To see the details of each Round and the Recap score, you must place your CURSOR over the light blue number and click, It will then show the detail

Transcription

1 Balanced Score Card Examples and Illustrations of calculations for components of the Balanced Score Card Created 11/07/14 by Dana Charles Walker, D.Mgt. for BUSN6200 Shanghai, Fall II, 2014

2 Balanced Score Card During each Competition Round a Balanced Score Card grade will be calculated. You do not need to calculate the Score Card, the simulation will calculate the scores as part of the simulation processing of the round. Each week two components (yearly and cumulative results) will be added to the total Balanced scorecard. Both components contain the four perspectives as described in the Balanced Score Card white paper distributed earlier and available on the class website. The four perspectives are: Financial, Internal Business Process, Customer, and Learning and Growth. You will be expected to know the four perspectives for the final exam

3 Balanced Score Card Each Simulation Round is considered one calendar year as stated on the Capstone Courier, where are actual results of each round/year are provided as of December 31 of each year. Round one yearly component has a possible 82 points for year one. Round two yearly component has a possible 89 points for year two (seven additional) possible points due to Human Resources module. Round three yearly component has a possible 89 points for year three. Round four through Round eight yearly component has a possible 100 points each year (eleven additional points) due to the addition of Total Quality Management (TQM) module. Each year also has a RECAP number of points that scores long term measurements which is added the yearly component. The next slide has an example for the Erie Company after a practice round two. Each company/team will only be able to see their own Balanced Score Card Details. I will publish the relative team Balanced Score Card Total each week.

4 Balanced Score Card HOW TO ACCESS the REPORTS and GRAPHS reviewed in this presentation: After logging into the Capstone Simulation: To access the Balance Score Card for aprior simulation run, select REPORTS for the Menu of the left side of the screen, then select Debrief Reports, after a simulation run, there will a button labeled Team Balanced Score Card. The Debriefing Reports show what actually occurred based upon your team and other teams competition during the simulation run. You should also review the POTENTIAL Balanced Score Card prior to submitting your final decisions using the PROFORMA REPORTS menu selection. Remember PROFORMA reflects possible objectives for the upcoming round, the PROFORMA Balance Sheet, Income Statement, Cash Flow Statement, and Balance Scorecard will reflect the PLANNED attainment. Depending upon your team s decisions and the competition from the other teams, your team may or may not achieve the results reflected in the PROFORMA statements and reports.

5 To see the details of each Round and the Recap score, you must place your CURSOR over the light blue number and click, It will then show the detail components The next slide shows the detail level.

6 Notice the Balanced Score Card Perspective

7 Balanced Score Card Under the Financial perspective there points for Stock Price, Profit, and Leverage. Under the Internal Business Process perspective there are point for Contribution Margin, Plant Utilization, Days of Working Capital, Stock out costs, and Inventory Carrying Costs. Under the Customer perspective there are points for Customer Buying Criteria, Customer Awareness, Customer Accessibility, Product Count, Selling and General Administrative (SG&A) Expenses. Under Learning and Growth perspective there are points for Employee Turnover and Employee Productive. This perspective will have additional points after Round One.

8 Balanced Score Card Focus more on meeting your customer buying criteria than trying to manipulate stock price. By providing attractive products that meet the client s buying criteria (different order and different weight/priority in each marketing segment high end, traditional, etc.) your customer will buy more, which in turn will result in betters sales, profitability, thereby better financial results such as stock price. Also it very important to maintain high liquidity (cash) in the early rounds. The industry is growing and you will not be able to fund your strategic investments through regular operating profits. YOU MUST seek and obtain external financing by ISSSUING LONG TERM BONDS, ISSUING STOCK, and BORROWING SHORT TERM from the Bank. (i.e. Financial Decisions) in the early rounds.

9 This is the full screen that includes both the Yearly and Recap Balanced Score Card, with the four perspective details on the bottom half of the screen. See next slide for a closer look at the Balanced Score Card Details section.

10 To see the details on how the points are calculated you may use your cursor to click on EACH separate measurement (in blue). For example, the following screen be shown if you select LEVERAGE (Note in this example Leverage has been given 5.3 points out of a possible 8 points.)

11 Leverage 3.2 Total possible Leverage Balanced Score Card Points is 8. Actual Leverage for Erie = 3.2 = Total Assets of $141,413 divided by Equity of $44,132. Looking at brown line in graph above. We determine that there will be partial credit for leverage between 2.8 and 4.0 values. Note that =1.2 ( is the range between point C and Point D ). Then Calculating partial credit for Actual Leverage of 3.2, calculate the difference between Full Credit and No Credit ( =0.8 and 0.8/1.2= ) x (8 Full Credit points) = Erie s Balanced Score Card score 5.3 for the Actual Leverage of value 3.2

12 To see the details on how the points are calculated you may use your cursor to click on EACH separate measurement (in blue). For example, the following screen be shown if you select CONTRIBUTION MARGIN under the Internal Business Process perspective (Note in this example Contribution Margin has been given 1.6 points out of a possible 5 points.)

