The Balanced

Scorecard: A Vision
Report Card
BY CHARLES J. PINENO, PH.D., AND CURTIS R. CRISTINI

THE ALPINE PRESSED METALS DIVISION OF METAL POWDER PRODUCTS CO. HAS

BEGUN A PROJECT TO IMPLEMENT A BALANCED SCORECARD TO CHANGE

ITS CULTURE AND BECOME MORE COMPETITIVE.

s with most companies, the bottom line tive systems. Each of the following Change Steps

A has always run the business and has been

the indicator of a successful or unsuccess-
ful financial period. Although a plausible
gauge, this short-term view hides the
long-term issues.
More than a gauge, the balanced scorecard (BSC), a
technique in strategic management, provides a compre-
requires much thought and systems implementation:
Check mapknow where you are
Have a goalknow where you want to be
Assemble a plan
Negate barriers
Get commitment
Employee involvement
hensive set of measures used to communicate and eval- Share ideas
uate achievement of an organizations mission and Trend progress
strategy. This tool traditionally includes both objective Elasticize thoughts
and subjective measures divided into four major areas: Plan again
Financial Perspective, Customer Perspective, Internal Sustain the momentum
Business Process, and Learning Process and Growth
Perspective.1 The balanced scorecard becomes a vital Approximately 50% of Fortune 1,000 companies in
tool in the changing of a culture. By providing the abili- North America and about 40% in Europe use a version
ty to translate strategy into action rapidly, measurably, of the BSC, according to a recent report by Bain & Co.
and knowledgeably, a balanced scorecard aligns that For example, Philips Electronics has used the balanced
strategy within an organizational structure to tap into scorecard to align company vision, focus employees on
hidden assets and knowledge. how they fit into the big picture, and educate them on
To implement a balanced scorecard, managers need what drives the business to achieve positive results.
to direct the change process and remove the fear that They assembled a team to establish a performance
may inhibit change. From day one, they need to take management system that measures progress toward the
steps to implement the new production and administra- corporate vision.2

M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY 28 SUMMER 2003, VOL.4, NO.4

