HCS: Designing a Balanced Scorecard in a Knowledge-Based Firm

By Moore, Chris; Rowe, Beverly J. et al. | Issues in Accounting Education, November 2001 | Go to article overview

HCS: Designing a Balanced Scorecard in a Knowledge-Based Firm


Moore, Chris, Rowe, Beverly J., Widener, Sally K., Issues in Accounting Education


ABSTRACT: The purpose of this case is to enable you to design a performance measurement system using a balanced scorecard. This case is based on factual issues and decisions faced by the real-world managers and employees of Holloway Consulting Services (HCS) (names and dollar amounts have been changed). HCS is a service firm that provides its customers with managed business solutions, i.e., integrating outsourcing options with systems design and support. Currently, HCS collects several financial and operational performance measures; however, Sharon Holloway, owner of HCS, is concerned that these measures are not adequate for a firm that competes using intangible assets, especially human capital. Therefore, she plans to implement a balanced scorecard in which performance measures are linked to the firm's strategy. This case provides you with the opportunity to develop a balanced scorecard that incorporates both traditional and nontraditional performance measures within the strategic context of a knowledge-base d firm.

INTRODUCTION

Sharon Holloway methodically tapped the desktop with her pen as she gazed out the office window. The spectacular view of the sun rising over the mountains escaped her notice. She slowly sipped her lukewarm coffee and mentally ran through the situation once again. She had achieved every goal she had set in the last six years since she started Holloway Consulting Services (HCS). The company had become a strong competitor, developing customized information system designs that effectively integrate various outsourcing options with the client's existing internal support systems. Over the years she had helped her highly skilled, highly trained, and highly independent staff of consultants to become an exceptional team of experts, capable of handling the most arduous customer demands. Development of strong interpersonal relationships had become the defining characteristic of HCS. Thus, the company's success depended on the internal relationships the staff maintained among themselves as much as the external relationsh ips they built with customers. Together, Sharon and the staff had created a vibrant, knowledge-sharing, collaborative work-community that thrived on the lifelong-learning and personal-growth initiatives that had become so familiar to anyone involved with HCS. Now, HCS was growing; growing quickly--perhaps too quickly. Sharon sighed and asked herself for the thousandth time, "Is it possible to grow without sacrificing everything we've worked so hard to achieve? How do we grow and still be HCS?"

Sharon's main concern was how to protect HCS' autonomous, collaborative work environment while continuing to "grow" the customer base and the staff. Sharon had told more than one new-hire, "We are not out to make as much as we can as fast as we can. We are about growing as people." When HCS was smaller, she had been able to personally assess staff members' progress through individual observation and the related company results. However, the staff had grown to a size that prohibited this one-on-one type of performance measurement. Now that HCS' corporate intellectual assets (the employees' collective knowledge and strengths) were well established as the firm's primary competitive advantage, Sharon was searching for a way to measure and guide the process of sustaining that advantage. She needed some answers.

Sharon recalled a recent conversation she had had with HCS' management accountant, Michael Christensen. They had briefly discussed the growth issue and he had some interesting ideas regarding performance measurement, particularly management tools that address the performance criteria typical of organizations competing with intellectual assets. Based on his expertise in the area, Michael strongly suggested that Sharon consider implementing a balanced scorecard. He explained that the balanced scorecard could be used to align an organization's strategy with key performance measures, providing forward-looking performance management with adequate consideration of employee contributions to corporate success. …

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