CASE 11–23 Balanced Scorecard [LO4]
Weierman Department Store is located in the downtown area of a medium-sized city in the Ameri- can Midwest. While the store had been profitable for many years, it is facing increasing competi- tion from large national chains that have set up stores in the city’s suburbs. Recently, the downtown area has been undergoing revitalization, and the owners of Weierman Department Store are some- what optimistic that profitability can be restored.
In an attempt to accelerate the return to profitability, the management of Weierman Department Store is in the process of designing a balanced scorecard for the company. Management believes the company should focus on two key problems. First, customers are taking longer and longer to pay the bills they incur on the department store’s charge card, and they have far more bad debts than are nor- mal for the industry. If this problem were solved, the company would have more cash to make much needed renovations. Investigation has revealed that much of the problem with late payments and un- paid bills is apparently due to disputed bills that are the result of incorrect charges on the customer bills. These incorrect charges usually occur because salesclerks enter data incorrectly on the charge account slip. Second, the company has been incurring large losses on unsold seasonal apparel. Such items are ordinarily resold at a loss to discount stores that specialize in such distress items.
The meeting in which the balanced scorecard approach was discussed was disorganized and ineffectively led—possibly because no one other than one of the vice presidents had read anything about how to put a balanced scorecard together. Nevertheless, a number of potential performance measures were suggested by various managers. These potential performance measures are:
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