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REQUIREMENTS 1. Prepare an analysis to determine whether the BSC appears to have had an effect. 2. Summarize your results in a presentation appropriate for the Board of Directors. 3. Identify differences in implementation quality that may explain variation in performance among branches A-E. What implementation recommendations would you make to ND managers who are considering adopting the balanced scorecard? Please prepare your response to Cases A and B in the form of a 15minute video presentation. 1 Most excerpts are actual comments gathered from interviews assessing a balanced scorecard implementation. Tom Aibright is the J. Reese Phifer Faculty Fellow at Culverhouse School of Accountancy, University of Alabama, Thscaloosa, Ala. Stan Davis is an assistant professor of accountancy at Babcock Graduate School of Management, Wake Forest University, WinstonSalem, Aleecia Hibbets is a doctoral student at Culverho use School of Accountancy. University of Alabama. She can be reached at (205) 348-0149 or [email protected] Key Business Perspectives and Lead/Lag Indicators [*] KEY BUSINESS PERSPECTIVES Financial Perspective--How do we look to our shareholders? * The financial objectives of the organization serve as the focus of all activities. Every measure selected for a balanced scorecard should be

part of a causal chain that results in improved performance on financial objectives. * Some examples of financial perspective objectives in the hospital industry include operating margins, cost per case, and capital fundraising. Customer Perspective--How do customers view us? * Organizations must identify key customers and market segments. Organizations must also determine how they add value for customers and seek to deliver better products and services that are tailored to specific customer needs. * Some examples of customer perspective objectives in the hospital industry include improved recommendation ratings and discharge timeliness. Internal Business Perspective--At what must we excel? * Organizations identify those processes that must be improved or created in order to reach the objectives of the customer and financial perspectives. * Some examples of internal business perspective objectives in the hospital industry include reducing the readmission rate (for the same medical condition) and increasing the doctor-to-patient contact time. Learning and Growth Perspective--How do we continue to improve and create value? * To achieve the lofty standards set in the previous three objectives, organizations must invest in their people and infrastructure. For this perspective, organizations identify where resources are needed and craft a plan to enable its employees to achieve the objectives of the other perspectives.

* Some examples of learning and growth perspective objectives in the hospital industry include increased employee training and retention, improved information technology systems, and adequate staffing for all shifts. LEAD ND LAG INDICATORS Nonfinancial measures (NFMs) selected in the customer, internal business process, and learning and growth perspectives serve as lead indicators of improvement in financial objectives because improvement in these NFMs often "lead" or precede the improvement observed in financial measures. Likewise, the financial measures selected in the financial perspective are often called lag indicators because improvement in these financial measures often "lags" or comes after the improvement in the NFMs. (*.) For additional information see Kaplan and Norton's Translating Strategy into Action: The Balanced Scorecard (1996) and The Strategy-Focused Organization (2001). Table 2: Performance Measures for TCCB Balanced Scorecards * Outstanding Loan Balances * Deposit Balances * Number of Products per Customer * Number of New Customers * Noninterest Income (Nll)--income earned from fees on services and products provided by the bank. Nll includes fees associated with CDs, ATM cards, insurance policies, lock boxes, annuities, brokerage accounts, checking accounts, and travelers' checks. * New Loans Created * New Accounts

* New Products Introduced * Employee Training Hours * Customer Satisfaction * Customer Retention * Employee Satisfaction * Sales Calls to Potential Customers * Thank-You Calls/Cards to New & Existing Customers * Employee Turnover * Referrals--referrals occur when an employee suggests a customer see another branch employee for more information about a product * Cross-Sells--selling multiple products to a customer when the customer comes in for only one product Notes from Branch Presidents' Meetings The most important financial measures are loan balances, deposit balances, and noninterest income. Everything we do should be aimed toward improving these three financial measures. Customer satisfaction must be improved. Because we are a small community bank, we rely on delivering quality services with a "hometown" feel. We rely on word-of-mouth advertising as much as we do radio and newspaper ads. Our employees must have training in several different areas, including sales techniques, customer service, and product knowledge/profitability. This type of training would improve the interactions between our employees and customers, allowing tellers

and Customer Sales Representatives to recognize customer needs and make more effective referrals and new product offerings. Table 3 Branch Performance on Key Financial Indicators AS OF JUNE 30, 2001 BRANCH LOAN DEPOSIT NONINTEREST BALANCE BALANCE INCOME (NII) (MILLION $) (MILLION $) (THOUSAND $) A 39.3 85.1 476.0 B 58.1 104.5 428.0 C 63.7 136.3 529.0 D 46.7 93.1 291.0 E 54.4 109.3 343.0 F 42.9 87.5 345.0 G 64.5 115.2 498.0 H 33.2 78.2 230.0 I 51.1 93.7 293.0 J 71.2 150.8 589.0 AS OF JUNE 30, 2000 BRANCH LOAN DEPOSIT NONINTEREST BALANCE BALANCE INCOME (NII) (MILLION $) (MILLION $) (THOUSAND $) A 35.9 77.0 411.0 B 49.7 101.4 399.0 C 56.1 124.0 474.0 D 45.1 86.7 276.0 E 53.9 108.2 344.0 F 41.9 88.5 335.0 G 64.5 114.8 477.0 H 32.7 77.8 233.0 I 50.8 91.6 280.0 J 68.0 145.0 571.0

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