate, improve, and develop capabilities.

  5. A strategy map shows:
    a) Only financial objectives
    b) Cause-and-effect relationships between objectives
    c) Only customer metrics
    d) Historical performance only
    Answer: b) A strategy map shows cause-and-effect relationships between objectives across the four perspectives.

  6. Non-financial measures are important because:
    a) They replace financial measures
    b) They are easier to measure
    c) They often lead financial performance and provide early warning signals
    d) They are required by law
    Answer: c) Non-financial measures often lead financial performance and provide early warning signals about future financial results.

  7. For a Luxembourg SME, which Balanced Scorecard perspective might include "Achieve 95% on-time delivery"?
    a) Financial
    b) Customer
    c) Internal Business Process
    d) Learning & Growth
    Answer: c) On-time delivery is an internal process measure that affects customer satisfaction.

  8. Variance analysis in the Balanced Scorecard context:
    a) Only applies to financial measures
    b) Can be applied to both financial and non-financial measures
    c) Is not used in Balanced Scorecards
    d) Only applies to customer measures
    Answer: b) Variance analysis can be applied to both financial and non-financial measures in a Balanced Scorecard.

  9. The Balanced Scorecard helps managers:
    a) Focus only on short-term financial results
    b) Balance short-term and long-term objectives
    c) Ignore financial performance
    d) Focus only on customer satisfaction
    Answer: b) The Balanced Scorecard helps managers balance short-term and long-term objectives across all four perspectives.

  10. For Luxembourg SMEs, the Balanced Scorecard is particularly useful for:
    a) Meeting only legal requirements
    b) Responding to stakeholder requests for broader performance metrics
    c) Replacing financial statements
    d) Eliminating the need for budgets
    Answer: b) The Balanced Scorecard helps Luxembourg SMEs respond to requests from banks, investors, and regulators for broader performance metrics.

Questions​

  1. Explain the four perspectives of the Balanced Scorecard and how they relate to each other.

  2. What is a strategy map, and how does it help communicate strategy?

  3. Describe the cause-and-effect relationships in a Balanced Scorecard. Give an example.

  4. Why are non-financial measures important in performance evaluation?

  5. How can variance analysis be applied to non-financial measures?

  6. What are the benefits and challenges of implementing a Balanced Scorecard in a Luxembourg SME?

  7. How does the Balanced Scorecard help balance short-term and long-term objectives?

  8. Explain how the Balanced Scorecard can support decision-making in a Luxembourg restaurant.

  9. What steps are involved in developing a Balanced Scorecard?

  10. How can Luxembourg SMEs use the Balanced Scorecard to strengthen their competitive position?

Problems Set A​

Problem A-1: Identifying Perspectives​

For each of the following measures, identify which Balanced Scorecard perspective it belongs to:

a) Return on investment
b) Customer satisfaction score
c) Employee training hours
d) On-time delivery percentage
e) Revenue growth f) Number of new products launched g) Market share h) Employee turnover rate

Problem A-2: Strategy Map​

Create a simple strategy map for a Luxembourg restaurant showing:

  • One objective in each of the four perspectives
  • Cause-and-effect relationships between objectives

Problem A-3: Selecting Measures​

A Luxembourg manufacturing SME wants to develop a Balanced Scorecard. Suggest 2-3 measures for each of the four perspectives that would be relevant for this company.

Problem A-4: Variance Analysis​

A Luxembourg tech startup has the following Balanced Scorecard targets and actual results:

MeasureTargetActualVariance
Customer satisfaction90%88%?
On-time delivery95%97%?
Employee training hours40 hrs/quarter35 hrs/quarter?
Revenue growth20%18%?

Calculate the variance for each measure and indicate whether it is favorable or unfavorable.

