International Tennis (IT) is a vertically integrated full-service tennis corporation. It produces tennis equipment, including nets, lights, balls, and racquets under the IT brand, selling them in the wholesale market. It also promotes and manages tennis tournaments in the U.S. and Europe. It has three wholly-owned entities the headquarters based in New York, the production facility located in Guangzhou, China and one tournament sales organization located in London.

2021 has been a challenging year. Performance measurement for all entities has always been done using the Balanced Scorecard (BSC) approach, with all entities having the same measures. Guangzhou and London management are both questioning the validity of the BSC in the current environment. The President of IT, Chris Everest, is on a Zoom call with Le Federar from London and Tom Murray from Guangzhou, regarding the measurements for 2021.

Chris: We need to review the second quarter scorecards. I see all operations are still below budget, and we reduced the budgets by a sizable amount due to the pandemic. Whats going on? Are the measurements below target due to the pandemic or do we have operational issues? I am worried about the second half of the year. What is the message to our shareholders? Our stock has dropped in price and the stock market has done well. What measurements need to be on the scorecard to access how we are doing in this Covid environment? What measures can we use in the last two quarters to incentivize our employees to work to improve profits during this time?

Le: First of all, I never liked all of us having the same measurements. My organization is a sales force we are a revenue center. Why do we have these high-level metrics like return on investment, when our job is to promote tournaments? All the measurements dont even apply to us! And, tennis tournaments were only allowed to have reduced capacity this year, which we did not anticipate. My cost of sales is all fixed costs; we have the rental of the stadiums, the payments to the athletes and my selling expenses represent both fixed and variable costs. How is that shown on this scorecard? Our sales force is working just as hard and the demand is there, but we are not allowed to sell more tickets. Perhaps we could reduce some advertising. We need more specific measures for our organization that reflects what we do and the fact that the Delta variant is rampant in Europe. My employees look at this scorecard and have no idea what they should be doing currently, as our normal operations are greatly diminished. This new Delta variant is really affecting my operations.

Chris: We are all in the same boat, so to speak. We all answer to the same shareholders, those of IT. Thats why we have the same measures; weve discussed this so many times Le. But I agree that we need a change. Lets come up with new measurements that are more specific to your business but also conducive to corporate profits.

Tom: I agree with Le. Our issues are production related; we are a cost center. ROI is a good measurement, but not specific enough for us. Our issue is the availability of supplies and workforce; the demand is there for us, but I cant hire enough workers. I currently have 50 open positions! Also, the supply chain just cannot deliver enough goods on time. I am paying my workers to literally wait for the aluminum to arrive so they can work on the racquets. These issues show indirectly in ROI, but not specifically in any measures. We need a specific scorecard for our business only reflecting our geographic challenges and strengths and our specific mission. And somehow we need to reflect the challenges due to Covid.

Chris: Well, perhaps its a good time to rethink the measurements on the balanced scorecard. I heard the USF Cost 2 class is an expert in Balanced Scorecard. Lets hire them as consultants.

1. Produce a revised balanced scorecard for the entire entity (IT Consolidated) and one other entity; you can choose China or London. Each quadrant should have 3 measurements. Explain why you chose each measurement. You will not necessarily have the numbers for each key performance indicator; that information would need to come from the company. Make sure the China/London scorecard reflects their challenges.

