David Palmer, Manager of the Paper Products Division of a Graham

question 65

Essay

David Palmer, manager of the Paper Products Division of a Graham Corporation, is a strong believer of outcome measures. During one of his management meetings, he impressed upon his management team that financial measures are the most important, and that his managers should only focus on improving those measures.
Nina Meyers, a recent CMA who was at the meeting filling in for her superior, was not too impressed with Palmer's exclusive focus on financial measures. As the meeting was about to end, she nervously pointed out to Palmer that his focus on outcome measures could be detrimental to the performance of the company.

Meyers: Excuse me, Mr. Palmer, but I think it is wrong to place exclusive emphasis on financial outcome measures. Instead, the emphasis must be on what are known as lead indicators, which provide information about the likely outcome of managerial decisions.
Palmer: I commend you for your knowledge on recent developments. However, I have more than 20 years' experience in this field and I think I know what I am doing. After all, ultimately financial results are what we want.
Meyers: I do not dispute that the ultimate result may largely be the financial returns to our shareholders. However, unless we pay attention to the drivers of the results, we will not understand the problems that exist in our processes. I can bring you up to date on a new performance measurement system known as the Balanced Scorecard if you like.
Although Palmer was not too impressed at being challenged, he instructed Meyers to write him a report on the Balanced Scorecard.

Required:

Prepare a brief report on the Balanced Scorecard with particular emphasis on the following aspects:

• What are leading and lagging indicators?
• Why are leading indicators important?
• What is the relationship between leading and lagging indicators (cause-effect relationships)?
• What are the different dimensions of the Balanced Scorecard?
• What are some examples of indicators pertaining to the different dimensions of the Scorecard?

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Definitions:

Dexterity

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Standard Deviation

A tool for measuring how far apart or closely grouped a set of numerical entries are.

Model Appropriate

The suitability of a statistical model in accurately representing the data and addressing the research question.

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