Tri-Cities Community Bank A BALANCED SCORECARD CASE

By Albright, Tom; Davis, Stan et al. | Strategic Finance, October 2001 | Go to article overview

Tri-Cities Community Bank A BALANCED SCORECARD CASE


Albright, Tom, Davis, Stan, Hibbets, Aleecia, Strategic Finance


The Student Case Competition is sponsored annually by IMA to promote sound financial/accounting analysis and presentation skills.

Case A. BALANCED SCORECARD DEVELOPMENT

Tri-Cities Community Bank (TCCB) is located in the Midwest U.S. and has a total of 10 branches grouped into two divisions--the southern division (SD) and the northern division (ND). Each division consists of five branches; each branch employs a branch president, branch vice-president/chief loan officer, customer service representatives, loan representatives, mortgage loan originators, head tellers, tellers, and administrative assistants. All branches are located within a 60-mile radius.

TCCB has enjoyed strong financial success over the past few years but continues to look for ways to improve its performance. The strategic direction of the bank is reviewed annually at a meeting of top bank officials and outside consultants. The purpose of the meeting is to outline the vision and mission of the bank and to ensure all top managers understand and agree on the direction of the organization. In 1997, TCCB management adopted the master strategy of balancing profits with growth to ensure the bank remains an independent entity existing to provide quality service and products to an increasingly diverse customer base.

Chris Billings recently was promoted from marketing director to SD president. The promotion came just as Chris finished her evening Master of Business Administration (MBA) degree in December 1999. As part of her graduate studies, she was introduced to the balanced scorecard (BSC), a performance measurement system that directs decision makers toward long-term value-creating activities. Chris thought the BSC could be used to improve the financial performance of TCCB. In late December 1999, she approached the chief executive officer (CEO) and requested permission to implement the new program.

TCCB's CEO was apprehensive about the new program. His reluctance stemmed from his own unfamiliarity with the BSC and Chris's short tenure as SD president. The CEO also was concerned about whether Chris's ideas would be accepted by the ND president and ND branch employees. Finally, he was uncertain about the BSC's benefits. At the same time, however, the CEO didn't want to respond negatively to Chris's first efforts as SD president. To appease Chris without totally committing the bank to implement the BSC, the CEO agreed to allow Chris to begin the process of developing the BSC in the five branches of her division. In turn, Chris agreed to make a presentation to the CEO and the bank's Board of Directors in three months. In this meeting, Chris would present BSC concepts and how she planned to use the program to improve the financial performance of her branches. Given the short period of time to design a pilot study, Chris wondered how she could convince the Board of Directors to give her permission to implemen t the BSC. She knew she must convince the SD branch presidents of its value.

On January 7, 2000, Chris met with her branch presidents to discuss the BSC program and enlist their help in developing balanced scorecards for their branches. She began the meeting by distributing a handout (Table 1) that highlighted the key objectives of the BSC. She used the handout to inform the branch presidents of the four business "perspectives" (categories of measures to be included on the BSC). The example measures she included on the handout were from a hospital that had implemented the BSC. Because she didn't have example measures from a bank using the BSC, she wanted to show measures from another service industry for the branch presidents to consider. As the handout shows, the hospital uses operating margin and cost per case as their primary financial measures, recommendation ratings from outgoing patients and discharge timeliness information as customer measures, length of stay and readmission rate (patients being admitted again for the same injury or illness) for the internal business measures, and employee training and retention measures in the learning and growth perspective. …

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