Validating the balanced scorecard

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Intangibles; Validating the Balanced Scorecard Today intangibles, such as customer relation- ships, account for more than half of total assets of firms in the United States. The importance of nonfinancial measures is one of the motivations for the increased use of the balanced scorecard, which includes a perspective on customer relationships. However, according to recent research, data on intangibles such as customer satisfaction can yield significant forecasts of earnings only when

the data are analyzed in conjunction with financial statistics and only when tied to corporate strat- egy. This result is based on a wide range of customer relationship data (e.g., customer satisfaction, employee turnover, the speed of loan processing, and the average number of products and services purchased) from 115 retail banks and represents potentially useful guidance for managers wanting to know how to use nonfinancial measures effectively.

Required Comment on the implications of the study for the use of the balanced scorecard. We have noted in the text that it is important to validate the balanced scorecard. What does it mean to validate the scorecard in the context of the retail bank example above?

Reference no: EM131123086

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