Chapter 1, Problem 30P

Susan Lopez, a consultant with Deloitte & Young, has just begun an engagement at Four Corners Airlines, which is based in Santa Fe, New Mexico. The company has fallen on hard times of late despite record profits for the rest of the airline industry. Management is somewhat set in its ways and could probably use some “new blood,” as the most recent hire to the firm’s executive team was 12 years ago.

In Lopez’s first meeting with the team, the airline’s chief executive officer commented that “all that mattered in this industry were load factors—the percentage of seats sold on scheduled flights. If load factors were adequate, everything else would take care of itself.” Lopez noted that while this measure was important, other, broader facets of operation were significant as well. She asked if any of the management team had heard of the balanced scorecard, and received dead silence as a response.

Based on her experiences with other engagements, including two that involved airlines, Lopez was convinced that the balanced scorecard could provide benefits in helping to solve the airline’s woes. After a presentation about the philosophy of the balanced scorecard, Four Corners Airlines’ management team accepted her idea, feeling that a shift in operating philosophy was needed for survival.

Required:

1. 1. What is a balanced scorecard, and what are its typical key elements?
2. 2. Lopez wants to assemble a committee to prepare the airline’s balanced scorecard. List several of the company’s functional areas (e.g., marketing) that should be represented on the committee.
3. 3. Identify a number of measures to evaluate the key elements that you specified in requirement 1. Measures would include items such as load factors, number of passenger complaints, percentage of on-time arrivals, and so forth.
4. 4. Do you see any problems with management’s prior focus on only one measure (i.e., load factor)? Briefly explain.