Problem 9-21A (continued)
2. Students’ answers may differ in some details from this solution.
Applied Pharmaceuticals
Return on
Stockholders’ Equity
Financial
Customer
+
+
R&D Yield
Defect rates
Internal
Business
Processes
+
+
+
+
+
–
Problem 9-21A (continued)
Destination Resorts International
+
Financial
Sales
+
Internal
Business
Processes
+
Room cleanliness
Average time to
resolve customer
complaint
Percentage of
error-free repeat
customer check-ins
+
–
Problem 9-21A (continued)
3. The hypotheses underlying the balanced scorecards are indicated by the
arrows in each diagram. Reading from the bottom of each balanced
scorecard, the hypotheses are:
Applied Pharmaceuticals
o If the dollars invested in engineering technology increase, then the
R&D yield will increase.
o If the percentage of job offers accepted increases, then the R&D
Destination Resort International
o If the employee turnover decreases, then the percentage of error–
free repeat customer check-ins and room cleanliness will increase
and the average time to resolve customer complaints will decrease.
o If the number of employees receiving database training increases,
then the percentage of error-free repeat customer check-ins will
Problem 9-21A (continued)
Each of these hypotheses is questionable to some degree. For example,
in the case of Applied Pharmaceuticals, R&D yield is not the sole driver
of the customers’ perception of first–to-market capability. More
Problem 9-22A (45 minutes)
The answers below are not the only possible answers. Ingenious people
1. Speed-to-market can be improved by taking on less ambitious projects.
Instead of working on major product innovations that require a great
2. In this case, the ground crews raced from one arriving airplane to
another in an effort to unload luggage from these airplanes as soon as
possible. However, once the luggage was unloaded from the airplane it
3. In real life, the production manager simply added several weeks to the
delivery cycle time. In other words, instead of promising to deliver an
Problem 9-22A (continued)
4. As stated above, ratios can be improved by changing either the
numerator or the denominator. Managers who are under pressure to
increase the revenue per employee may find it easier to eliminate
employees than to increase revenues. Of course, eliminating employees
Before eliminating
the business unit
After eliminating
the business unit
Total revenue …………….
$120,000,000
$110,000,000
Total profits ………………
Learning
and
Growth
+
Customer
+
Case (60 minutes)
1. Student answers may differ concerning which category—learning and
growth, internal business processes, customers, or financial—a
particular performance measure belongs to.
Customer
satisfaction with
accuracy of charge
account bills
Percentage of sales
clerks trained to
correctly enter data
on charge account
slips
+
+
Case (continued)
A number of the performance measures suggested by managers have
2. The results of operations can be exploited for information about the
company’s strategy. Each link in the balanced scorecard should be
regarded as a hypothesis of the form “If …, then …”. For example, the
balanced scorecard on the previous page contains the hypothesis “If
Case (continued)
3. a. This evidence is inconsistent with two of the hypotheses underlying
the balanced scorecard. The first of these hypotheses is “If customers
express greater satisfaction with the accuracy of their charge account
bills, then the average age of accounts receivable will improve.” The
second of these hypotheses is “If customers express greater
satisfaction with the accuracy of their charge account bills, then there
b. This evidence is inconsistent with three hypotheses. The first of these
is “If the average age of receivables declines, then profits will
increase.” The second hypothesis is “If the written-off accounts
receivable decrease as a percentage of sales, then profits will
increase.” The third hypothesis is “If unsold inventory at the end of
the season as a percentage of cost of sales declines, then profits will
increase.”
Case (continued)
The reduction in unsold inventories at the end of the season as a
percentage of cost of sales could have occurred for a number of
Communicating in Practice
Date: Current date
To: Instructor
From: Student’s Name
Subject: Talk with a store manager
The student’s memorandum should address the following:
The name, title and job affiliation of the individual interviewed. (Note:
These data are not specifically required in problem but are essential