Which term is used to describe performance measurement systems that align with strategy by focusing on long-term value?

Which term is used to describe performance measurement systems that align with strategy by focusing on long-term value?

• A. Balanced scorecard
• B. Activity-based costing
• C. Lean accounting
• D. Economic value added

Answer: (A)

The main idea is a performance measurement framework that links strategy to action and emphasizes long-term value creation. The balanced scorecard does this by translating strategic objectives into a cohesive set of measures across four perspectives—financial, customer, internal processes, and learning and growth—so everyday activities are aligned with long-term goals. It integrates both financial and non-financial indicators, uses leading indicators to drive future results, and shows how different parts of the organization contribute to strategy through cause-and-effect links, often via a strategy map. This broader, strategy-driven approach keeps attention on sustainable value rather than short-term financial results alone. Activity-based costing focuses on assigning costs to activities to improve costing accuracy, not on linking performance measures to strategy. Lean accounting centers on supporting lean operations and waste reduction, not on a comprehensive, multi-perspective framework tied to strategic value creation. Economic value added is a financial performance measure assessing value above the cost of capital, but it doesn’t provide a full, strategy-aligned measurement system across multiple dimensions.

The main idea is a performance measurement framework that links strategy to action and emphasizes long-term value creation. The balanced scorecard does this by translating strategic objectives into a cohesive set of measures across four perspectives—financial, customer, internal processes, and learning and growth—so everyday activities are aligned with long-term goals. It integrates both financial and non-financial indicators, uses leading indicators to drive future results, and shows how different parts of the organization contribute to strategy through cause-and-effect links, often via a strategy map. This broader, strategy-driven approach keeps attention on sustainable value rather than short-term financial results alone.

Activity-based costing focuses on assigning costs to activities to improve costing accuracy, not on linking performance measures to strategy. Lean accounting centers on supporting lean operations and waste reduction, not on a comprehensive, multi-perspective framework tied to strategic value creation. Economic value added is a financial performance measure assessing value above the cost of capital, but it doesn’t provide a full, strategy-aligned measurement system across multiple dimensions.