IT Consolidated - January through June 2021 FINANCIAL INTERNAL BUSINESS PROCESSES Actual 12% Budget 21% Actual 50% Budget 95% Return on investment Percent of venues filled Operating income 5,900,000 10,300,000 Cost per tennis racquet 65 50 Days sales outstanding 52.50 30 # wholesalers carrying brand 8 10 CUSTOMER LEARNING AND GROWTH Actual 63% Budget 80% Actual 17.50 Budget 25 Customer survey - brand recognition Hours training per employee Customer wait time to obtain tickets (phones) 53 30 Employee turnover 33% 5% Customer survey - satisfaction with equipment 80% 95% 50% 100% Participation in employee mentoring program New York 0 Sales ACTUAL China London 18,000,000 20,000,000 12,000,000 12,000,000 6,000,000 8,000,000 350,000 5,000,000 1,600,000 500,000 Cost of sales Gross Margin Selling expenses General and Admin 0 New York 0 0 0 150,000 500,000 Total IT 38,000,000 24,000,000 14,000,000 5,500,000 2,600,000 BUDGET China London 20,000,000 30,000,000 11,000,000 20,000,000 9,000,000 10,000,000 700,000 5,000,000 2,000,000 500,000 Sales Cost of sales Gross Margin Selling expenses General and Admin Total IT 50,000,000 31,000,000 19,000,000 5,800,000 2,900,000 0 100,000 400,000 Operating Income 4,050,000 2,500,000 (650,000) 5,900,000 Operating Income 6,300,000 4,500,000 (500,000) 10,300,000 Total Assets 30,000,000 18,200,000 1,800,000 50,000,000 China Balanced Scorecard - January through June 2021 FINANCIAL Actual 14% Budget 21% INTERNAL BUSINESS PROCESSES Actual Percent of venues filled n/a Budget 95% Return on investment Operating income 4,050,000 6,300,000 Cost per tennis racquet 65 50 Days sales outstanding 45 30 #wholesalers carrying brand 8 10 CUSTOMER LEARNING AND GROWTH Actual Actual 50% Budget 80% Budget 25 Customer survey - brand recognition Hours training per employee 15 Customer wait time (phones in seconds) 45 30 Employee turnover 25% 5% Customer survey - satisfaction with equipment 80% 95% 60% 100% Participation in employee mentoring program London Balanced Scorecard - January through June 2021 FINANCIAL Actual Return on investment 14% Budget 25% INTERNAL BUSINESS PROCESSES Actual Percent of venues filled 50% Budget 95% Operating income 2,500,000 4,500,000 Cost per tennis racquet n/a 50 Days sales outstanding 60 30 #wholesalers carrying brand n/a 10 CUSTOMER LEARNING AND GROWTH Actual 75% Budget 80% Actual 20 Budget 25 Customer survey - brand recognition Hours training per employee Customer wait time (phones) 60 30 Employee turnover 40% 5% Customer survey - satisfaction with equipment n/a 95% 40% 100% Participation in employee mentoring program IT Consolidated - January through June 2021 FINANCIAL INTERNAL BUSINESS PROCESSES Actual 12% Budget 21% Actual 50% Budget 95% Return on investment Percent of venues filled Operating income 5,900,000 10,300,000 Cost per tennis racquet 65 50 Days sales outstanding 52.50 30 # wholesalers carrying brand 8 10 CUSTOMER LEARNING AND GROWTH Actual 63% Budget 80% Actual 17.50 Budget 25 Customer survey - brand recognition Hours training per employee Customer wait time to obtain tickets (phones) 53 30 Employee turnover 33% 5% Customer survey - satisfaction with equipment 80% 95% 50% 100% Participation in employee mentoring program New York 0 Sales ACTUAL China London 18,000,000 20,000,000 12,000,000 12,000,000 6,000,000 8,000,000 350,000 5,000,000 1,600,000 500,000 Cost of sales Gross Margin Selling expenses General and Admin 0 New York 0 0 0 150,000 500,000 Total IT 38,000,000 24,000,000 14,000,000 5,500,000 2,600,000 BUDGET China London 20,000,000 30,000,000 11,000,000 20,000,000 9,000,000 10,000,000 700,000 5,000,000 2,000,000 500,000 Sales Cost of sales Gross Margin Selling expenses General and Admin Total IT 50,000,000 31,000,000 19,000,000 5,800,000 2,900,000 0 100,000 400,000 Operating Income 4,050,000 2,500,000 (650,000) 5,900,000 Operating Income 6,300,000 4,500,000 (500,000) 10,300,000 Total Assets 30,000,000 18,200,000 1,800,000 50,000,000 China Balanced Scorecard - January through June 2021 FINANCIAL Actual 14% Budget 21% INTERNAL BUSINESS PROCESSES Actual Percent of venues filled n/a Budget 95% Return on investment Operating income 4,050,000 6,300,000 Cost per tennis racquet 65 50 Days sales outstanding 45 30 #wholesalers carrying brand 8 10 CUSTOMER LEARNING AND GROWTH Actual Actual 50% Budget 80% Budget 25 Customer survey - brand recognition Hours training per employee 15 Customer wait time (phones in seconds) 45 30 Employee turnover 25% 5% Customer survey - satisfaction with equipment 80% 95% 60% 100% Participation in employee mentoring program London Balanced Scorecard - January through June 2021 FINANCIAL Actual Return on investment 14% Budget 25% INTERNAL BUSINESS PROCESSES Actual Percent of venues filled 50% Budget 95% Operating income 2,500,000 4,500,000 Cost per tennis racquet n/a 50 Days sales outstanding 60 30 #wholesalers carrying brand n/a 10 CUSTOMER LEARNING AND GROWTH Actual 75% Budget 80% Actual 20 Budget 25 Customer survey - brand recognition Hours training per employee Customer wait time (phones) 60 30 Employee turnover 40% 5% Customer survey - satisfaction with equipment n/a 95% 40% 100% Participation in employee mentoring program