 Another such company is Alpine Pressed Metals, the
focus of our research. Well look at how the balanced
scorecard evolved, Alpines background, how to handle
change, setting the course for where Alpine wants to be,
determining optimal targets, and implementing the
scorecard.
HOW THE B A L A N C E D S C O R E C A R D E V O LV E D
Throughout the history of performance measurement
and performance pay, there has been a persistent prob-
lem with monitoring and paying on one dimension of a
job. The result is often a decline in one or more other
dimensions. For example, pay based on patients han-
dled may cause quality to suffer.
In 1986, as a possible solution to such a problem,
Glenn Felix and James Riggs introduced the perfor-
mance matrix consisting of a group of priority-weighted
performance measures. The sum of the weighted mea-
sures is computed to reflect a balanced performance
index or success indicator, so pay based on the index,
rather than the individual performances, ensures that
employees attend to all the key performances associat-
ed with their jobs. In 1992, Robert Kaplan and David
Norton expanded the concept of balanced performance
to include future organizational outcomes and learning
and growth. The basic concept came to be called the
balanced scorecard.3
Corporations across the world have begun leveraging
the power of balanced scorecards for converting vision
and strategy into measurable targets.4 The results, how-
ever, have been mixed. Companies seem to have a dif-
ficult time adopting the proper set of metrics and
linking them to support a meaningful, continuous
improvement and assessment effort.5
According to Allan Bailey, Chee Chow, and Kamal
Haddad, a partial list of users of balanced scorecards
includes AT&T, Brown and Root, Intel, 3Com, Elf
Atochem, the AM&R division of Mobil Oil, Philips
Electronics, and Tenneco. In the service sector,
adopters include the international accounting firms
KPMG Peat Marwick and Ernst & Young.6
Bailey, Chow, and Haddad summarized the following
scorecard benefits:
1. Promotes the active formulation and implementa-
tion of organizational strategies.
M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY
2. Makes organizational strategies updated and
highly visible.
3. Improves communication within the organization.
4. Improves alignment among divisional or individ-
ual goals and the organizations goals and
strategies.
5. Aligns annual or short-term operating plans with
long-term strategies.
6. Aligns performance-evaluation measurement and
long-term strategies.7
ALPINE PRESSED
Lets look at Alpine Pressed Metals. The powder met-
als manufacturing industry consists of taking base
metals (iron, stainless steel, aluminum, bronze, brass,
exotic metals) that are already in powder form and com-
pacting them at a known tonnage to form a near net
shape for industrial application. Once formed, compo-
nents are sintered to attain the necessary structural and
physical properties. Additional operations that may be
completed to move to final component forms and prop-
erties are drilling, tapping, machining, heat treatment,
coatings, and so forth.
In 1981, two primary investors, one of which man-
aged the facility full-time, started Alpine Pressed Met-
als. Alpine Pressed gained success producing primarily
lawn and garden products along with a few products in
the automotive sector. Additional sales were seen in
small hand tools and recreation. Since automotive sales
were attained in 1999, Alpine has met the requirement
of QS9000.
In 1998, Metal Powder Products Company, located in
Carmel, Ind., purchased Alpine Pressed. Today, MPP-
Alpine accounts for more than 30% of the worlds pow-
der metal. Alpines current customer base has remained
relatively the same, except for additional automotive
components, government tier-two components, and
original equipment others segment. Sales for Alpine
grew from $9 million in 1991 to $14 million in 2000,
with a budgeted sales value for 2001 at $18 million.
Metal Powder Products Company consists of seven
facilities: three in Pennsylvania and one each in Califor-
nia, Michigan, Mexico, and Canada. Sales for MPP-
Alpine topped $100 million for the calendar year 2001,
the time period we are discussing.
29 SUMMER 2003, VOL. 4, NO. 4
 The manufacturing system consisted of 100% batch
production and little or no automation. The operators
would load the powder onto the press and unload com-
ponents from the press by hand. Production quantities
ran between lots of 500 pieces and +100,000 pieces.
Setups accounted for approximately 10%-15% of
capacity.
Both the Alpine facility and corporate headquarters
used various measurement systems. A management
review of the basic income statement items was at the
forefront. Alpine lacked trending knowledge and did
not gather other data to check progress. The progress
was seen in sales and profit, but they made no relation-
ships or correlations between quality levels, production
levels, customer service, etc.
Alpines vision boiled down to make as much as you
can and sell as much as you can. The mission was a
quality policy stating price, quality, and delivery as im-
portant factors. Leadership and lack of planning were at
a low because the initial owner had been promoted and
was unavailable.
The culture at the Alpine facility was very centralized,
although corporate culture was decentralized. The tall
and narrow organizational structure of corporate head-
quarters was set in a manner that created communica-
tion, reaction, and reporting issues and that did not allow
for the responsibility and accountability for actions to be
set.
Due to a lack of direction and vision, employee
morale was low. Consistent delivery issues, low quota-
tion acceptance, and high returns and allowance contin-
ued to push old and potential customers away, while
current volume and efficiencies created a facility with
large spending and efficiency variances.
Beyond morale, operator involvement was also lack-
ing. There was no employee handbook, no formalized
suggestion programs, and no formal teams. The one
bonus was the nonunion workforce, which gave the
facility the ability to make sweeping changes for
improvement and implement incentive-based sugges-
tion programs.
Overall, the facility had been running the same way

Table 1: Key Internal Strengths and Weaknesses of MPP-Alpine

Strengths Weight Value* Weighted Value
1. Location 0.1 3 0.3
2. Core Competence 0.1 4 0.4
3. Theory Training 0.05 2 0.1
4. Diverse Customer Base 0.175 4 0.7
5. Component Knowledge 0.05 5 0.25
6. Certified Quality System 0.025 2 0.05
1.8

Weaknesses Weight Value* Weighted Value

1. Overburdened Resources 0.1 3 0.3
2. Management and Facility Culture 0.1 1 0.1
3. Facility Layout/Space Constraints 0.1 3 0.3
4. Capacity Constraints 0.05 4 0.2
5. Supplier Management 0.1 2 0.2
6. Cash Flow Constraints 0.05 3 0.15
1.25
3.05
*On a scale of 1-5, with 5 being the highest.

