Axim Chalets Ltd (ACL) is a large chain of African resorts headquartered in Ghana. ACL prides itself in offering a unique African experience. Its properties are all located on beachfronts and feature thatched huts residences. ACL's mission is, To become the No. 1 midscale all-inclusive resort chain in Africa - by creating unrivalled vacation experiences for customers, exceptional opportunities for employees, avant-garde products and services and continuously improving financial and environmental performance'. ACL's corresponding critical success factors are linked to its mission. The subsidiary aims of the company are to maximise shareholders wealth and value. ACL's properties include numerous buildings which, in addition to offering residences, feature conference rooms, gyms, swimming pools, sports facilities, playgrounds and local community tours. The company operates as a five-division organisation for reporting purposes. These are namely, the Eastern Africa, Western Africa, Central Africa, Northern Africa and Southern Africa divisions. Recent divisional strategic performance information for the five divisions have been provided in table 1 below. The report informs the basis of the company's annual review by its board. At the operational level, each hotel manager is given an individual budget for their hotel, prepared in the finance department, and is judged by performance against budgeted profit. ACL intends to change its business model and introduce the balanced scorecard (BSC) across its divisions. The company is thinking of selling half of its properties and leasing them back. Most hotels follow this strategy and ACL anticipates this will reduce the need to manage properties while enabling more focus on serving customers. Table 1: Strategic Performance Report for review: Axim Chalets Ltd Eastern Africa Division Sales Revenue Cost of Sales Gross profit Staff Costs Operating Expenses Resorts Head office Head office royalty charge Operating Profit Finance Costs Profit before tax Capital Employed Earnings Per Share (EPS) Return on Capital Employed (ROCE) Cost of Capital $m 668 66 602 156 160 100 186 Central Western Africa Africa Division Division Sm 642 62 580 144 156 96 184 $m 912 76 836 158 166 136 376 Northern Southern Africa Africa Division Division Sm 1,064 116 948 180 166 160 442 Total 20X9 $m Sm 1,643 4,929 160 480 1,483 319 324 246 594 4,449 957 972 720 738 1,062 255 807 $4,944 $5.7 21.48% 13% Total 20X8 $m 4,803 396 4,407 954 945 705 720 1,083 246 837 $4,845 $5.55 22.34% 13% Growth Year on Year 2.043% 2.703% -3.85% The CEO of ACL has proposed the following preliminary measures for the BSC: Key Strategic Perspective Strategic financial performance Customer satisfaction Resort performance against budget Employee satisfaction Metric Financial performance benchmarked to ACL's main competitors' operating profit and return on capital employed. Customer satisfaction survey scores Cost variance analysis for each hotel Staff turnover The scorecard must be consistent with the goal of meeting the strategic mission and critical success factors. It is imperative that the operational measurements match the strategic performance measurement into a coherent framework. You have learnt that on average only 1% of ACL's staff manage to receive their maximum possible bonus annually. In fact, about 90% of staff receive no bonus and this has demotivated employees. Employees complain of challenging, unrealistic targets and turnover is high. Under the new performance reward system, employee/management targets are to be derived from the BSC's strategic measures on the basis of an employee's area of responsibility. Hotel managers will be given challenging targets based on their hotel's performance against budgeted profit, industry wide staff turnover and the company's average customer satisfaction scores. Required A. Evaluate, from both a theoretical and practical perspective, the current strategic performance report and the choice of performance metrics. [400 words max] B. Compute the following: 1. The ROI for 20X9 and 20X8. II. The residual income for 20X9 and 20x8. [25 marks] [15 marks] C. Evaluate ACL's proposed balanced scorecard. In doing so, discuss the four perspectives that would enable managers to use the BSC for strategic management purposes by proposing suitable improvements to the measures suggested. Provide examples of measures, targets and initiatives that can be employed by ACL. (You may use the metrics in B as indicators) [500 words max] [30 marks] D. The CEO of ACL has indicated that the company would like to benchmark the sustainability part of its balanced scorecard (BSC) against that of the Hilton Group's Grand Vacations properties (HGVC). You have found out that 'Hilton has made tracking and reporting energy, water and waste as a brand standard across all of its hotels through its LightStay" programme. Using specific examples, advise the CEO on how to incorporate sustainability objectives and measures into the proposed Balanced Scorecard for ACL. [300 words max]