ACCT IS 710: Managerial Accounting

Assignment #1 (8 points)

Please feel free to provide responses in the spaces below or utilize Excel, etc. If using Excel or another form of
submission please clearly label your responses for ease of identification.

Question #1
A company attempted to build a Balanced Scorecard by fitting the companys objectives and financial and non-financial
performance measures into the four Balanced Scorecard perspectives. Briefly explain why this approach may not lead to
a well-developed Balanced Scorecard. (1 point)
Answer #1
There are a couple of reasons that this approach would not lead to a well-developed Balance Scorecard as mentioned
below:

The companys objectives may or may not be based on a sound strategy. A company that doesnt have a sound
strategy, will never be able to generate an effective Balanced Scorecard.
Leading measures should be used based on potential ways to grow rather than measures already in place.
Question #2
A companys CEO wanted his/her company to develop a Balanced Scorecard. After giving it considerable thought to who
should lead the development, he/she decided on the head of information technology (IT) because the Balanced Scorecard
would obviously involve collecting and analyzing information leading to the needed measurements. Briefly describe and
explain three (3) common problems (i.e., pitfalls) that may occur with the CEOs approach to the development and
management of this Balanced Scorecard. (1 point)

Answer #2
The 3 possible problems that may occur with the CEOs approach are as follows:

The head of IT may not necessarily have the full understanding of the overall company strategy, and without the
balanced scorecard aligning with the company strategy, this development might be a futile process.
It will be hard for the other department heads to be on board with the Balanced Scorecard developed by the head
of IT because they would have no say and very limited accountability in each metric of the Balanced Scorecard.
Balanced Scorecard should never be developed for the whole organization, it should be built separately for
different parts of the organization. Therefore, a better approach would have been for all departments to have a
different Business Scorecard.

Question #3 (note: there are seven (7) requirements in this question)

Instructions: read the assigned reading titled HCS: Designing a Balanced Scorecard in a Knowledge-Based Firm
available via the course website and address the following seven (7) requirements.
1. In your own words, summarize HCS' strategy. (.5 points)
Answer 1. HCS has always had a customer centric strategy, i.e. a focus on a long-standing customer relationship. This
strategy aims to develop and maintain customer loyalty by continuously modifying services to specific customer needs.
As mentioned in the case, this strategy requires flexible and responsive business processes and a highly educated, capable,
and empowered staff who partner closely with customers to develop and implement solutions that work.
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2. What performance measures does HCS currently use? (.5 points)
Answer 2. HCS uses the following performance measures:

Financial
o Quarterly Revenues
o Expenses
o Comparison of quarterly revenues and expenses
o Hours billed and paid by quarter; and their comparison with revenues and expenses
Customer
o Non-financial measures related to customer satisfaction and employee attitudes
Employee response time and employee morale survey

3. What are your impressions of HCS' current use of performance measures (i.e., are the current measures adequate for
its business)? Please explain why or why not. (1 point)
Answer 3. The performance measures used by HCS are primarily financial performance metrics with a couple of non-
financial metrics around customer satisfaction and attitudes.
In addition to these metrics, HCS should also incorporate learning and business process performance metrics to create
long term growth and value creation as well as put additional emphasis on customer related performance metrics.

4. Provide at least two (2) potential performance measures related to HCS' financial objective (refer to Figure 4 in the
case and please note there is one (1) financial objective). In your response provide a brief definition of each measure
(e.g., if your measure is 'profit per employee' then your definition of that measure may be 'the amount of profit for a
quarter divided by the number of employees employed in that quarter') and provide your reasoning as to why your
performance measures are appropriate. (1 point)
Answer 4. Two important financial metrics that ensure financial growth over a long term are as follows:

Cash Flow Cash flow is the amount of money that moves in and out of an organization in a given
time period. For a services company such as HCS to have seamless operations and consistent
performance year after year, having a positive cash flow is very important. For a lot of companies, the
primary reason for failure is a negative cash flow for a longer time than they can handle, signifying
the importance of this metric.
Increased return on equity Return on equity is the profit incurred on shareholders investments. For
a customer centric services company such as HCS, it is also very important to keep the shareholders
happy by consistently showing positive return on equity. It is easier for shareholders of services
companies to try out different strategies such as going off-shore or fire the top management to get the
desired results if the current performance is not satisfactory. On the other hand, if the shareholders are
happy they would invest more and the company would be more likely to grow long term.

