Question 1: Creating Balanced Scorecards That Support Different Strategies

The Performance Enhancement Group (PEG) helps companies to build balanced scorecards. As part of its marketing efforts, (PEG) conducts an annual balanced scorecard workshop for prospective clients. You are PEGs newest employee, so your boss has asked you to participate in this years workshop by explaining to attendees how a companys strategy determines the measures that are appropriate for its balanced scorecard. Your boss has provided you with the excerpts below from the annual reports of two current PEG clients. She has asked you to use these excerpts in your portion of the workshop.

Excerpt from Applied Pharmaceuticals annual report:

The keys to our business are consistent and timely new-product introductions and manufacturing process integrity. The new-product introduction side of the equation is a function of research and development (R&D) yield (e.g., the number of marketable drug compounds created relative to the total number of potential compounds pursued). We seek to optimize our R &D yield and first-to-market capability by investing in state-of-the-art technology, hiring the highest possible percentage of the best and the brightest engineers, and providing world-class training to those engineers. Manufacturing process integrity is all about establishing world-class specifications and then relentlessly engaging in prevention and appraisal activities to minimize defect rates. Our customers must have an awareness of and respect for our brand image of being first to market and first in quality. If we deliver on this pledge to our customers, then our financial goal of increasing our return on shareholders equity should take care of itself.

Excerpt from Destination Resorts Internationals annual report:

Our business succeeds or fails based on the quality of the service that our front-line employees provide to customers. Therefore, we must strive to maintain high employee morale and minimize employee turnover. In addition, we must train our employees to use technology to create one seamless worldwide experience for our repeat customers. Once an employee enters a customer preference (e.g., provide two extra pillows in the room, deliver freshly brewed coffee to the room at 8:00 AM. etc.) into our database, our worldwide workforce strives to ensure that a customer will never need to repeat this preference at any of our destination resorts. If we properly train and retain a motivated workforce, we should see continuous improvement in our percentage of error-free repeat customer check-ins, the time taken to resolve customer complaints and our independently assessed room cleanliness. This in turn should drive improvement in our customer retention, which is the key to meeting our growth goals.

Select balance scorecard measures for each company and link the scorecard measures using the framework from Exhibit 12-6. Use arrows to show the causal links between the performance measure and show whether the performance measure should increase or decrease over time. Feel free to create measures that may not be specifically mentioned in the chapter, but nonetheless make sense given the strategic goals of each company.