M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY 30 SUMMER 2003, VOL. 4, NO. 4

for 20 years. With the downturn in the economy, a new
management team was given the task of rectifying more
than 20 years of habits, so the need for change was
great. Management had made no significant improve-
ments in costing, and the drops in profits had begun to
affect relations with customers, especially with price
reductions forced on the company. The competitive
edge and risk taking had been lost.
Table 1 rates the strengths and weaknesses of MPP-
Alpine, with five being the highest value.
DECISION TO CHANGE
How was Alpine gong to change? The first step was
understanding the process. Understanding change
begins with knowing that it is difficult and constant.
Because there is no single guaranteed way to succeed,
each organization requires a careful analysis of both the
individuality and the culture of the people.
When it comes to change, managers are either proac-
tive or reactive. Being proactive requires a manager to
be a futurist and see an organizations long-term objec-
tives. Most managers, however, have been reactive, and
their organizations became followers and only advanced
in dire situations. Being reactive is not a downfall, but
no reaction at all is.
Regardless of responsibility, an organizational manag-
er is driven to change by three factors. They are:
demands of customers, which include price, time to
delivery, and service; competition in the marketplace;
and an expectation that the organization will produce a
quality product. These three factors represented more
than 75% of the issues presented by Birkner &
Birkner.8
To start getting employees involved in the change
process, the organizational leader must sellnot
mandatethe idea of transforming the organization to
everyone. To sell the concept, the leader must know
the audience. Because each group within an organiza-
tion is different, information must be tailored to the
needs and wants of the group. For example, middle
managers focus on results, so they want to know that
the systems will enable higher production and
increased savings. Hourly employees, however, focus on
job security and increased performance expectations,
which means removing fears and instilling worker pride
M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY
should be a priority. This leads to growth and security
for the organization.
As values are instilled in each level of an organization
and a show of commitment is attained, change becomes
easier and part of an organizations culture. If total com-
mitment is not attained, the scorecard may fail.
To continue employee involvement, many compa-
nies use teams and meetings to solve problems.
Depending on the status of an organizations quality
management, the use of team impact varies. Lower per-
formers should emphasize teams, especially departmen-
tal and cross-functional; medium performers should
focus on problem-solving teams at the department
level; higher performers should minimize department-
level teams.9
The next step after the development of teams or
similar approaches is to give people the tools and the
training to change and to solve problems. Used with a
balanced scorecard, a Total Quality Management
(TQM) system has three distinct sets of management
tools:
1. The seven tools of quality (Ishikawa diagram, con-
trol charts, Pareto diagram, scatter plots, etc.).
2. The seven new management tools of quality
(affinity diagram, matrix diagram, tree diagram,
arrow diagram, process decision diagram, etc.).
3. The seven product-planning tools (group inter-
views, questionnaire surveys, positioning analysis,
concept checklist, table-type conceptualizing, con-
joint analysis, and quality tables). The product-
planning phase determines 70% of the value
added in products and services for customers.
Yet no matter what training and involvement an orga-
nization tries, resistance will surface. The formula is
simple: 70% of people buy into good ideas, 10% never
buy in and will fight to the death, and 20% hold the
opinion of the last person they talked with. To accom-
plish a major change program, management needs 85%
to 90% of the organization to accept the change, and to
do this management has to keep those who hate new
ideas away from those who love them and spend a lot of
time selling change. Therefore, managers must antici-
pate, understand, and effectively respond to resistance.
Far too many managers depend on charts, data, and so
31 SUMMER 2003, VOL. 4, NO. 4
forth and fail to assess the feelings, attitudes, and com-
munications required during change.10
To motivate employees, managers should offer
rewards based on ideas and implementation cost reduc-
tions. Kaizen Teian, or continuous improvement
through small incremental improvements, shows several
ways to instill involvement and initiate change. This is