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5. Provide at least two (2) potential performance measures for each of HCS' customer objectives (refer to Figure 4 in the
case and please note there are two (2) customer objectives). In your response provide a brief definition of each
measure and provide your reasoning as to why your measures are appropriate. (1 point)

Answer 5. Customer metrics:

To know and understand the customer needs
Market share in existing customer base Market share in existing customer base can be calculated by
calculating the business done by all other competitors with the same customer base. This metric helps the
company compare itself with the competitors and potentially increase the business by providing better
services to the customer compared to all its competitors.
Customer Morale Survey Customer morale survey provides the company an understanding of what the
customers like and dislike about the companys operations. Typically, Net Promoter Scores are calculated
through such surveys to measure the companys performance versus industry standards. The higher the net
promoter score, the more the customer happiness with the company.

To engage in service over self-interest (client will come first)

Employee Response Time Employee response time is the amount of time the employee takes to resolve the
customers problems or to cater to the customers needs. For HCS, which focuses its strategy entirely on
keeping the customers with them for a long time, employee response time is critical. The more business that
a customer brings, the more power it must move to a different organization. Typically, customers of service
organizations do business with companies who can deliver them solutions in the minimum possible amount
of time, irrespective of the cost, making this metric extremely important.
Employee Hours Billed Employees in service firms typically must bill the number of hours that they
worked on. The trends for the number of hours billed can give an idea of whether the employee is dedicated
to meeting customers needs or not. A consistent billing of 40 hours per week would typically mean that the
employee wants to work only the required number of hours, while a fluctuation would show that the
employee stepped up when the customer needed it the most.

6. Provide at least one (1) potential performance measure for each of HCS' internal business process objectives (refer to
Figure 4 in the case and please note there are three (3) internal business process objectives). In your response provide
a brief definition of each measure and provide your reasoning as to why your measures are appropriate. (1 point)

Answer 6. Internal business process metrics:

To encourage and promote knowledge sharing
Frequency of ideation sessions/ strategy discussions The frequency of ideation sessions around long term
strategy and goals for the employees can improve the efficiency within a company immensely. Typically,
firms that are focused on continuous improvement do so through learning from each other at ideation sessions
or discussions about strategy.

To be authentic
Have specific guidelines around communication To ensure authenticity in the form of timely, honest and
accurate communications, it is important for firms to have specific guidelines around how they want to
communicate. Often employees have nothing official to refer to when they have a conundrum regarding
communication and specific guidelines would help them in these matters.
To empower employees

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 Delegate more than just work As a manager of any employee who you want to empower, its important to
not only delegate additional responsibilities but also opportunities such as leading a team meeting, pitching
ideas to clients and so on. This will show employees that they are valuable to the company and have ever
increasing authority and responsibilities.

7. Provide at least one (1) potential performance measure for each of HCS' learning objectives (refer to Figure 4 in the
case and please note there are three (3) learning objectives). In your response provide a brief definition of each
measure and provide your reasoning as to why your measures are appropriate. (1 point)

Answer 7. Learning objectives metrics:

To maintain an open and collaborative culture in order to attract and retain employees
Hold diversity trainings for all new employees Diversity training is instruction aimed at helping participants
to gain cultural awareness in order to benefit the organization or company. All employees must understand
that all other employees were hired based on their capabilities and not based on any set quotas. Explaining the
recruitment process will also help employees gauge that all other employees are fully capable and have been
chosen using a standard process, which would increase empathy at workplace. After learning about these
trainings, more and more employees would want to associate themselves with such a dynamic and diverse
organization and attracting talent would become easier.

To seek diversity among our employees (diversity)

Develop a wing within the organization to seek talent from underrepresented communities Like top business
schools partner with consortium, companies should also look to either form a team within or partner with an
external organization focused at hiring of people from underrepresented communities. Not only will this make
the organization diverse, but also bring in fresh perspectives that might create a significant difference in the
functions of the company.

To ensure that our employees have achieved a sense of balance in order to give us the ongoing energy to be
efficient and effective (balance)
Work-life balance trainings Companies should teach their employees strategies to maintain a healthy work-
life balance and devise strategies for them that would help them avoid burnouts. Companies could then hold
these trainings every month or every quarter. They could have high performers deliver speeches on how they
maintain their efficiency while having a nice work-life balance at these sessions, which could also work as an
added incentive for high performers.