Choosing Performance Measures The President of the Canby Insurance Company Has Just Read

question 4

Essay

Choosing Performance Measures
The president of the Canby Insurance Company has just read an article on the balanced scorecard.A company has a balanced scorecard when there is a set of performance measures that reflect the diverse interests and goals of all the stakeholders (shareholders,customers,employees,and society)of the organization.Presently,Canby Insurance Company has only one performance measure for the top executives:profit.The board of directors claims that profit as the sole performance measure is sufficient.If customers are satisfied and employees are productive,then the company will be profitable.Any other performance measure will detract from the basic goal of making a profit.
Required:
Explain the costs and benefits of only having profit as a performance measure.

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Definitions:

Common Resource

A shared resource that multiple parties can access and use, which often leads to overuse and depletion due to a lack of exclusive ownership.

Positive Externality

A benefit that affects a party who did not choose to incur that benefit, often associated with public goods or services that extend beyond the direct participants in an economic activity.

Rival in Consumption

Refers to a situation where the consumption of a good by one individual prevents or diminishes its consumption by another.

Club Goods

Goods that are excludable but non-rivalrous, meaning they can be accessed by members of a specific group but one person's use does not diminish availability for others.