Posts Tagged ‘Management Accountant’

Beyond the Balanced Scorecard – Should Strategy Maps be a part of the management accountant’s tool kit?

January 29, 2009

This post is a summary of a journal article I wrote for a piece of coursework last year. In it I look at whether Strategy Maps (and Balanced Scorecards), as developed by Kaplan and Norton, should form a part of the future management accountant’s tool kit. It is available in full here.

The Balanced Scorecard:

Balanced scorecard translates mission and strategy into objectives and measures, organized into four different perspectives – innovation, learning & growth, internal business process, customer and financial. Providing a framework to communicate the mission and strategy; it uses measurement to inform employees about the drivers of current and future success. (Kaplan and Norton, 1996). Complementing financial measures, which tell the results of previous actions, with operational measures, which are the drivers of future financial performance (Kaplan and Norton, 1992).

So senior executives use the balanced scorecard not to tell their employees what to do, but rather communicate where the organisation wants to be in future and hope that their employees use their skills to work towards achieving the organisational goals by meeting the performance measures set out in the balanced scorecard. By using it, decision makers are able to see the skills, knowledge and systems the employees will need to improve the internal processes, by innovating and efficiency gains, which will deliver added value to the organisation’s stakeholders.

Strategy Maps:

Strategy maps are a tool that organisations can use for communicating both their chosen strategy and the processes, systems and skills that will be required to implement that strategy. They demonstrate “the cause and effect links by which specific improvements [in assets, processes and staff attributes] can create desired outcomes.” (Kaplan and Norton, 2000, p168). They give employees, at all levels, a clear view of how their jobs are linked to the overarching objectives of the organisation, hopefully allowing everyone to work in a cohesive manner towards achieving the organisation’s goals.

The Strategy Map, as a progression from the Balanced Scorecard, “show how an organization will convert its initiatives and resources – including intangible assets such as corporate culture and employee knowledge – into tangible outcomes.” (Kaplan and Norton, 2000, p168). The measures from an organisation’s balanced scorecard are based upon the strategy map, which connects the desired outcomes of the strategy with the measures which will drive those outcomes.

Kaplan and Norton (2000) say that the best way to construct a strategy map is from the top down, starting with the destination, i.e. the financial goals, and working down through the cause and effect relationships between actions that will allow the organisation to meet those financial objectives. As management accountants have immense knowledge of the organisation, especially the financial measures and what impacts on them, they are in an ideal position to take a lead in developing the strategy maps, ensuring that they are accurate, feasible and based on facts.

What is in the management accountant’s toolkit?

I propose that the management accountant’s toolkit would contain five main tools or techniques which enable them to serve their purpose within the organisation of identification, measurement, analysis, interpretation and communication of this information for decision makers to use while also ensuring accountability and appropriate use of resources (Chartered Institute of Management Accountants, 1991). The toolkit would be comprised of the following:

  • Activity Based Costing/Management
  • Customer Profitability/Value Analysis
  • Competitor Analysis
  • Balanced Scorecard
  • Performance Measurement


As we have seen, the balanced scorecard and latterly the strategy maps can, if created and used in the right way, be very useful tools for organisations to use in defining their strategy to enable their employees to work collectively towards achieving the organisational goals by following the strategy laid out by the senior executives. With the management accountants able to use their knowledge and skillsets to provide the strategic decision makers with the information that they need, with the information for the balanced scorecards and strategy maps being adapted from data and knowledge already gathered for other areas of the management accountant’s role for example: activity based costing and management gives the management accountant information about where in the organisation’s operations costs are incurred but also why, this can then be used in a balanced scorecard in setting a target of reduction in certain activity costs.

So strategy maps are a natural partner with the other parts of a management accountant’s role, and provided that the management accountant’s information and knowledge is used in the creation of strategy maps it should add value to the organisation, which is what should be aspired to.