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Performance Measures
Evidence from a Balanced
Scorecard at Store24
Presented By
BRIJESH SEHGAL J.K.YADAV SAJISEBASTIAN
VIJAY KUMAR SANJEEV KUMAR SANJAY KUMAR
S.P. SINGH
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Agenda
• Introduction
• Objective
• Process
• Analysis
• Results
• Conclusion
• References/Credentials
• Q&A
8/2/2010 2
Introduction
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What the study is about?
Store24, a privately held convenience store retailer in New England, the 4th largest in the
region. Whose primary product categories include cigarettes, beverages, snacks, prepared
foods, and lottery tickets. It operates in a mature environment with competition from
convenience stores, gasoline retailers, and drug stores. During FYs 1998 and 1999, Store24
formulated a strategy aimed at increasing sales and margins. To achieve this, Store24
changed its strategy to creating entertaining in-store atmospheres that would differentiate its
stores from those of competitors. To implement the same Store24 used BSC & Strategy Map,
but the strategy was unsuccessful .
This study is a follow up research to analyze the failure of above strategy focusing on
following points:
investigate the role of the balanced scorecard in generating useful information for testing
and validating an organization's strategy.
Finding the gap through statistical tests of the hypotheses underlying the firm's balanced
scorecard and strategy map
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Who did the study?
Name Designation/Organisation Paper Publish
Dennis Campbell associate professor in the Accounting and
Management unit at Harvard Business School
Srikant M. Datar Arthur Lowes Dickinson Professor of
Accounting at Harvard Business School
V.G. Narayanan the Thomas D. Casserly, Jr. Professor of
Business Administration at Harvard Business
School
Susan L. Kulp Assistant Professor of Accountancy “Organizational Control Mechanisms: The Next
Phase of Procurement Efficiency," Interfaces, May-
June 2006
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Why?
Understand to what extent do balanced
scorecards (BSC) provide useful information
for testing and validating an organization's
strategy?
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Objectives
• to explore whether, when, and how information about
problems with strategy of Store24 was captured in
Store24’s balanced scorecard.
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Process
Strategy
Balance Scorecard (BSC)
Performance Measurement
System
Strategy Map
Hypotheses Underlying the BSC
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Strategy of Store24
Traditional Strategy
cleanliness,
efficiency,
freshness
Differentiation Strategy
Greater Loyalty
“end-caps”- contained high margin product
Fun & Entertainment
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Balanced Scorecard Performance
Measurement System
Performance measures were organized around
the four traditional balanced scorecard
perspectives
– financial
– customer
– internal
– learning & growth
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Balance Scorecard
Financial Perspective Sales Revenue
Margin
Controllable Contribution
EBIT
Customer Perspective Transaction Volume
In-store Comment Card
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Balance Scorecard of Store24
Pa ra me te r Me a sure me nt Le ve l Fre que ncy
Every 6-
Manager Skills Skill rating of store managers Store months
Learning & Growth
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Strategy Map
ROI
Asset
Contribution Utilization
Gross Profit
Increase Sales
Quality, Value,
Cleanliness,
Interaction
Experience
Interesting
Promotion
Enjoyable
Selection
Friendly
Differentiation in-store Increase Customer Value
Perspective
Experience
Enhance the Customer
Internal
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Hypotheses Underlying the BSC &
Strategy Map
Explicit
Implicit
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Explicit Hypotheses
H1: Ceteris Paribus strategy inputs are positively related to
financial performance.
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Implicit Hypotheses
H5: Ceteris Paribus the impact of increases in
strategy inputs on strategy-specific customer
outcomes is positively related to the level of
employee capabilities.
H3
Customer H1
Perspective Strategy-Specific Customer Outcomes
H6 H2
Internal
Perspective Strategy Input
H5
H4
Learning
& Growth Employee Capabilities
Perspective
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Analysis
Financial Performance
Non Financial Performance
Measure of Strategy Inputs
Measure of Basic Operational Compliance
Measure of Strategy –Specific Customer
Outcomes
Employee Capability
Customers Performance Measure
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Strategy-Specific Input Measure
125%
124%
Walk Through Audit Score
124%
123%
123%
122%
122%
121%
121%
120%
120%
Q1 FY99 Q2 FY99 Q3 FY99 Q4 FY99
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Strategy-Specific Customer Outcome
Measure
6.2
Enjoyable Experience Rating
6.1
5.9
5.8
5.7
5.6
5.5
Q1 FY99 Q2 FY99 Q3 FY99 Q4 FY99
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RESULT
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Result
• These results highlight that the hypothesized link in the scorecard between internal implementation of the
action plans related to the new strategy and financial performance does not exist (H1). However, it is
unclear whether the strategy was poorly formulated or poorly implemented.
• although the strategy was well implemented, the strategy formulation may have been flawed.
• suggest problems with the fit of the differentiation strategy with Store24’s employee capabilities. Crew
skills determine the magnitude of the relationship between strategy outcomes and financial performance,
but the relationship is only greater than zero for high levels of crew skills
• information in the scorecard reveals that the primary role of employee capabilities is not necessarily in
ensuring store-level execution of the strategy (e.g. H4), but rather in ensuring that even if executed well at
the local level, the differentiation strategy ultimately translated into the desired financial outcomes.
• Tables 3-5 offering evidence that formal analysis of the data generated by Store24's balanced scorecard
provides timely information about strategic problems relative to the firm's quarterly strategy review
process.
• the operating standards which Store24 executives eventually abandoned were not, while those they
retained were, drivers of financial performance.
Overall, these results provide evidence that Store24 executives learned about the underlying drivers of
store performance despite a lack of reliance on formal statistical analysis of the assumed relationships
underlying their scorecard.
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Conclusion
8/2/2010 25
References
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London: Sage Publications.
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Reference
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Reference
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Q&A
8/2/2010 29