RESPONSIBILITY

CENTER

Is a segment of the business whose

manager is accountable for specified
sets of activities.
 Responsibility Center

• Cost Center
• Revenue Center
• Profit Center
• Investment center
Cost center
Revenue Center
Profit Center
Investment Center
Manakah yang lebih baik
kinerjanya

Perusahaan A Perusahaan B

Laba 100 juta Laba 500 juta

Manakah yang lebih baik
kinerjanya

Perusahaan A Perusahaan B

Laba 100 juta Laba 500 juta

Manakah yang lebih baik
kinerjanya

Perusahaan A Perusahaan B
Laba 100 juta Laba 500 juta
Aset 100 juta Aset 2M
 Operating Income
ROI = Average Operating Assets
 Advantages of ROI
• It encourages managers to focus on the
relationship among sales, expenses, &
investment, as should be the case for a
manager of in investment center
• It encourages managers to focus on cost
efficiency
• It encourages managers to focus on
operating asset efficiency
Disadvantages of ROI
• It can produce a narrow
focus on divisional
profitability at the expense
of profitability for the overall
firm

• It encourages managers to
focus on the short run at
the expense of the long run
 A Cleaning Products Division has the opportunity to invest
in two projects for the coming year
Project I Project II
Investment $10,000,000 $4,000,000
OI 1,300,000 640,000
ROI 13% 16%

a. The division currently earns ROI of 15%, which operating assets of $50
million and OI $7,5 million
b. The division has approval to request up to 15 million in the new investment
capital
c. Corporate headquarters requires that all investments earn at least 10%
d. Any capital not used by a division is invested by headquarters, and it earns
exactly 10%
e. The division manager has four alternatives:
1) Invest in Project I
2) Invest in Project II
3) Invest in both Projects I & II
4) Invest in neither project
The divisional ROI was computed for each alternative:
Alternatives
Select Select Select Select
Project I Project II Project I & II Neither Project
OI $8,800,000 $8,140,000 $9,440,000 $7,500,000
Assets $60,000,000 $54,000,000 $64,000,000 $50,000,000
ROI 14,67% 15,7% 14,75% 15%

Headquarter Investment
Division Select Select Select Select
Decision Project I Project II Project I & II Neither Project
Div Investment $10,000,000 $4,000,000 $14,000,000 $0
Headquarter $5,000,000 $11,000,000 $1,000,000 $15,000,000
Investment
Total return ($10,000,000x13%) ($4,000,000x16%) ($10,000,000x13%) $15,000,000x10%)
+(5,000,000x10%) +(11,000,000x10%) +(4,000,000x16%)
(1,000,000x10%)
=$1,800,000 =$1,740,000 =$2,040,000 =$1,500,000
 Residual Income
= Operating Income – (Minimum rate of return
x Average Operating Assets)
Advantage of Residual Income
Residual income encourages
managers to accept any
project that earns
above the minimum rate
Disadvantage of Residual Income

• Can encourage a short run orientation

• Direct comparison of the performance
of two different investment centers
becomes difficult, since the level of
investment may differ
 A Cleaning Products Division has the opportunity to invest
in two projects for the coming year
Project I Project II
Investment $10,000,000 $4,000,000
OI 1,300,000 640,000
ROI 13% 16%

a. The division currently earns ROI of 15%, which operating assets of $50
million and OI $7,5 million
b. The division has approval to request up to 15 million in the new investment
capital
c. Corporate headquarters requires that all investments earn at least 10%
d. Any capital not used by a division is invested by headquarters, and it earns
exactly 10%
e. The division manager has four alternatives:
1) Invest in Project I
2) Invest in Project II
3) Invest in both Projects I & II
4) Invest in neither project
 Residual Income
Operating Income – (Minimum Rate of Return x Average Operating Assets)

Current Condition
= $7,500,000 – (0,1 x $50,000,000)
= $2,500,000

Project I
= $1,300,000 – (0,1 x $10,000,000)
= $300,000

Project II
= $640,000 – (0,1 x $4,000,000)
= $240,000
The divisional RI was computed for each alternative:

Headquarter Investment
Division Select Select Select Select
Decision Project I Project II Project I & II Neither Project
Div Investment $10,000,000 $4,000,000 $14,000,000 $0
Headquarter $5,000,000 $11,000,000 $1,000,000 $15,000,000
Investment
Total return ($10,000,000x13%) ($4,000,000x16%) ($10,000,000x13%) $15,000,000x10%)
+(5,000,000x10%) +(11,000,000x10%) +(4,000,000x16%)
(1,000,000x10%)
=$1,800,000 =$1,740,000 =$2,040,000 =$1,500,000
 • Economic value added (EVA) is after-tax
operating profit minus the total annual
cost of capital.

