Review the enclosed case "True Coop Community Bank Case
", and prepare a report based on the requirements below. Upload your answer file(s) here on or before the due date given. Your report on the above will be graded using the rubric available in the Files folder in Canvas. The case report should be approximately 2-3 pages in length.
Required:
Prepare a report to the Board of Directors that explains how the BSC may be used to help TCCB achieve its strategic goals. Include the following in your report:
1) A table that categorizes each of the measures in Exhibit A2 into one of the four BSC perspectives. State why you placed a measure in a particular perspective.
2) Two cause-and-effect chains are similar to the one shown in Exhibit A3. Use the measures listed in Exhibit A2 or suggest other measures you feel are appropriate. Be sure to include a causal chain explanation with your answer.
True Coop Community Bank - A Balanced Scorecard Case True Coap Community Bank (TCCB) is located in the Midwest US and has a total of 10 branches grouped into two divisions, the southern division (SD) and the northern division (ND). Each division consists of five branches; each branch employs a branch president, branch vice-president/chief loan officer customer service representatives, loan representatives, mortgage loan originators, head tellers, tellers, and administrative assistants. All branches are located within a 60-mile radius. TCCB has enjoyed strong financial success over the past few years but continues to look for ways to improve its performance. The strategic direction of the bank is reviewed annually at a meeting of top bank officials and outside consultants. The purpose of the meeting is to outline the vision and mission of the bank and to ensure all top managers understand and agree on the direction of the organization. In 2004, TCCB management adopted the master strategy of balancing profits with growth to ensure the bank remains an independent entity existing to provide quality service and products to an increasingly diverse customer base. Chris Billings recently was promoted from marketing director to SD president. The promotion came just as Chris finished her evening Masters of Business Administration degree in December 2006. As part of her graduate studies, she was introduced to the balanced Scorecard (BSC), a performance measurement system that directs decision-makers toward long-term value creating activities. Chris thought the BSC could be used to improve the financial performance of TCCB. In late December 2006, she approached the chief executive officer (CEO) and requested permission to implement the new program. TCCB's CEO was apprehensive about the new program. His reluctance stemmed from his own unfamiliarity with the BSC and Chris's short tenure as SD president. The CEO also was concerned about whether Chris's ideas would be accepted by the ND president and ND branch employees. Finally he was uncertain about the BSC's benefits. At the same time, the CEO did not want to respond negatively to Chris's first efforts as SD president. To appease Chris without totally committing the bank to implement the BSC, the CEO agreed to allow Chris to begin the process of developing the BSC in the five branches of her division. In turn, Chris agreed to make a presentation to the CEO and the bank's Board of Directors in three months. In this meeting, Chris would present BSC concepts and how she planned to use the program to improve the financial performance of her branches. Given the short period of time to design a pilot study, Chris wondered how she could convince the Board of Directors to give her permission to implement the BSC. She knew she must convince the SD branch presidents of its value. On January 7th, 2007, Chris met with her branch presidents to discuss the BSC program and enlist their help in developing balanced Scorecards for their branches. She began the meeting by distributing a handout (Exhibit Al) highlighting the key objectives of the BSC. She used the handout to inform the branch presidents of the four business "perspectives" (categories of measures to be included on the BSC). The example measures she included on the handout are from a hospital that had implemented the BSC. Since she did not have example measures from a bank using the BSC, she wanted to show the branch presidents measures from another service industry for them to consider. As the handout shows, the hospital uses operating margin and cost per case as their primary financial measures, recommendation ratings from outgoing patients and discharge timeliness information as customer measures, length of stay and readmission rate (patients being admitted again for the same injury or illness) for the internal business measures, and employee training and retention measures in the learning and growth perspective. She then instructed the branch presidents to work together to develop meaningful measures to be included on branch BSC. While each branch would eventually develop a branch specific scorecard, she believed the branches were similar enough to allow branch presidents to work together initially. The group was to meet again in six weeks to discuss their progress in developing branch BSCs. 1 The group meeting on February 25th did not go as well as Chris had hoped. While the branch presidents had done a good job of identifying areas that needed attention within each branch, the information presented could, at best, only be considered as raw materials necessary to build a BSC program. Much work was needed prior to implementing the program. With time running out, Chris grew concerned about the scheduled meeting with the Board of Directors on March 31st. She had nothing concrete to present at the meeting and worried she might not receive permission to pursue the program if she did not make a solid presentation to the board. Chris's goal is to present a group of quantifiable measures that are linked through causal