13 Average Contribution Margin is used for Balanced Score card. Looking at Page one of the Capstone Courier Practice Round Two we see that Erie s Average Contribution Margin is 29.8%. Full Credit is for Contribution Margin of 36.0% (or above) is worth 5.0 Balanced Score Card Points. Note there are NO point for below 27% Contribution Margin. Range of 5.0 possible points is between 36% and 27%, Therefore a range 36.0% 27.0% =9.0%, Taking Erie s actual of 29.8% 27.0%= 2.8%, 2.8/9.0 =.3111 x 5.0 = 1.55 rounding 1.6 Score Card Points for Contribution

14 To see the details on how the points are calculated you may use your cursor to click on EACH separate measurement (in blue). For example, the following screen would be shown if you select EMPLOYEE TURNOVER RATE under Learning and Growth perspective (Note in this example EMPLOYEE TURNOVER has been given 7.0 points out of a possible 7 points.)

15 From the Capstone Courier Page 12 HUMAN RESOURCES SUMMARY, we see that employee turnover has been calculated for Erie as a value of 7.0%. Full Credit is issued for Employee Turnover rate that is equal to, or less than of 9.0%. (Low Employee Turnover is good). Since Erie has 7.0% employee turnover, all Balanced Score Card points of 7.0 for EMPLOYEE TURNOVER has been awarded.

16 Balanced Score Card You can repeat the process to review the additional components of the yearly Balance Score Card. Just place your cursor on the Name of the measurement and press enter. The graph and point values on the graph will be shown on each measurement. Each measurement is slightly different but will reflect a satisfactory value or range of values that is translated into the Balanced Scorecard points. Remember that the Balanced Score Card reflects the company s performance for a year that has been processed.

17 Balanced Score Card Now let us review the RECAP Component of the Balanced Score Card As stated earlier the RECAP focuses on more long term measurements, and attainment with the Recap will change from year to year. The Recap contains the four perspectives. However the Recap measurement will focus on the 1. Financial measurements of Market Capitalization, Sales, and Emergency Loan status. 2. The Internal Business Process of Operating Profit. 3. The Customer measurements of Weighted Average Customer Survey Score and Market Share, and 4. The Learning and Growth measurements of Sales Revenue per Employee, Dollar Value of Assets per Employee, and Dollar Value of Profits per Employee.

18 Notice that Four perspectives total the number of Balanced Score Card points for the Recap total. Each week the Recap Total is added to the Prior Rounds. In this example, The total cumulative Balanced Score Card for Erie after the end of Round Two is 123.

19 Let us now focus on some of the key RECAP measurements starting with Emergency Loan measurement. Notice that Erie has experienced at least one Emergency Loan, therefore has obtain ZERO points out of 20 possible for this measurement.

20 For Round Two Erie s Total Assets (found on Page 3 of the Capstone Courier) are valued at $141,413,000. From Page One (and other locations in the Capstone Courier) we see that Erie s Emergency Loan was for $5,584,112. Emergency Loan of $5,584,112 Divided by Total Assets of $141,413,000 = 3.9%. If the Emergency is greater the 1.0% of total assets, NO POINTS for this component of the Balanced Score Card.

21 Now let us look at SALES component. Notice that Erie a score of 12.8 from a possible 20 points.

22 From ROUND Two of the Capstone Courier Page One we obtain Erie s Annual Sales of $131,224,128. There are no points for Sales equal to or under $15,000,000. Full Credit of 20 Points are given for Sales Equal to or Greater Than $181,000,000. To calculate, $131,224,128 $15,000,000 = $116,224,128 and divide $116,224,128 by $181,000 =.64 x 20 possible points = 12.8 points.. Remember that the Recap is recalculated each year, therefore Erie may earn additional or lower points in the coming rounds/years because of Higher or Lower Annual Sales.

23 Let us now review MARKET CAPITALIZATION. Notice that Erie has a score of 3.7 points of a possible 20 points for Market Capitalization. Market Capitalization is the Stock Price times the Number of Shares Outstanding. Market Capitalization is listed on Page two of the Capstone Courier ($16.90 per share x 2,400,000 shares) = $40,560,000

24 We also need the Market Capitalization for the entire industry, which can be calculated by adding Market Capital for all companies together (also listed on Page 2 of Capstone Courier). The Industry Capitalization is valued at $640,000,000. Erie Market Cap of $41,000,000 (rounded) divided by Industry Market Cap of $640,000,000 = 6.5%. Zero points for 1% or less. Therefore Market Cap Share of 6.5% 1.0%=5.5%. 5.5% divided by 30% possible = times 20 possible points = 3.7 Balanced Score Card points for Market Capitalization. Again, each year this measurement is recalculated and can be higher or lower.

25 In the CENTER of most web pages within the simulation is the HELP & SUPPORT button. The button also has a blue book with a Question Mark?. By selecting this option you will be taken to page show above. The ONLINE GUIDE provide a WEALTH of Valuable information. The PDF Guide is the TEAM GUIDE. The Tutorial & Demo Button have videos and other tutorials (requires good bandwidth). Feel Free to use these resources.