EVA
EVA == After-tax
After-tax operating
operating income
income –– (Weighted
(Weighted
average
average cost
cost of
of capital
capital xx Total
Total capital
capital
employed)
employed)
 Balanced Scorecard
as a management strategic system
• Awalnya merupakan sebuah alat penilaian
kinerja yang digunakan untuk mengukur
kinerja eksekutif
• Untuk menilai kinerja eksekutif diperlukan
ukuran kinerja komprehensif yang tidak
hanya mencakup perspektif keuangan, tetapi
juga perspektif lain yaitu pelanggan, proses
internal bisnis, dan pembelajaran SDM
 The Balanced Scorecard translates
an organization’s mission and
strategy into operational objectives
and performance measures for four
different perspectives:
 The financial perspective
 The customer perspective
The
Balanced  The internal business
Scorecard
process perspective
 The learning and growth
perspective
 4 perspectives in the balanced
scorecard:
• The financial perspective describes the economic consequences
of actions taken in the other three perspectives. .
• The customer perspective defines the customer and market
segments in which the business unit will compete.
• The internal business process perspective describes the internal
processes needed to provide value for customers and owners. .
• The learning and growth (infrastructure) perspective defines the
capabilities that an organization needs to create long-term growth
and improvement. This perspective is concerned with three major
enabling factors: employee capabilities, information systems
capabilities, and employee attitudes (motivation, empowerment, and
alignment)
LOW COST Strategy
 Summary of Objectives and
Measures:
Financial Perspective
Objectives Measures
Cost Reduction:
Reduce unit product cost Unit product cost
Reduce unit customer cost Unit customer cost
Reduce distribution channel cost Cost per distribution channel

Asset Utilization:
Improve asset utilization Return on investment
Economic value added
 Summary of Objectives and Measures:
Customer Perspective
Objectives Measures
Core:
Increase customer retention Percentage of repeat
customers
Increase customer satisfaction Ratings from customer
surveys
Increase delivery reliability On-time delivery percentage
 Summary of Objectives and Measures:
Internal business process perspective
Objectives Measures
Increase process efficiency Productivity
Output/input(s)
Percentage of defective units

Decrease process time Cycle time

Increase service efficiency Cost trends

Output/input(s)
Decrease service time Cycle time
 Objectives Measures

Decrease new product Time to market (from start

development time to finish)

Response to Customer Complaint Percentage of complaints receiving

response .
Average response time
 Summary of Objectives and Measures:
Learning and Growth Perspective
Objectives Measures
Increase employee capabilities Employee satisfaction ratings
Employee turnover
percentage
Employee productivity
(revenue/employee)
Hours of training
 Summary of Objectives and Measures:
Learning and Growth Perspective
Objectives Measures
Motivation:
Increase motivation and alignment Suggestions per employee
Suggestions implemented per
employee

Information Systems (IS) Capabilities:

Increase IScapabilities Percentage of processes with real-
time feedback capabilities
Percentage of customer-facing
employees with online access to
customer and product information
Why Implement
BSc?
 Perusahaan yang Sukses
Menerapkan BSc

• South West Airlines

• Bank Indonesia
• Unilever Indonesia
• Astra Internasional
• SOHO Group
 Implementasi BSc
• At its peak in 2008, the BSC was being used by 53% of
companies worldwide (Rigby & Bilodeau, 2009).
• The BSC has remained an integral performance
measurement tool in a variety of settings, with many
professional events devoted to it (
Fatima & Elbanna, 2020).
• the BSC has remained the only PMS on the list of the
top 25 most popular management tools (
Rigby & Bilodeau, 2018)
 Unilever telah menerapkan BSc sejak tahun 2000
dan hasilnya selama 6 tahun berturut-turut berhasil
mempertahankan tingkat pertumbuhan 2 digit. Di
tahun 2004 angka penjualan tumbuh 10,6%
menjadi Rp 8,985 triliun; laba usaha tumbuh
14,8% menjadi 2,039 triliun; laba bersih tumbuh
sebesar 13,2% menjadi 1,468 triliun
Mobil North America Marketing and
Refining division
Kondisi awal :
1. Provitabilitas divisi ini menduduki
peringkat terakhir dalam industri sejenis
2. ROI yang sangat rendah
3. Membutuhkan suntikan dana segar
sekitar $500 million dari induk
perusahaan hanya untuk memelihara
dan memperbaiki fasilitas.
• Tahun 1994, balanced scorecard
dikenalkan untuk mengkomunikasikan &
mengelola strategi baru (customer driven
strategy)
• Setelah diterapkannya balanced scorecard:
1. Tahun 1995 (hanya 2 tahun sejak balanced
scorecard diimplementasikan) profit divisi ini
berubah dari peringkat terakhir menjadi
peringkat pertama dalam industri, 56% diatas
rata-rata industri.
2. Posisi sebagai leader dalam industri terus
dipertahankan selama 4 tahun berikutnya.