Tri-Cities Community Bank (TCCB), based in the Midwest United States, has been extremely successful over the

recent years but it continues to explore ways to improve its performance further. Chris Billings, the new president of TCCBs southern division (SD) believes that the Balanced Scorecard (BSC) could be used to boost TCCBs financial performance. The BSC helps an organizational align activities to its vision and strategy, enhance external and internal communications, and evaluate organizational performance in comparison to achievement of strategic goals (What Is, n.d.). One of BSCs major benefits relate to causal relationship mapping from nonfinancial performance measures to key financial measures monitored by TCCB. Nonfinancial measures of TCCB are classified into Learning and Growth Perspective, Internal Business Process Perspective, and Customer Focus Perspective (Stan, 2001).

Categorization of Measures into Balanced Scorecard Perspectives Learning & Growth Perspective * Employee Training Hours * Employee Satisfaction * Employee Turnover Internal Business Perspective * Sales Calls to Potential Customers * Referrals * New products Introduced * Cross-sells * Number of Products per Customer * New Accounts * Number of New Customers Customer Perspective * Customer Satisfaction * Customer Retention * Thank-You Calls/ Cards to New and Existing Customers. Financial Perspective * Outstanding Loan Balances * NoninterestIncome * Deposit Balances * New Loans Created

My categorization of Employee Training Hours, Employee Satisfaction, and Employee Turnover measures into the Learning & Growth Perspective is based on how TCCB should continue to create and improve value. To achieve the high standards set in the other three perspectives, TCCB should invest in people and infrastructure. TCCB should identify the areas where resources are required and develop a plan that empowers its employees to fulfill the objectives of other perspectives. My categorization of measures into the Internal Business Perspective is based on considering the areas that TCCB must excel. TCCB must identify processes that should be created or improved so that financial and customer perspectives can be realized. This is the reason why I placed Sales Calls to Potential Customers, Referrals, New products Introduced, and Cross-sells measures into this perspective. The concerns of customers generally fall into cost, performance, service, time, and quality categories (Kaplan & Norton, 1992). My categorization of measures into the Customer Perspective is based on how customers view TCCB. TCCB should identify its key market segments and customers. TCCB must determine how they can add value for customers and tailor their products and services that cater to the specific needs of the customers. This is the reason why I categorized Customer Satisfaction, Customer Retention, Thank-You Calls/ Cards to New and Existing Customers, Products per Customer, New Accounts, and Number of New Customers measures into this perspective. My categorization of Outstanding Loan Balances, Noninterest-Income, Deposit Balances, and New Loans Created measures into the Financial Perspective is based on how TCCB appears to Stakeholders. TCCBs financial objectives must act as the focus of every

activity. Every measure that TCCB selects for its BSC should be an integral segment of a causal chain that produces an improved performance on financial objectives. Cause and effect chains in the BSC will happen as following: An improvement in learning will cause the internal processes to improve. An improvement in the internal processes will cause the customer value to improve. An improvement in the customer value will cause the financial performance to improve. The effectiveness of an organizations strategy is best measured through its financial performance, so if the financial performance of TCCB increases significantly, then its strategy would be deemed successful. Therefore, if TCCBs strategy is good, the nonfinancial perspective measures will act as primary indicators of value addition that will be unmistakably demonstrated by improvement in the financial measures (Stan, 2001). If employees of TCCB are trained in customer service, knowledge on local bank, effectiveness in sales, and profitability of products, they will be well placed to provide high-quality service to the customers. At TCCB, the effectiveness of employee training programs is measured through in-house tests on a range of training topics. An increase in employee skills and knowledge will result in cross-sell proposals and high-quality referrals, heading towards greater customer satisfaction and higher customer retention (Stan, 2001). Current customer base maintenance lays the foundation for an increase in loan and deposit balances, while an increase in the successful referral count and crosssells causes noninterest income to increase. Managers of the five SD branches brought their own individual styles to the BSC implementation process, creating differences in the BSC implementation quality and producing variation in performance between branches A-E. I think Branch A did a good

job in making all its employees understand why the BSC was being implemented. Both Branch A and Branch B let their employees know how the BSC will be implemented, and they made sure that the workload was evenly distributed and the BSC measures were challenging but yet realistic. Branch A and Branch B both offered cash incentives to employees who went above and beyond their scorecard expectations. Branch C promoted teamwork and made all its employees individually and collectively realize their role in the bigger picture. Branch C focused on employees by taking their feedback and offering encouragement through quarterly parties and earned time-offs. Branch C however set some unrealistic scorecard measures for its employees. Just like Branches A and B, Branch C set realistic scorecard measures, distributed expectations evenly, and offered cash incentives as an encouragement to well-performing employees. Branch D promoted growth and helped its employees focus their ideas. Both Branch D and Branch E allowed their employees to compare their performance with the others. Branch E however failed to set challenging goals, involve employees in scorecard development, provide clarity on targets, and offer incentives to employees based on performance. I think the pilot study on the overall is a success considering the fact that all SD braches A-E, when compared to last year showed significant improvement in all the key financial indicators (except Branch Es noninterest income), namely: loan balance, deposit balance, and noninterest income. I would recommend ND managers to integrate the four balanced scorecard perspectives. I would suggest that they inform all their employees about why the BSC was being implemented and how it will be implemented. I would ask them to set challenging yet achievable goals, involve employees in the development of the BSC, provide clarity on organizational goals and overall picture, take

employee feedback on a regular basis, promote teamwork and growth, distribute workload evenly, tie performance to employee growth assessment, allow employees to compare their performance with others, and offer incentives to employees based on performance. The BSC thus translates TCCBs strategy into Learning and Growth, Internal Business, Customer, and Financial perspectives and strikes the right balance not only between internal, external, objective, and subject measures but also between performance outcomes and future result drivers (The Balances, n.d.).

References

What is the Balanced Scorecard? Retrieved June 19, 2008, from http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/ta bid/55/Default.aspx

Stan, D. (2001). Tri-Cities Community Bank A BALANCED SCORECARD CASE. Retrieved June 19, 2008, from http://www.allbusiness.com/humanresources/employee-development/814343-1.html

Kaplan, R. S., & Norton, D. P. (1992). The Balanced Scorecard: Measures That Drive Performance. Retrieved June 19, 2008, from http://library.tmu.edu.tw/news/%5BHarvard%20Business%20Review%20%20January-February%201992%5D%20-%20Kaplan%20&%20Norton%20%20The%20Balanced%20Scorecard%20%20Measures%20That%20Drive%20Pe.pdf

The Balanced Scorecard. (n.d.). Retrieved June 19, 2008, from http://www.quickmba.com/accounting/mgmt/balanced-scorecard/