3) The Balanced Scorecard has four perspectives. Answer:

a) What are those four perspectives?

b) Explain each perspective?

c) Using the Birminham Machine case: give examples of measures on the

four perspective of the Balanced Scoredcard

Page 3

BIRMINGHAM AMUSEMENT MACHINES

Birmingham Amusement Machines was a company that manufactured gaming and videoamusement

machines. The company sold its products to an operating company which

distributed them to bars, country clubs, casinos and pubs. Both companies were started

by Bob Greenwood, an engineer who was fascinated by the design of the early mechanical

gaming machines. Largely through innovative design, the company had grown to be one

of the four largest in the market with 30 per cent market share.

Four years ago Bob Greenwood sold out to a large industrial group, but he was retained

as Chief Executive of the manufacturing company. The new owners were happy to let

Bob indulge his talent for design, especially since the company had entered the videoamusement

market. Video-amusement machines did not pay out cash prizes like gaming

machines, but allowed the player time on the machine to play a game, usually with a

theme drawn from the "Wild West" or "Interplanetary Space Warfare". The company

manufactured all parts for the gaming machines and assembled them in its factory.

However, many of the components for the video-amusement machine were imported

and only assembled into the outer casings in the factories.

Recently, the owners became dissatisfied with the company's performance. The market

for its goods was still growing, but the company's profitability had failed to match

expectations. The owners decided to install a new chief executive and to fire Bob, who

was predictably upset at being replaced:

"It's always been the combination of high technology and fashion that's fascinated me

about this industry. You have to be first in the field with every advance in technology,

especially now video amusement is a big part of our business, but you also have to keep

an eye out for the fashionable trends. On average, we've brought out a new product every

four months, for the last five years. You can't run a company like this by putting an

accountant as its boss - you need an innovator".

In fact the owners had installed an accountant to be the head of the company. On his

first day, the new boss made a tour of the plant, after which he called the Manufacturing

Manager into his office and began to criticise what he had seen of the production set-up:

"It seems to me that the whole plant is totally disorganised. There's part-finished goods

everywhere, and no one seems to know exactly what they're going to do next. I found

some people with nothing to do. I am sure, with a bit of tighter management, you could

get your unit production costs down dramatically".

The production manager was defensive.

"Of course I'd like to get my unit costs down, and of course I could rearrange the whole

plant to make it more efficient. The trouble is, the design department are getting me to

change products every few months, so I never really have time to let the production system

settle down. At the same time, marketing are wanting me to give them instant delivery on

new products, almost as soon as I have the drawings from the design office, and they insist

on quality being of the highest standard at all times".

The new boss called in the marketing manager to explain these demands placed on the

production system. The marketing manager was equally forthright.

"I couldn't care less about his unit costs. It's not low cost which sells these machines. Look

at it this way: in a heavy gambling club one of these machines can pay for itself in less

than three months. Under those circumstances, nobody in this industry is competing on

price. It's not totally unimportant, but plus or minus 10 per cent isn't going to make much

difference to our sales. What sells machines is a new product on the books every few

months or so and almost instant delivery - many of the club owners buy on impulse - and

an unimpeachable reputation for the highest product reliability".

After listening to the testimony of both his managers, the new boss was a lot less certain

on how he should proceed to reshape the business.

Later in the day the new chief executive got a further surprise. He was walking past the

engineering department, when a young engineer stopped him to enquire what had

happened to a capital expenditure request that had been given to Bob Greenwood the

week before his abrupt departure.

"I spent weeks putting that specification together. It's a new machine we need for rapidly

downloading and configuring the software - state of the art with all the bells and whistles.

But if we don't get it we are dead, the competition will walk all over us and I for one will

be off. If the company won't use the latest kit, I need to find a job with a company that

does."

As the young engineer walked off down the corridor, one of the production fitters chimed

in.

"It's all right for whiz kids like him. With his games background he can go any time he

wants and they will be queuing up at the gates with job offers as soon as he walks out of

the door. But for the rest of us, with the factory closures round here, we are just glad to

have a half decent job."