done by cash rewards for implemented ideas, regardless
of cost savings, which contrasts with the American sug-
gestion system that bases the rewards on total cost sav-
ings. Each system has its good and bad points. While
the Kaizen programs receive more suggestions and have
lower payoff, the American system receives a lower
number of suggestions but rewards the big cost savings
with high payoffs. Newer systems can use both aspects
of the suggestion systems to influence a greater number
of suggestions with relative payoff levels.
Managers can meet resistance head-on by sitting and
talking one-on-one with employees, understanding
their concerns and determining if they fully understand
the desired changes and why. If the issues are real, the
manager should initiate a plan to change, and if they are
perceived, he/she should remove the issues by a mutual
understanding.
The more proactive approach to change is to focus on
the organizations readiness. By implementing and
assessing a persons individuality within the system,
managers, especially front-line supervisors, can initiate
ideas and practices with much less resistance. They can
do this face-to-face rather than through large meeting-
type introductions to change, such as videos, memos,
and so on.
Once change has begun, sustaining it can be difficult.
Managing momentum requires the same discipline as
managing accounts within a budget. It requires aligning
the organization around the principal objectives of the
system and moving everyone in a common direction.
Momentum killers include an organizational structure
that prevents departments or personnel from communi-
cating effectively, leaders or managers who do not fol-
low the system, fear, and lack of amnesty for risk takers
and innovators. Building amnesty for these risk takers
removes fear, which is good because an organization can
learn from the mistakes of a group or individual.
As communication is important in the programs
M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY
inception, it does not remove itself from this part. Com-
munication is important because quality begins inside
an organization and works its way out. If employees do
not understand the progress made toward the objective
and see how the initiative fits together, customers will
not realize the effect.
A data-gathering and data-communication system is
key to a company knowing where it is and where it
wants to be. Many small- and medium-sized companies
gather data only to conform to their quality system for
certification, which means the information is incom-
plete, unused, and not communicated effectively. The
balanced scorecard can move a company from where it
is to where it wants to be.
ALPINE BEGINS ITS CHANGE PROCESS
An overhaul of the Alpine division began with a new
vice president of manufacturing. Corporate required
data on some basic trends for production, delivery, qual-
ity, and costs. The main changes required at the corpo-
rate level came in April 2001. A strategic planning
session took place with various corporate team mem-
bers and with plant personnel, and from this session
they developed a new vision statement, a new mission
statement, and core values. (Creating a strategic mission
should be the most ambitious, most debated, and most
analyzed piece of the puzzle. The mission statement is
the ultimate goal to strive for and must clearly state the
organizational position and plan.)
Here is Alpines statement (key words are capitalized):
Vision: Incorporating our core VALUES we will be the
acknowledged industry leader for the supply of
INNOVATIVE custom-engineered products of
EXCEPTIONAL value.
Mission: To create value by DELIGHTING our cus-
tomers by ENHANCING the capabilities of the
entire company.
Core Values: We are a manufacturing company with the
following core values: uncompromising
INTEGRITY, exceptional customer SERVICE,
continuous IMPROVEMENT in all we do, and
recognize the contributions of our employees.
32 SUMMER 2003, VOL. 4, NO. 4
 Table 2: Opportunities and Threats Matrix
Strengths Weaknesses
Aluminum Lack of capital
GC bearing High cost/overhead
PCF Efficiency/automation
Geography Old equipment
Management team Production organization
Tool design Cost structure
Material specialists Leverage
Opportunities Strengths/Opportunities Weaknesses/Opportunities
(SO) Strategies (WO) Strategies
GC bearing Differentiation Plant conversions
PCF Technology leader Value-added processing
Aluminum Application conversions Joint ventures
Sachs High-tech materials Market penetration
Excess capacity
Plant focus
New markets
Threats Strengths/Threats Weaknesses/Threats
(ST) Strategies (WT) Strategies
Price pressures Vertical integration Low-cost provider
Low margin Acquisitions Preventative maintenance
Other technologies Foreign facilities Quotation program
NFTAA and FTAA Joint ventures