relationships and lead to improvement of key financial measures. One of the primary benefits of the BSC comes through mapping the causal relationships from nonfinancial performance measures to the three primary financial measures the bank monitors. Nonfinancial measures are categorized into three perspectives: Learning and Growth, Internal Business Processes, and Customer Focus. The cause and effect linkages in the BSC will occur in the following manner. if leaming improves, then internal processes will improve. If internal processes improve, then customer value will increase. If customer value increases, financial performance will improve. Financial performance is the ultimate evaluation of a firm's strategy. If financial performance improves significantly, the firm's strategy is successful. Thus, if the strategy is good, the measures of the nonfinancial perspectives will be lead indicators of increasing value that will ultimately he proven by improved financial measures. Exhibit A2 provides a list of performance measures developed by the branch presidents and notes Chris took during meetings with them. Exhibit A3 illustrates a sample cause-and-effect chain. For example, as shown in Exhibit A3, if employees receive training in sales effectiveness, customer service, product profitability, and local bank knowledge, they will be better equipped to provide customers with higher quality service. TCCB measures the effectiveness of its training programs by having employees take in-house tests on various training topics. By increasing employee knowledge and skills, higher quality referrals and cross-sell proposals will take place, leading to higher customer satisfaction and greater customer retention. Maintaining the current customer base provides the basis for growth in deposit and loan balances, while a greater number of successful referrals and cross-sells increase non-interest income Chris wants to prepare a series of cause-and-effect chains to illustrate to the Board of Directors how the BSC can be used to improve performance on three key financial measures loan balances, deposit balances, and non- interest income. She knows that any program emphasizing improvement in these three measures has a strong chance of receiving approval. Required: Prepare a report to the Board of Directors that explains how the BSC may be used to help TCCB achieve its strategic goals. Include the following in your report: 1) A table that categorizes each of the measures in Exhibit A2 into one of the four BSC perspectives. State why you placed a measure in a particular perspective. 2) Two cause-and-effect chains similar to the one shown in Exhibit A3. Use the measures listed in Exhibit A2 or suggest other measures you feel are appropriate. Be sure to include a causal chain explanation with your answer. 2 Exhibit A1 Key Business Perspectives and Lead/Lag Indicators KEY BUSINESS PERSPECTIVES Financial Perspective - Hawda we look te our sharchuliers The Financial obectives of the organization serve as the focus of altes. 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LEAD AND LAG INDICATORS: Mireless Nected in the store bares process and coming under lines serve as adidas improvement in ancil objectives because ingruerentinthece NFMis otonead or precede the ingrenent observed in Financial reasures Liwon the financial selected in the first met called by indicators Printerid chten Tagsreschter the promoting NA yed fire Kaputant Nurse's Powdesig is erw. Andeerd maal (19 ard Ykkond gezistow 2001 Exhibit A2 Performance Measures for TCCB Balanced Scorecards - Outstanding Loan Balonces Employee Traning Hours Dan Suci : rition Number of Products per le - Nutter News nie Sostation Sa Cala Perlistanas Thank You Caneta Nuh Cister Employee Torrow -Non-martinicana.innamalan oss second products proved by the rank Nil intestos actos atod with ATM cardinale, brokerage accounts, cheating, and travers checks. News C -New Acos - New Products Introduced - Referrals-referrals accur when an employee suggests a customer see the branchemployee for more informatie about product Crocs Sells samutiple products to a customer when the customer comes in for any one product Notes from Branch President Martins The most important facil assures rabarbare, depresses are non-interest incore. Everything we do should be anetowerd iTpring the final Customer satisfaction must be improwad. Because we are a small nunty tenk, warayonning quality services with a horretown" teel anyon wonderlmutteriche da rodadas Uurainpocos must hy training instaliratare, in der sales techniquas, TOT STIC, and product wiado prontality. This peorang would presencia de Sanders into a CRITETSSsia Tagrie care hard tenars afaria nanani is artietalaig. Exhibit A3 Cause-and-Effect Chain Illustration for TOCR Learning and Growth Perspective Il-Business Perspective Customer Parque Financial Perspection Numer of Training Houna Eroly Receive Castaner Rotion Race soflar CU with TCCS , , und News Employee Scanson is basedustab sales, service, and produst know edge kumber See Refrais ar Cros Customer Section Ratings on Orly Survey Cuccal Chain Exaluation Il sera para bang inaakte eest, prodat profility, and scalbarwady, then that prile bull ELST SHY unity inclut with a tlak pl. TOCE employees will be leder able to ascertain the nears of customers, they making higher quality referrals and Ores-cell proposals to customers and customers wilte nore setisfied and choose to continue banking wth TCCS. Hicreased referrals o cross-selesnore ses non-interest hare ant provides the bacis for growth in depositarloan lanca. Exhibit 01 Branch performance on key financial indicators Acom Depan Balance Las a Milion 51 Lar Illion 50 No-lucere Therandi Branch A B 151 Nana Thes (11 423.1 522 2910 Neofare 2007 Departinlanar| IMIR D 1014 1340 28.7 7 040 D E F 1983 121 1193 3440 3350 229 4330 589 21.9 145 287 508 6.D 1152 112 533 H 1 R2 51.1 71.2 ICE 2 EES 1148 118 516 1450 223.1 2300 2331 128 5
