In this video tutorial, accounting professor Kay Stice explains how learning and growth measures focus on the company’s employees. Traditional financial measures can cause managers to view employees as a cost. However, a balanced scorecard has a company view its employees as a key resource. He explores leading measures and outcomes in this video.
- In my opinion the learning and growth measures are a very valuable contribution of the balanced scorecard approach. The Learning and Growth Measures focus on the company's employees. Traditional financial measures can cause managers to view employees as a cost. The balanced scorecard focuses a manager on viewing the employees as a key resource. Now an infamous example of this is the statement by Jerry Krause, general manager of the Chicago Bulls during the 1980s and the 1990s. He said that players don't win championships, organizations win championships.
Well, it turns out that organizations with the right players, such as Michael Jordan, they win championships. The large CPA firms these days are constantly talking about work life balance. Now is it because these firms are charitable organizations that care only about their employee's happiness? No. Instead the CPA firms realize that their good employees are a resource, not a cost, and that they can increase their financial profits by retaining their good employees. As with the customer measures, it is useful to think of the employee measures as being both leading measures and outcome measures.
An important Leading Measure is the amount spent on employee training. As with spending on research and development, this measurement of spending on employee training reflects a key change in perspective. Spending money on training is not a negative, it's a positive. Measuring spending on employee training, or tracking the number of employees who have completed additional certification courses, such as this one, reminds managers that money must be consistently spent on employee development in order to keep the employee satisfied and engaged.
Again, without this perspective the accountants and the budget cutters would slash compensation and increase layoffs at the first sign of a temporary decline in profits. Such short term actions motivated by a focus on just measures of short term profits reduce employee loyalty and increase the cost of doing business in the long run. The ultimate result of building learning and growth in the organization is to enhance employee productivity. Employee productivity then leads to internal process improvements.
Related to employee productivity is the employee retention and employee satisfaction. These three issues form the desired outcome measures of learning and growth. Therefore the organization should track performance in the productivity, retention rates, and satisfaction of its employees. A good accounting system can and should measure satisfaction of employees using surveys, reporting on resignation trends within the company, and measure employees productivity in terms of volume, quality, and timeliness of output.
To review, the Balanced Scorecard is a framework for organizing a company's performance measures, or key performance indicators, the KPIs. A traditional way to structure the Balanced Scorecard is to organize the KPIs into four areas, financial, customers, internal processes, and learning and growth, which is with the employees. The Balanced Scorecard framework is an aid to help managers identify areas in which they should create key performance indicators.
In this course, accounting professors Jim and Kay Stice explain what KPIs your business should consider in a balanced scorecard, from financial goals to employee and customer satisfaction. They describe how to craft a clear mission statement that complements your KPIs, and how to tie performance to incentives. Plus, get a look at KPIs in action, as Jim and Kay break down a case study examining a trucking company's balanced scorecard.
- The importance of KPIs and measuring performance
- Financial goals and measure
- Customer needs and satisfaction
- Employee growth
- Creating an effective mission statement
- Linking measurements and rewards
- Examining a KPI case study