Following Alpines mission statement are both finan-
cial and nonfinancial goals. As directed by MPP,
Alpines primary goal is to attain an EBITDA (earnings
before interest and taxes plus depreciation and amorti-
zation) of 25%. Additional goals are to reduce the cost
of goods sold by more than 10% or to a level of less
than 69%. The only conflicting goals between Alpine
and MPP, at least temporarily, is the EBITDA of 25%
and the inventory turns of 18.
Table 2 shows a matrix that includes the opportuni-
ties and threats determined during the strategic plan-
ning meeting.
The internal vision and mission incorporates a manu-
al dedicated to the reduction of waste, which involves
six corresponding philosophies:
1. Well-trained and involved employees will be the
primary contributor to continuous process and
product improvement.
2. A capable and well-designed process is the most
important element in determining cost and
quality.
3. A comprehensive equipment maintenance plan
that includes operators and die-setters is essential
to continued process effectiveness.
4. Suppliers must be involved as true partners in our
success, contributing technology as well as quality
material and components.
5. Visual controls are the most effective and efficient
means of controlling plant operations.
6. Product design must reflect not only the require-
ments but must also provide for efficient and
error-free production for internal customers.

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P R E PA R I N G THE BALANCED SCORECARD
Alpines next step was to prepare a balanced scorecard.
One main feature of the balanced scorecard is to pre-
sent a comprehensive set of measures covering perfor-
mance of the business and its success in strategy
implementation. A strategy is a set of relationships
(hypotheses) about cause and effect. According to
Kaplan and Norton, the measurement system should
make the relationships among the objectives and mea-
sures explicit so that they can be managed and validat-
ed. Achieving comprehensiveness includes measures
that interact on the basis of established cause-and-effect
relationships. For example, the subjective measure of
customer satisfaction is usually correlated with the
market-share growth of the business. Philips Electron-
ics uses a more sophisticated approacha value map to
devise customized critical success factors from a survey.
The analysis reflects a perceived performance relative
to the price for competing products.11
D E T E R M I N I N G O P T I M A L TA R G E T S
The realistic approach may help determine optimal tar-
gets for each measure in the balanced scorecard. One
approach weighs the measures of the balanced score-
card and calculates a weighted average success indica-
tor. Measures that maximize the success indicator
should be targets in the balanced scorecard. A perfor-
mance index developed by Matthew J. Liberatore and
Tan Miller may be used in the analysis to determine
optimal targets for the balanced scorecard.12
Most accounting systems generate product or service
data that are precise, objective, verifiable, and good for
external reporting but that do not always provide rele-
vant data for management decisions. Developed
decades ago and used without any significant changes,
these cost accounting techniques cannot handle infor-
mation requirements for decision making in todays
economic environment.
Even though the strategies may be conceptually bril-
liant, if they are based on inaccurate information about
costs of products or services, the company will lose its
competitive marketing edge. In fact, if inaccurate infor-
mation is the basis of management decisions, a compa-
ny may not survive long in the current intense global
competition.
M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY
A cost system doesnt have to measure everything
down to the finest degree. A good cost system trades off
informational errors in order to minimize total cost as
product and services diversity increasesas high vol-
ume is mixed with low volume or labor intensity is
mixed with automation or new technology. For
instance, the more low-volume products or services
offered, the more setup-related overheads are incurred.
The more complex products or services offered, the
more complexity-related overheads are incurred. The
activity hierarchy recognizes types of activities and costs
that are expected to be influenced by changes in pro-
duction or services volume or mix.13 A good cost system
systematically analyzes a majority of all costs incurred
by a significant business unit.14 It also helps manage-
ment understand what resources are consumed and
what outputs are produced by each activity and process
within the organization, enabling better decision
making.15
Over the past decades, recessionary environments
have given birth to cost-reduction programs that actual-
ly resulted in several million U.S. managers and work-
ers having to accept pay cuts or lose their jobs. The
downsizing trend has increased over the last five years
because of extreme pressures brought on by a changing
economy and intense global competition. These cost-
reduction programs only provided short-term cost com-
petitiveness because valuable, trained managers and
workers lost their jobs, and many U.S. firms failed to
adopt a long-term perspective for a strategic business
plan. Current reports indicate that companies have not
achieved the necessary cost reductions through down-
sizing, so the stage is set for potential long-term
failure.16
During this period, many organizations also revised
their cost systems significantly as they reorganized to
become more competitive in an environment that
demands excellent service, high quality, and reasonable
prices. Customers expectations are higher as a result of
unprecedented scientific and technological progress.
Along with the intense global competition, this will
cause new management philosophies and policies, such
as corporate partnerships, to be an essential factor in
meeting these changing demands.17
34 SUMMER 2003, VOL. 4, NO. 4
 Figure 1
Vision
and
Mission

Scanning (S&W) Scanning (O&T)

Communicate

Internal (Facility and Corporate) Align Strategies (Corporate) Align External Environment

Communicate Strategies (Facility) Align Facility Plan Communicate

Internal Business
Financial
Process

Performance
Learning and
Customer
Growth

Innovation

Balanced Scorecard

THE BALANCED SCORECARD: VISION business environment:

REPORT CARD
Figure 1 shows the thinking process for the Alpine divi-
sion regarding a balanced scorecard. Each item was
addressed and communicated during the implementa-
tion process.
The balanced scorecard is part of the management
system, which enables a company to correlate key per-
formance indicators to the firms goals. These goals, in
new terminology, are the vision and the mission. The
scorecard accomplishes seven main objectives in todays
1. Translates the vision, mission, and strategies.
2. Defines and aligns objectives and measurements.
3. Communicates the objects and measures.
4. Aligns strategic initiatives.
5. Aligns people.
6. Aligns compensation with performance.
7. Provides feedback on strategy.
The balanced scorecard translates the vision, mission,
and strategies into four or five basic categories that can-

