Case 1223 Balanced Scorecardlo 124haglund Department Store

Case 1223 Balanced Scorecardlo 124haglund Department Store Is Loca

Haglund Department Store is located in the downtown area of a small city and has been profitable for many years. However, it is now facing increasing competition from large national chains on the outskirts of the city. Recently, the downtown revitalization has given hope for restoring profitability. Management of Haglund Department Store is in the process of designing a balanced scorecard with a focus on two key problems: late customer payments with high bad debt levels caused by incorrect billing entries by salesclerks, and large losses on unsold seasonal apparel that is resold at a discount or written off. A disorganized and ineffective discussion about the balanced scorecard has taken place, with several managers suggesting various performance measures, including error rates on charge accounts, sales clerk training, accounts receivable age, sales metrics, customer satisfaction, unsold inventory, and employee courtesy.

The task is to construct an integrated balanced scorecard using only the given performance measures, following the format of a typical scorecard and illustrating causal links between measures. The scorecard should address strategies for reducing accounts receivable issues and unsold merchandise. Predictions about performance after one year of implementation should also be discussed, including how management should interpret partial improvements and the potential reasons behind them.

Paper For Above instruction

The balanced scorecard approach provides a comprehensive framework that aligns business activities to the company’s strategy, offering performance measures in four perspectives: financial, customer, internal business processes, and learning and growth. For Haglund Department Store, the primary issues revolve around receivables management and inventory turnover. Consequently, the scorecard should emphasize strategies to improve billing accuracy, reduce customer disputes, accelerate receivables collection, and minimize unsold seasonal merchandise losses through better operational efficiencies and customer satisfaction.

Constructing the Balanced Scorecard

In the financial perspective, the ultimate goal is to increase total profit. Intermediate measures include profit per employee, sales per employee, sales per square foot, and sales revenue. Improved internal processes begin with reducing billing errors; hence, the percentage of charge account bills with errors and the percentage of salesclerks trained to correctly enter data are key measures. These improvements are expected to lead to a decrease in the average age of accounts receivable and a reduction in written-off bad debts. Additionally, managing unsold inventory involves tracking the percentage of unsold seasonal apparel relative to total cost of sales, with the aim to lower this measure.

From a customer perspective, satisfaction with billing accuracy is a critical measure and can be influenced by the percentage of charge account bills with errors. Enhancing billing accuracy should decrease customer disputes and improve satisfaction, which in turn fosters loyalty and timely payments. Employee courtesy, although perhaps less direct, can further contribute to a positive customer experience.

The learning and growth perspective supports these objectives by training salesclerks, which is crucial for sustained improvements. The percentage of employees attending cultural diversity workshops contributes to a more engaged workforce, fostering a culture of quality and continuous improvement, potentially translating into fewer billing errors and better inventory management.

The causal links within the scorecard can be visualized as follows: training salesclerks increases billing accuracy (% of bills with errors decreases), which reduces customer disputes. This leads to a decrease in the average age of accounts receivable, lowers bad debts (% written-off accounts decreases), and accelerates cash flow. Simultaneously, improved inventory management reduces unsold seasonal stock, decreasing loss on distressed merchandise. These combined effects ultimately enhance total profit.

Performance measures should reflect these causal relationships. For instance, increases in sales clerk training (% of clerks trained) should lead to decreases in billing errors and customer disputes. Reduced billing errors should improve customer satisfaction and decrease accounts receivable age, reducing bad debts. Improved inventory management should decrease unsold stock percentage. Financially, these efficiency gains should boost profitability.

Next Steps After One Year

If, after one year, some measures improve while others do not, management must analyze the underlying causes. For example, if customer satisfaction with billing accuracy improves but the average age of accounts receivable and bad debts remain unchanged, this could suggest that while customers perceive billing as more accurate, systemic issues in collection processes or credit policies persist, preventing faster cash collection.

If measures such as the average age of receivables, bad debts, and unsold inventory improve but total profits do not, it indicates that operational efficiencies or cost reductions have not translated into higher profitability. This disconnect may occur if revenue growth stagnates or if costs saved on inventory or receivables are offset by increased operational costs elsewhere. Management should conduct a comprehensive review to identify bottlenecks and unintended consequences of implemented strategies.

In both scenarios, management needs to systematically analyze data, understand causal relationships, and adjust strategies accordingly. For instance, enhancing collection efforts, revising credit policies, or innovating inventory management might be required. Continual monitoring and refining of the scorecard will help align operational performance with strategic financial goals, fostering long-term success.

Conclusion

The successful implementation of a balanced scorecard for Haglund Department Store depends on carefully selecting performance measures that reflect strategic priorities, establishing clear causal links, and continuously reviewing outcomes. By addressing billing accuracy, collection efficiency, and inventory management, the retailer can improve financial performance while simultaneously enhancing customer satisfaction and staff capabilities. Ongoing analysis and strategic adjustments are crucial to sustain improvements and achieve long-term profitability.

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