Direct National Deliveries Ltd (DND) is a leading express courier company, offering a comprehensive high quality service across the whole of New Zealand. DNDs mission is to be a world-class national courier company, and the CEO, Nikki Hamblin, explains that the aspirations underlying this mission are to have engaged and motivated staff, excellent customer service, engaged and loyal customers and world-class profitability.

Nikki admits that the target return on investment of 16% set by the board currently seems out of reach, and she therefore needs to improve performance measurement and management. In the board meeting, Usain Bolt, the sales director argues that the company should focus on achieving 100% on-time delivery. Nikki responds:

Staff cant control the weather, traffic congestion or road accidents, so they cant be expected to achieve 100% on-time delivery. There are other important factors relating to providing an excellent customer service. Even efficient order processing and accurate invoicing are important. We have had problems with high staff turnover and absenteeism lately, particularly in relation to customer relationship management staff. New staff are unlikely to give excellent customer service until they are fully trained.

Yohan Blade, the CFO, adds that the company needs to work harder on complaint resolution as the costs associated with complaints are huge in terms of lost opportunities and lost customers. Yohan also emphasises that profitability must be achieved through volume increases from existing customers, by acquiring new customers and by cost savings through efficiency gains.

Required:

1. Explain the limitations of the financial performance measure (i.e., return on investment) used by DND. (2 marks)

2. Design a balanced scorecard for DND. Suggest one suitable objective for each performance perspective. For each objective, provide one relevant lag indicator and one corresponding lead indicator. Write your answers in the table provided. (7 marks)