Creating Balanced Scorecards that Support Different Strategies
The Midwest Consulting Group (MCG) helps companies build balanced scorecards. As part of its marketing efforts, MCG conducts an annual balanced scorecard workshop for prospective clients. As MCG’s newest employee, your boss has asked you to participate in this year's workshop by explaining to attendees how a company's strategy determines the measures that are appropriate for its balanced scorecard. Your boss has provided you with the excerpts below from the annual reports of two current MCG clients. She has asked you to use these excerpts in your portion of the workshop.
Excerpt from Applied Pharmaceuticals7 annual report:
Toe keys to our business are consistent and timely new product introductions and manufacturing process integrity. The new product introduction side of the equation is a function of research and development (R&D) yield (e.g.. the number of marketable drug compounds created relative to the total number of potential compounds pursued). We seek to optimize our R&D yield and first-to-market capability by investing in state-of-me-art technology hiring the highest possible percentage of the "'best and the brightest" engineers that we pursue, and providing world-class training to those engineers. Manufacturing process integrity is all about establishing world-class quality specifications and then relentlessly engaging in prevention and appraisal activities to minimize defect rates. Our customers must have an awareness of and respect for our brand image of being "first to market and first in quality." If we deliver on this pledge to our customers, then our financial goal of increasing our return on stockholders7 equity should take care of itself.
Excerpt from Destination Resorts International’s annual report:
Our business succeeds or fails based on the quality of the service that our front-line employees provide to customers. Therefore, it is imperative mat we strive to maintain high employee morale and minimize employee turnover In addition, it is critical that we train our employees to use technology to create one seamless worldwide experience for our repeat customers. Once an employee enters a customer preference (e.g.. provide two extra pillows in the room. deliver fresh brewed coffee to the room at 8:00 A.M.. etc.) into our database, our worldwide workforce strives to ensure that a customer will never need to repeat it at any of our destination resorts. If we properly train and retain a motivated workforce, we should see continuous improvement in our percentage of error-free repeat customer check-ins. me time taken to resolve customer complaints, and our independently assessed room cleanliness. This in turn should drive improvement in our customer retention, which is the key to meeting our revenue growth goals.
Required:
1. Based on the excerpts above, compare and contrast the strategies of Applied Pharmaceuticals and Destination Resorts International.
2. Select balanced scorecard measures for each company and link the scorecard measures using the framework from Exhibit 10-5. Use arrows to show the causal links between the performance measures and show whether the performance measure should increase or decrease over time. Feel free to create measures that may not be specifically mentioned in the chapter, but nonetheless make sense given the strategic goals of each company.
3. What hypotheses are built into each balanced scorecard? Why do the hypotheses differ between the two companies?
Want to see the full answer?
Check out a sample textbook solutionChapter 10 Solutions
INTRO MGRL ACCT LL W CONNECT
- Strategy The table below contains the names of six companies. Required: For each company, categorize its strategy as being focused on customer intimacy, operational excellence, or product leadership, if you wish to improve your understanding of each company’s customer value proposition before completing the exercise, review its most recent annual report. To obtain electronic access to this information, perform an Internet search on each company’s name followed by the words “annual report.”arrow_forwardThe Midwest Consulting Group (MCG) helps companies build balanced scorecards. As part of itsmarketing efforts, MCG conducts an annual balanced scorecard workshop for prospective clients. AsMCG’s newest employee, your boss has asked you to participate in this year’s workshop by explainingto attendees how a company’s strategy determines the measures that are appropriate for its balancedscorecard. Your boss has provided you with the excerpts below from the annual reports of two currentMCG clients. She has asked you to use these excerpts in your portion of the workshop.Excerpt from Applied Pharmaceuticals’ annual report:The keys to our business are consistent and timely new product introductions and manufacturingprocess integrity. The new product introduction side of the equation is a function of research andd evelopment (R&D) yield (e.g., the number of marketable drug compounds created relative to thetotal number of potential compounds pursued). We seek to optimize our R&D yield…arrow_forwardClassify the performance measures below into the most likely balanced scorecard perspective itrelates to. Label your answers using C (customer), P (internal process), I (innovation and growth), or F(financial). Employee sustainability training sessions attendedarrow_forward
