Haglund Department Store is located in the downtown area of a small city. While the store had

been profitable for many years, it is facing increasing competition from large national chains that

have set up stores on the outskirts of the city. Recently the downtown area has been undergoing

revitalization, and the owners of Haglund Department Store are somewhat optimistic that profitability

can be restored.

In an attempt to accelerate the return to profitability, management of Haglund Department

Store is in the process 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 they incur using the department stores charge card, and the company has far more

bad debts than are normal for the industry. If this problem were solved, the company would have

more cash to make much needed renovations. Investigation has revealed that much of the problem

with late payments and unpaid bills results from customers disputing incorrect charges on their

bills. These incorrect charges usually occur because salesclerks incorrectly enter data on the charge

account slip. Second, the company has been incurring large losses on unsold seasonal apparel.

Such items are ordinarily resold at a loss to discount stores that specialize in such distress items.

The meeting in which the balanced scorecard approach was discussed was disorganized and

ineffectively ledpossibly because no one other than one of the vice presidents had read anything

about how to build a balanced scorecard. Nevertheless, a number of potential performance measures

were suggested by various managers. These potential performance measures are:

a. Percentage of charge account bills containing errors.

b. Percentage of salesclerks trained to correctly enter data on charge account slips.

c. Average age of accounts receivables.

d. Profit per employee.

e. Customer satisfaction with accuracy of charge account bills from monthly customer survey.

f. Total sales revenue.

g. Sales per employee.

h. Travel expenses for buyers for trips to fashion shows.

i. Unsold inventory at the end of the season as a percentage of total cost of sales.

j. Courtesy shown by junior staff members to senior staff members based on surveys of senior

staff.

k. Percentage of suppliers making

l. Sales per square foot of floor space.

m. Written-off accounts receivable (bad debts) as a percentage of sales.

n. Quality of food in the staff cafeteria based on staff surveys.

o. Percentage of employees who have attended the citys cultural diversity workshop.

p. Total profit.

Required:

1. As someone with more knowledge of the balanced scorecard than almost anyone else in the

company, you have been asked to build an integrated balanced scorecard. In your scorecard,

use only performance measures listed previously. You do not have to use all of the performance

measures suggested by the managers, but you should build a balanced scorecard that

reveals a strategy for dealing with the problems with accounts receivable and with unsold

not be concerned with whether a specific performance measure falls within the learning and

growth, internal business process, customer, or financial perspective. However, use arrows

to show the causal links between performance measures within your balanced scorecard and

explain whether the performance measures should show increases or decreases.

2. Assume the company adopts your balanced scorecard. After operating for a year, some performance

measures show improvements, but not others. What should management do next?

3. a. Suppose customers express greater satisfaction with the accuracy of their charge account

bills but the performance measures for the average age of accounts receivable and for bad

debts do not improve. Explain why this might happen.

b. Suppose the performance measures for the average age of accounts receivable, bad debts,

and unsold inventory improve, but total profits do not. Explain why this might happen.

Assume in your answer that the explanation lies within the company