Having problems with this problem, doing pretty good with just a little help her

Question

Having problems with this problem, doing pretty good with just a little help here and there, until I hit a wall with this one.

2. Select balanced scorecard measures for each company and link the scorecard measures using the framework from Exhibit 11-5. Use arrows to show the casual links between the performance measures and show whether the performance measure should increase or decrease over time. Feel free to create measures that may not be specifically mentioned in the chapter, but nonetheless make sense given the strategic goals of each company.

Explanation / Answer

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:
• If the dollars invested in engineering technology increase, then the R&D yield will increase.
• If the percentage of job offers accepted increases, then the R&D yield will increase.
• If the dollars invested in engineering training per engineer increase, then the R&D yield will increase.
• If the R&D yield increases, then customer perception of first-to-market capability will increase.
• If the defects per million opportunities decrease, then the customer perception of product quality will increase.
• If the customer perception of first-to-market capability increases, then the return on stockholders’ equity will increase.
• If the customer perception of product quality increases, then the return on stockholders’ equity will increase.

Destination Resort International:
• 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.
• If the number of employees receiving database training increases, then the percentage of error-free repeat customer check-ins will increase.
• If employee morale increases, 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.
• If the percentage of error-free repeat customer check-ins increases, then the number of repeat customers will increase.

Each of these hypotheses will be questionable to some degree. For example, in the case of AP, even if the dollars invested in engineering technology increase, it doesn’t mean the R&D yield will increase. Money can be spent researching a product that cannot feasibly be produced. However, questioning the hypothesis doesn’t make the balanced scorecard invalid. Management can use the scorecard to identify which hypotheses are erroneous.

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