M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY 35 SUMMER 2003, VOL. 4, NO. 4

not be conflicting: financial, customer, internal business
process, employee (learning and knowledge), and/or
innovation. The result is a Vision Report Card. Each
category contains a mission to accomplish.
Financial: How do we want our stakeholders to view us?
Kaplan and Norton do not dismiss the old-style man-
agement need for financial data. This type of data will
always be a priority, and most managers will do whatever
possible to accomplish the task. As network systems grow,
data can be centralized and automated to create timely
and accurate reports. The financial goals, however, cannot
be attained at the sacrifice of the other categories.
Customer: How do we want our customers to view us?
The importance of customers comes down to basic
need because without them we have no business. Thus,
customer service and satisfaction should be the fore-
front of all indicators. After all, if customers are not sat-
isfied, they will find someone else to supply the service
or product.
Internal business process: What are the processes at
which we should excel?
This category allows a manager to know how the
operation is running. Aligned with the first two, it
shows the production efficiency, quality levels, etc., in
relation to what the customer wants and expects. These
processes can be split into two unitsproduction (ser-
vice) processing and support processing. Support pro-
cessing, such as maintenance (internal and external),
engineering, quality, etc., can be rated by many vari-
ables similar to those in the service industry.
Employees: How do we support, satisfy, and develop our
employees into excellence?
A companys most valuable resource is its people.
Therefore, just like equipment, people need mainte-
nance and improvement, which includes training, re-
training, evaluations, and so forth. In the current
technological explosion, it is imperative that workers
are in a continuous learning mode. Measurement met-
rics guide managers in focusing training funds to the
most important areas. Kaplan and Norton emphasize,
Learning is more than training, and include mentors,
M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY
tutors, and coaches leading workers within the organiza-
tion, easing the process, and improving communications
to readily improve problem solving and decision
making.18
Innovation: How can we continue to improve our
processes to create value?
Continuous improvement of our people, processes,
and systems are vital to the long-term success of our
business because what happens today may not be
enough for tomorrow. Each of these metrics needs to be
referenced back to the first four categories, and, as
innovation happens, change occurs in performance. If
the continuous improvement metrics are not utilized,
employees may believe that the goals set are the high-
est attainable, so long-term failure is inevitable.
I M P L E M E N TAT I O N
After understanding the process of developing and
using the balanced scorecard, Alpine was ready to
implement. The actual timelines and objectives of the
plan were laid out with details. Once this was accom-
plished, ownership had to be attained. Within the
details, a communication process was established with
more timelines and information dispersements.
MPP-Alpines timeline was set at nine months. The
initial project moved from data gathering and review on
a monthly basis to communication with an in-depth
philosophy manual and monthly management review
meetings. The intent was to change the culture, which
had been instilled for years. Financial and quality data
were introduced to all management team members in
writing, while monthly meetings provided the avenue
for divulging information to other employees. Confi-
dential data were either converted to percentage
change or eliminated from the meeting.
Further plans include incorporating meetings to
develop the missions for the five balanced scorecard
items. The meetings will continue throughout the dura-
tion of the project and through innovations or needs.
The most common failures in the introduction of a sys-
tem are barriers that may not stop the project but could
destroy the projects effect, such as fear of change, cul-
ture, communication, trust, etc. Each project must
therefore focus on how the barriers can be removed.
36 SUMMER 2003, VOL. 4, NO. 4
 Communication, communication, and communica-
tion are the three most important steps to removing
these barriers. Meetings, memos, personnel discussions,
and surveys (with responses) help to alleviate many
issues. The organization as a whole must know its role