Problem A-5: Balanced Scorecard Objectives​

Develop Balanced Scorecard objectives for a Luxembourg service company (e.g., consulting, IT services) with:

  • 2 objectives in Financial perspective
  • 2 objectives in Customer perspective
  • 2 objectives in Internal Process perspective
  • 2 objectives in Learning & Growth perspective

Problems Set B​

Problem B-1: Complete Balanced Scorecard​

Develop a complete Balanced Scorecard for a Luxembourg retail SME including:

  • Mission statement
  • Strategic themes
  • 2-3 objectives per perspective
  • 1-2 measures per objective
  • Strategy map showing relationships

Problem B-2: Performance Evaluation​

A Luxembourg restaurant has implemented a Balanced Scorecard. Evaluate the following performance:

Financial:

  • Target: 15% profit margin; Actual: 12%
  • Target: €500,000 revenue; Actual: €480,000

Customer:

  • Target: 95% satisfaction; Actual: 92%
  • Target: 20% repeat customers; Actual: 18%

Internal Process:

  • Target: less than 20 min service time; Actual: 22 min
  • Target: less than 5% waste; Actual: 4.5%

Learning & Growth:

  • Target: 40 training hours/quarter; Actual: 35 hours
  • Target: less than 10% turnover; Actual: 12%

Analyze the performance, identify areas of concern, and suggest actions.

Problem B-3: Balanced Scorecard Implementation​

A Luxembourg manufacturing SME wants to implement a Balanced Scorecard. Develop an implementation plan including:

  • Steps to develop the scorecard
  • Key stakeholders to involve
  • Timeline
  • Challenges and solutions
  • Success factors

Problem B-4: Non-Financial Variance Analysis​

A Luxembourg service company tracks the following non-financial measures:

MeasureBudgetActualVariance
Customer complaints10/month8/month?
Project completion on time90%85%?
Employee certifications5/quarter6/quarter?
New customer acquisition20/month22/month?

Calculate variances, identify favorable and unfavorable variances, and explain what actions management should take.

Comprehensive Problem​

Comprehensive Problem 24: Balanced Scorecard for Le Petit Bistro​

Marie wants to implement a Balanced Scorecard for Le Petit Bistro to improve performance and prepare for potential expansion.

Current Situation:

  • Revenue: €450,000/year
  • Profit margin: 10%
  • Customer satisfaction: 85%
  • Staff turnover: 15%
  • Average service time: 25 minutes
  • Food waste: 8% of food cost

Strategic Goals:

  • Expand to a second location within 2 years
  • Improve profitability to 15%
  • Achieve 95% customer satisfaction
  • Reduce staff turnover to less than 10%
  • Improve operational efficiency

Required:

  1. Develop a Balanced Scorecard with:

    • Mission statement
    • Strategic themes
    • 2-3 objectives per perspective
    • Measures for each objective
    • Targets for each measure

  2. Create a strategy map showing cause-and-effect relationships.

  3. Identify data sources and collection methods for each measure.

  4. Develop a quarterly review process.

  5. Explain how the Balanced Scorecard will help Marie:

    • Make decisions about expansion
    • Improve current operations
    • Communicate with potential investors
    • Meet Luxembourg compliance requirements

  6. Identify challenges in implementation and propose solutions.

Cases​

Case 24-1: Implementing a Balanced Scorecard​

A Luxembourg manufacturing SME with 50 employees wants to implement a Balanced Scorecard. The CEO is enthusiastic, but middle managers are resistant, saying they don't have time for "another reporting system."

Questions for Analysis:

  1. How can the CEO overcome resistance to the Balanced Scorecard?

  2. What steps should the company take to implement the scorecard successfully?

  3. How can they ensure the scorecard doesn't become just another reporting burden?

  4. What training or resources are needed?

  5. How can they integrate the scorecard with existing systems?

  6. What are the risks of not implementing a Balanced Scorecard?

Case 24-2: Balanced Scorecard and Stakeholder Communication​

A Luxembourg tech startup needs to present performance to potential investors. The company has strong financial metrics but wants to show broader performance using a Balanced Scorecard.

Questions for Analysis:

  1. How can the Balanced Scorecard help communicate the company's strategy to investors?

  2. What measures should they include to appeal to investors?

  3. How can they present the Balanced Scorecard effectively?

  4. What are the risks of presenting non-financial measures to investors?

  5. How can they link non-financial measures to future financial performance?

  6. What Luxembourg-specific considerations should they include?

Solutions are published in supplementary/instructor/solutions/chapter_24_solutions.md.