Haglund Department Store is located in the downtown area of asmall city. While the store had been profitable for many years, itis facing increasing competition from large national chains thathave set up stores on the outskirts of the city. Recently thedowntown area has been undergoing revitalization, and the owners ofHaglund Department Store are somewhat optimistic that profitabilitycan be restored. In an attempt to accelerate the return ofprofitability, management of Haglund Department Store is in theprocess of designing a balanced scorecard for the company.Management believes the company should focus on two key problems.First, customers are taking longer and longer to pay the bills theyincur using the department storeâs charge card, and the company hasfar more bad debts than are normal for the industry. If thisproblem were solved, the company would have more cash to make muchneeded renovations. Investigations has revealed that much of theproblem with late payments and unpaid bills results from customersdisputing incorrect charges on their bills. These incorrect chargesusually occur because salesclerks incorrectly enter data on thecharge account slip. Second, the company has been incurring largelosses on unsold seasonal apparel. Such items are ordinarily resoldat a loss to discount stores that specialize in such distressitems. The meeting in which the balanced scorecard approach wasdiscussed was disorganized and ineffectively led-possibly becauseno one other than one of the vice presidents had read anythingabout how to build a balanced scorecard. Nevertheless, a number ofpotential performance measures were suggested by various managers.These potential performance measures are: a. Percentage of chargeaccount bills containing errors. b. Percentage of salesclerkstrained to correctly enter data on charge account slips. c. Averageage of accounts receivable. d. Profit per employee. e. Customersatisfaction with accuracy of charge account bills from monthlycustomer survey. f. Total sales revenue. g. Sales per employee. h.Travel expenses for buyers for trips to fashion shows. i. Unsoldinventory at the end of the season as a percentage of total cost ofsales. j. Courtesy shown by junior staff members to senior staffmembers based on surveys of senior staff. k. Percentage ofsuppliers making just-in-time deliveries. l. Sales per square footof floor space. m. Written -off accounts receivable (bad debts) asa percentage of sales. n. Quality of food in the staff cafeteriabased on staff surveys. o. Percentage of employees who haveattended the cityâs cultural-diversity workshop. p. Total profit.1. As someone with more knowledge of the balanced scorecard thanalmost anyone else in the company, you have been asked to build anintegreated blanced scorecard. In your scorecard, use onlyperformance measures listed previously. You do not have to use allof the performance measures suggested by the managers, but youshould build a balanced scorecard that reveals a strategy fordealing with the problems with accounts receivable and with unsoldmerchandise. Construct the balanced scorecard folliwng the formatused in Exhibit 12-5. Do not be concerned with whether a specificperformance measure falls within the learning and growth, internalbusiness process, customer, or financial perspective. However, usearrows to show the casual links between performance measures withinyour balanced scorecard and explain whether the perfroamcnemeasures should show increases or decreases. 2. Assume that thecompany adopst your balanced scorecard. After operating for a year,some performance measures show improvements, but not others. Whatshould management do next? 3. A. suppose that customers expressgreater satisfaction with the accuracy fo their charge accountbills but the performance measures for the average age of accoutnsreceivable and for bad debts do not improve. Explain why this mayhappen. b.
Haglund Department Store is located in the downtown area of asmall city. While the store had been profitable for many years, itis facing increasing competition from large national chains thathave set up stores on the outskirts of the city. Recently thedowntown area has been undergoing revitalization, and the owners ofHaglund Department Store are somewhat optimistic that profitabilitycan be restored. In an attempt to accelerate the return ofprofitability, management of Haglund Department Store is in theprocess of designing a balanced scorecard for the company.Management believes the company should focus on two key problems.First, customers are taking longer and longer to pay the bills theyincur using the department storeâs charge card, and the company hasfar more bad debts than are normal for the industry. If thisproblem were solved, the company would have more cash to make muchneeded renovations. Investigations has revealed that much of theproblem with late payments and unpaid bills results from customersdisputing incorrect charges on their bills. These incorrect chargesusually occur because salesclerks incorrectly enter data on thecharge account slip. Second, the company has been incurring largelosses on unsold seasonal apparel. Such items are ordinarily resoldat a loss to discount stores that specialize in such distressitems. The meeting in which the balanced scorecard approach wasdiscussed was disorganized and ineffectively led-possibly becauseno one other than one of the vice presidents had read anythingabout how to build a balanced scorecard. Nevertheless, a number ofpotential performance measures were suggested by various managers.These potential performance measures are: a. Percentage of chargeaccount bills containing errors. b. Percentage of salesclerkstrained to correctly enter data on charge account slips. c. Averageage of accounts receivable. d. Profit per employee. e. Customersatisfaction with accuracy of charge account bills from monthlycustomer survey. f. Total sales revenue. g. Sales per employee. h.Travel expenses for buyers for trips to fashion shows. i. Unsoldinventory at the end of the season as a percentage of total cost ofsales. j. Courtesy shown by junior staff members to senior staffmembers based on surveys of senior staff. k. Percentage ofsuppliers making just-in-time deliveries. l. Sales per square footof floor space. m. Written -off accounts receivable (bad debts) asa percentage of sales. n. Quality of food in the staff cafeteriabased on staff surveys. o. Percentage of employees who haveattended the cityâs cultural-diversity workshop. p. Total profit.1. As someone with more knowledge of the balanced scorecard thanalmost anyone else in the company, you have been asked to build anintegreated blanced scorecard. In your scorecard, use onlyperformance measures listed previously. You do not have to use allof the performance measures suggested by the managers, but youshould build a balanced scorecard that reveals a strategy fordealing with the problems with accounts receivable and with unsoldmerchandise. Construct the balanced scorecard folliwng the formatused in Exhibit 12-5. Do not be concerned with whether a specificperformance measure falls within the learning and growth, internalbusiness process, customer, or financial perspective. However, usearrows to show the casual links between performance measures withinyour balanced scorecard and explain whether the perfroamcnemeasures should show increases or decreases. 2. Assume that thecompany adopst your balanced scorecard. After operating for a year,some performance measures show improvements, but not others. Whatshould management do next? 3. A. suppose that customers expressgreater satisfaction with the accuracy fo their charge accountbills but the performance measures for the average age of accoutnsreceivable and for bad debts do not improve. Explain why this mayhappen. b.