in such a system. The initial team members must
understand the why and what of the processes that
will be measured to ensure alignment between the
processes and measurements as well as to gain commit-
ment. True leadership ensures people know what the
job is and what is expected. The key is to communicate
effectively and efficiently.
Part of the communication process is to ask people
what they believe is important. A strategy of one-on-
one conversations with employees, customers, and sup-
pliers will help to get everyone thinking about the
project. Major weaknesses in a company are often
pointed out by the obvious but most often ignored
source, the people who do the job.
Management must use the full capabilities of not
only the equipment or processes but also the people.
Innovations occur through Management by Walking
Around, instilling full involvement in the program by
all hourly employees. When employees begin to man-
age their areas, managers can move from a production
orientation to a customer orientation at a much more
rapid pace.
A simple interview form can help find the defects in
the system and provide ideas to rectify the situation.
Suggestion systems, comment programs, and hands-on
training with reports, along with the interview process,
also enhance involvement.
The key to continued involvement lies in three areas
(3Rs): realize, respond, and reward. Employees must
realize management is using their ideas, responding to
them for their ideas, and rewarding them accordingly.
The lack of any response could make an employee put
up another barrierthe sense of Why tell them?
Nothing will change.
During the whole process, discussions and meetings
give management the opportunity to bounce ideas off
many different individuals. A manager must be willing
to listen to the criticism of the idea, which is sometimes
difficult to do, and must also be willing to change. As an
organization moves closer to implementation, it must
M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY
ensure the system focuses on several items that address
what the customer wants, not what the company can
give them. In other words, it must maintain a customer
orientation instead of a production orientation.
KEY WORDS ADDRESSED
After Alpine completed the process just discussed, it
finished the vision, mission, and core values, and it
addressed separate missions for each of the sections
determined. These missions correlated to the original
corporate mission and statement, with most including
the key words pulled from the corporate statements:
Values, Innovative, Exceptional, Delighting, Enhanc-
ing, Integrity, Service, Improvement, and People.
Addressing these key words within the five sections
of Innovation, Customer, Learning and Growth, Finan-
cial, and Internal Business Process to fully align them
was next. The Alpine kick-off of the program consist-
ed of data gathering and data recording. Eight key areas
were addressed for analysis. These measurements had
no correlation to the mission, but they forced a culture
change because the review was more than the finan-
cials. The eight key areas are production control, manu-
facturing, quality, human resources, customer service,
engineering, accounting, and overall. Each key area was
broken down into further subcategories for analysis:
1. Production control
a. Inventory control
b. Inventory variance
c. Delivery
d. Freight costs
e. Capacity
f. Vendor
2. Manufacturing
a. Production efficiency variances
b. Scrap and rework
c. Downtime
d. Workplace organization and visual controls
e. Labor costing
3. Quality
a. Returns and allowance
b. Parts-per-million rejection
c. Corrective action review
d. QS9000 nonconformance review
e. QS9000 updates
37 SUMMER 2003, VOL. 4, NO. 4
 f. Cost of quality f. Setup costs
4. Human Resources 7. Accounting
a. Safety a. Cost of goods sold
b. Training b. EBITDA review
c. Absenteeism c. Budget review
d. Turnover d. Balance sheet review
e. Satisfaction review e. Cash flow review
5. Customer Service f. Costing system review
a. Satisfaction review 8. Overall
b. Quotations a. Total plant efficiency rating
c. Pricing review b. Facility plan
d. Credit review c. Facility continuous improvement
e. Customer visits d. Action listing
f. Sales review e. Needs assessment
6. Engineering
a. Tooling quotations Each of these sections contained many graphs and/or
b. Tooling costs written text. The objectives related to the graphs corre-
c. New parts launch lated back to the corporate goals and individual goals
d. Maintenance review determined from the initial Where are we and where
e. Preventative maintenance do we want to be? planning sessions.

