[SOLVED] Build a Balanced Scorecard for the

Financial service firms have enjoyed great success but still face some hurdles in their efforts
calibrates the development strategies for fundamental values in their frameworks of
measurement. The harmonization of lag from historical information first is necessary to avoid
overreliance of past data. Implementation of strategic objectives is also important in
accomplishing diversification to achieve company mission (Creelman & Makhijani, 2013). The
Balanced Scorecard is capable of providing a solution on the fronts above. By providing an
evaluation on a myriad of perspective it provides a wider reach. The framework provides
traditional financial measures to evaluate performance but due to the implied lag it also evaluates
future value of the company in terms of users, providers and employees. Current prospects are
also incorporated in the framework. Additionally, the scorecard measures vital importance
concerning the maintenance of security of the infrastructure, since it has substantive impact on
proper operation and competitiveness.
Keywords: Bank of America, quality, performance measurement, Balanced Scorecard
INTRODUCTION
There is evidence that a balanced scorecard ensures an appropriate management tool in
performance evaluation and creates a perfect balance between various aspects of the business.
The entity under study is Bank of America Corporation. Its business model is segmented in
multiple division for simplicity in operation. Core activities are in consumer banking with a top
evaluation in the country. Bank of America operation is based on global investment and wealth
management in global market. The strategic goal is to provide the highest level of retail and
corporate banking experience. Besides that, more efficient division in various specters of the

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BALANCED SCORECARD PERFORMANCE MEASUREMENT
business model has helped accomplish the achievement of broadening the revenue mix to
enhance consistency and growth parameters.
Performance evaluation
The financial institution has a cause and effect connection in strategy map to ensure the
institution is always efficient in offering services. In this case, the evaluation is based on a
financial service industry. Therefore, this study will benchmark the metrics based on the criteria
described below

Strategy
Financial
(Improve returns-)
Broaden Revenue Mix

INTERNAL
Cross-sell Products
Bundle Solutions

Leaning and Growth
Process Innovation
Skill growth

CUSTOMER
Solve Fiancial Strategies

The strategy incorporated in the scorecard entails:

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BALANCED SCORECARD PERFORMANCE MEASUREMENT
Expand Sources of
Revenue

Expand Cost
Efficiency

Increase customers
confidence in
services

Understand and
serve customers

Provide Speedy and
accurate services

Revenue Risk
Management

Productivity

Identify and target
regional
opportunities

Proactive Risk
management and
compliance

leverage technology to
improve efficiency

Strengthen critical
partnerships

Robust plan for
recovery

Streamline credit
approval process

Provide Valuable
skills training

Collaborative and high
achieving Environment

Clear communication and understanding
organization strategies

Financial Perspective
Funding and income structure
A change of the financing structure has been elicited towards this end with a strategic increase in
deposits while reducing the loan in the balance sheet as shown below. The long-term target set in

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BALANCED SCORECARD PERFORMANCE MEASUREMENT
the first quarter of 2010 was to reduce the deposit to loan term debt from 30 % to a lower metric,
around 20%. The company has outperformed in this metric. Currently standing at 17%, the
fruition of this KPI has been realized.

1Q 20104Q 2016

Time

976

1261

512

217

Deposits V loan Book
DepositsLoanbook

Sales

201320142015201620172018

Years

0
10
20
30
40
50
60
70
80
90
100

Sales

Reported Sales($) In billionsExpected Sales ($)

The growth projected by this sales expectation and actual sales stands at an annual rate of
6.28%.This falls mildly short of projections but within the range of the consensus estimates.

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BALANCED SCORECARD PERFORMANCE MEASUREMENT

2013201420152016

Year

0
10
20
30
40
50
60

Sources of income

Interest IncomeNon-Interest Income Total

The company has been able to maintain consistency in income streams by avoiding overreliance
on particular areas of business and exiting the underperforming business in its model. This
includes auto leasing business, subprime debt among the areas that fall short of the target. In the
near term, this will yield adverse effects due to abandoned streams but will have surmounting
charge-offs and long term betterment.
Customer perspective
Increasing the consumer especially small business segment that forms the most consistent and
predictable earnings with exciting potential.
Market share
Market share The bank stands at a first position with a market share of 10.73% posting total
assets of $1574 billion in 2016.This is quite high owing to competitive nature of the sector
(Comoreanu, 2017).
Average Annual Sales volume per customer

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BALANCED SCORECARD PERFORMANCE MEASUREMENT
With average annual sales at around 90 Billion and a client base of over 38.7 million retail
consumers excluding institutional investors.
The metric here is average annual sales per customer.
Average Annual Sales per customer=90000/38.7=$2325.281
A comparison with industry average shows outperformance
Customer satisfaction
The company has been associated with negative reviews as revealed in historical surveys with
benchmarks for the same regions being higher showing general discontent (Maxfield, 2017).