- Describing the balanced scorecard and identifying key performance indicators for each perspective Consider the following key performance indicators, and classify each indicator according to the balanced scorecard perspective it addresses. Choose from the financial perspective, customer perspective, internal business perspective, and the learning and growth perspective. a. Number of customer complaints b. Number of information system upgrades completed c. Residual income d. New product development time e. Employee turnover rate f. Percentage of products with online help manuals g. Customer retention h. Percentage of compensation based on performance i. Percentage of orders filled each week j. Gross margin growth k. Number of new patents l. Employee satisfaction ratings m. Manufacturing cycle time (average length of production process) n. Earnings growth o. Average machine setup time p. Number of new customers q. Employee promotion rate r. Cash flow from operations s. Customer…arrow_forwardIn the Stanford Journal of law, Business,& Finance explain how environmental, sustainability, and governance considerations are important in compensation for hiring a new CEO? how could we label them using this chart? What other action should we take to implement this plan of action from the chart? Metric Name Description Goals Measurementarrow_forwardHyperflash Inc. has a balanced scorecard that includes the following relationships: Actual results for this month and last month are as follows: Instructions 1.Analyze these data to verify whether they support the expected relationship between the strategic objectives and performance metrics. 2.Identify three possible reasons for any unsupported relationship you identified in part (1). 3.Which of the three possibilities you identified in part (2) is the most likely reason for the unsupported relationship you identified in part (1)?arrow_forward
- Forty years ago, Vinfen was founded as a nonprofit company by psychiatrists and social workers at the Massachusetts Mental Health Center and Harvard Medical School to help people with psychiatric conditions transition to group homes for community living. Vinfens strategy map for fiscal 2006 shows how it is building from its mission to accelerating organizational learning and elevating agency performance through its balanced scorecard perspectives to bring value to the customer supported by operational excellence. The following are elements in the balanced scorecard and the four key perspectives. Match the elements with the correct perspectives.arrow_forwardThe following if-then statements were taken from a Balanced Scorecard: a. If employee capabilities increase, then process time decreases. b. If process time decreases, then customer retention will increase. c. If customer retention increases, then market share will increase. d. If market share increases, then revenues will increase. Required: 1. Identify the lead and lag variables, and explain your reasoning. 2. Discuss the implications of Requirement 1 for the financial and learning and growth perspectives. 3. Using the first if-then statement, explain the concept of double-loop feedback.arrow_forwardWhat are the components of a strategic plan? Find one of these components for the company you work for and share (if you are not currently employed, use the college you attend).arrow_forward
- Carson Wellington, president of Mallory Plastics, was considering a report sent to him by Emily Sorensen, vice president of operations. The report was a summary of the progress made by an activity-based management system that was implemented three years ago. Significant progress had indeed been realized. At the conclusion of the report, Emily urged Carson to consider the adoption of the Balanced Scorecard as a logical next step in the companys efforts to establish itself as a leader in its industry. Emily clearly was impressed by the Balanced Scorecard and intrigued by the possibility that the change would enhance the overall competitiveness of Mallory. She requested a meeting of the executive committee to explain the similarities and differences between the two approaches. Carson agreed to schedule the meeting but asked Emily to prepare a memo in advance, listing the most important similarities and differences between the two approaches to responsibility accounting. Required: Prepare the memo requested by Carson.arrow_forwardCoral Creations has strategic plans that call for rapid growth, a limited number of units for each design to enhance exclusivity, designs for the perfect fit, on-time delivery to customers, retention of highly trained employees with innovative skills, and excellent inventory control. A. Suggest one performance measure for each dimension of the balanced scorecard for Coral Creations. B. Take one of your measures and discuss the linkage it has to multiple strategies in Corals plan.arrow_forwardThe balanced scorecard for a service company American Express Company is a major financial services company noted for its American Express® card. Some of the performance measures used by the company on its balanced scorecard are listed below. For each measure, identify whether the measure best fits the learning and growth, internal processes, customer, or financial performance perspective of the balanced scorecard. Performance Metric Performance Perspective Average card member spending Number of Internet features Cards in force Number of merchant signings Earnings growth Number of new card launches Hours of credit consultant training Return on equity Investment in information technology Revenue growth Number of card choicesarrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College