Figure 2: Flow Diagram for Key Words

How do we follow our values? No

Can it be measured?

What is the measurement?

What is the goal?

Who is to measure it?

Who is to act upon it?

What else does this trend affect?

What else affects this trend?

Are there any other measurements?

No

Next word?

M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY 38 SUMMER 2003, VOL. 4, NO. 4

 Setting the objectives or goals was the next step.
(They are the set of critical goals that must be achieved
in order to accomplish the mission within the section.)
These objectives addressed the opportunities and
weaknesses identified during the assessment. Deter-
mining which measurable objective could be utilized
took time and knowledge of the system. Some measur-
able objectives may be subjective, which is not bad and
will still give the information needed.
THE NEXT STEP
The next part of the process for Alpine is to ask several
questions for each of the nine key words, using the flow
diagram in Figure 2.
A key to the process is to be honest in regard to the
data integrity. Managers will want to pick data that make
them look good. Just as in budgets, games will be played,
so the project administrator must ensure both direct and
indirect coverage and correlation. For example, sales per
employee may be skewed with sales per direct hour by a
multitude of overtime, and sales per direct hour may be
affected by use of indirect labor or part-time labor classi-
fication. Thus, the data integrity may be held with sales
per clock hour converted to full-time equivalents plus
the number of salaried individuals. This is an example
that the facility already has seen and has rectified.
Alpine will calculate the current major facility index
prior to BSC implementation:
1) Internal Efficiency Factor (IEF) = Availability *
Efficiency * Int. Yield (PPMs)
2) External Efficiency Factor (EEF) = Ext. Yield
(PPMs) * Delivery
3) Total Efficiency Factor (TEF) = Ext. Yield * Int.
Yield * Availability * Efficiency * Delivery
Availability = (Total Equipment Hours
Downtime)/Total Equipment Hours
Efficiency = Standard Cost of Goods
Manufactured/Actual Cost of Goods
Manufactured
Internal Yield = (1,000,000 Internal
PPMs)/1,000,000
External Yield = (1,000,000 External
PPMs)/1,000,000
Delivery = Number of Orders on Time/Number
of Orders Scheduled
M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY
AC H I E V I N G A LEADERSHIP POSITION
Although the process is in mid-stream, implementation,
communication, and discussion are being completed
throughout MPP-Alpine. Training will be a major
aspect in the future to address poor or miscommunicat-
ed issues. As part of MPP-Alpines strategy, the bal-
anced scorecard will be integral to achieving a
leadership position in the market of both low-cost pro-
ducer and innovative supplier. Innovation does not
occur by part conversions or process changes or cost
reductions aloneit also includes management process-
es and theories. Again, communication and involvement
are imperative to the success of the program. The
change steps outlined above give MPP-Alpine the nec-
essary path to implementation.
But the balanced scorecard is only part of the
changes to the facilitys management. Activity-based
costing is being introduced in parallel to the BSC.
There is a near-perfect correlation when looking at
activities and cost drivers, and these cost drivers
become part of the balanced scorecard data review.
There are many such systems and computer packages
that incorporate the two systems, so Alpine will develop
its approach through the use of spreadsheets and con-
vert them into a database program.
Competition necessitates a flexible, dynamic system
that can lead to continued success. The balanced score-
card is a major part of the solution.
Charles J. Pineno, Ph.D., is a professor of accountancy at
Clarion University of Pennsylvania and the director of the
Center for Accounting Education and Research. He can be
reached at (814) 393-2614 or cpineno@clarion.edu.
Curtis R. Cristini is a former plant manager at Metal
Powder Products Company.
1 Robert S. Kaplan and David P. Norton, Why Does Business
Need a Balanced Scorecard? Journal of Cost Management,
May/June 1997, pp. 5-11.
2 Andra Gumbus and Bridget Lyons, The Balanced Scorecard
at Philips Electronics, Strategic Finance, November 2002,
pp. 46-48.
3 William Abernathy, Balanced Scorecards Make Teamwork
a Reality, The Journal for Quality and Participation,
November/December 1997, pp. 58-59.
4 Tim Fielden, Pilot Refines Decision Support, Info World,
Nov. 29, 1999, pp. 77-78.
39 SUMMER 2003, VOL. 4, NO. 4
 5 B. Douglas Clinton, Sally A. Webber, and John M. Hassell,
Implementing the Balanced Scorecard Using the Analytic
Process, Management Accounting Quarterly, Spring 2002,
p. 1.
6 Allan R. Bailey, Chee W. Chow, and Kamal M. Haddad, Con-
tinuous Improvement in Business Education: Insights from
the For-Profit Sector and Business School Deans, Journal of
Education for Business, January-February 1999, pp. 165-181.
7 Ibid.
8 Lawrence R. Birkner and Ruth K. Birkner, Managing
ChangeA Strategy, Occupational Hazards, 1997, p. 55.
9 Arlene H. Heiss, Quality as Change Management, The Public
Manager: The New Bureaucrat, 1993, pp. 57-60.
10 Heiss, 1993.
11 Gumbus and Lyons, 2002.
12 Matthew J. Liberatore and Tan Miller, A Framework for Inte-
grating ABC and the Balanced Scorecard into the Logistics
Strategy Development and Monitoring Process, Journal of
Business Logistics, 1988, pp. 131-155.
13 Neil Hartnett, John Lowry, and Robert Luther, ABC and
Australian Accounting Standards, Australian Accountant,
December 1994, pp. 19-21.
14 Deborah J. Fisher, Richard E. Westney, and Vipal Kumar
Gupta, Total Cost Management: A New Approach,
Industrial Management, May-June 1994, pp. 1-4.
15 Margaret May, Activity-Based Management Accounting,
Management Accountant, January 1995, p. 40.
16 Godwin J. Udo and Russell C. Kick, Effectiveness of Infor-
mation System Downsizing: A Survey of the Top IS Users,
Industrial Management & Data Systems, 1994, pp. 16-22.
17 Ted R. Compton, Using Activity-Based Costing in Your
Organization, Part 2, Journal of Systems Management, April
1994, pp. 36-39.
18 Kaplan and Norton, 1997.

M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY 40 SUMMER 2003, VOL. 4, NO. 4