CaliforniaFloridaMid-
Atlantic
MidwestNew
England
North
Central
NorthwestSouth
Central

760
770
780
790
800
810
820
830
840

Customer satisfaction

Bank of America's Score*Region Average

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BALANCED SCORECARD PERFORMANCE MEASUREMENT
However, in 2017 the polls have shown a relative increase in customer satisfaction with areas of
improvement reaching targets. A relevant study on a 100-point scale demonstrates the bank at
75, an increase from a record low of 68 in previous years since the post-financial crisis (Ratings,
2017). The subfactors contributing to this increase include: fees, problem resolution, and product
offerings being reduced, hence reducing the complaints rates.
Expenses per customer
A modern alienation has been an increase in charges to use debit cards. Debit card usage has
imposed a fixed charge of $60 per annum which is due to debit cards stemming from the
regulatory cut and for transaction deduction on usage cost from $0.44 to $0.24 per debit
transaction. The regulatory change caused a reduction of 9 billion in revenue. To restore the
channel of income bank resulted in introduction of fixed maintenance charges for debit accounts.
The expense has caused an adverse impact on sales with some withdrawing accounts. The impact
is overall negative. An initiative should be carried out to ensure alienation does not cause
antagonistic behaviors in customer behaviors.
Trademark Index and Number of Advertising Campaigns and effectiveness
A comparison on a global level puts the Bank of America 6 th globally and second in America
with a brand value of around 30.27 Billion dollars the Company uses a brand metric of ad spend
to measure how it is strong relative to its goals. The company paid 89 million dollars in advert
expenditure for debit account campaigns in 2016. The effectiveness saw a surge in credit and
debit card and new enrollments. This translates to higher growth given the efficiency in a
marginal increase of deposits by more than $ 30 billion in the advertising period and increases in
accounts.

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BALANCED SCORECARD PERFORMANCE MEASUREMENT
Internal Process Perspective
Revenue per employee
The evaluation is based on efficiency of the workforce in delivering KPI goals
Revenue average=90 billion/145245=$619642.7
It is slightly above the industry average with the company ranking number on average number 5
throughout the quarters. It can be improved to yield an even higher setting higher targets to
higher achievable rankings of upwards of $750,000 per employee
Expense of agency problems
The changes in cost structure are necessary. The changes including litigation costs are shown
below. The diagram bellow represents some of the agency problem costs. The company has
maintained a floor for this agency costs, and therefore the targets have been retained in a
decreasing norm.

201120122013201420152016
0
10
20
30
40
50
60
70
80
90

SIgnificantly improved cost structure

Non interest Expense including litigationLitigation Expense

Labor productivity growth

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BALANCED SCORECARD PERFORMANCE MEASUREMENT

2013-122014-122015-122016-12TTM

YoY

0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000

Revenue V operating Expense

RevenueOperating Expense

The company set objective have been flouted in recent years since BOA has not been meeting
targets on cost reduction. There is an apparent increase in operating expense with no adverse
increases in revenue. It shows the company has not accomplished proper metrication.
Learning and Growth Perspective
The company has come up with bundled solution so as to ensure the consumers, especially in the
retail division, do not feel out of their debts given the complexities. In this regard, they have
reassessed and bundled over 150 products to yield four broad categories with only simple
changes for business solicitation. The strategy is to build financial services company helps
businesses and organizations to create, build, preserve and grow wealth.
Employee satisfaction Build skill base using culture and tailor made programs such as
Excellence program that provides study-leave hours for study and tuition reimbursement worth
over $5250 per year. The company has over 145245 employees and provides inclusive diverse
programs for employee growth and culture promotion. (Statista)
Strategic Alignment

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BALANCED SCORECARD PERFORMANCE MEASUREMENT
The strategy is simply put in three words as :attract, retain, deepen. Investment in deposit growth
strategies as well as targeting marketing 80/20 rule in advertising while re-engineering core
business processes using enhanced tools to makes interactions easier ("Bank of America |
Investor Relations | Financial Releases", 2017).
Other strategic objectives in other divisions include expanding distribution capability in asset
management and utilizing large customer base to increase their investment business by bundling
solutions (Cox, 2017). The effort will drive the sales culture and expand other departments in
geographical diversification, the global corporate and investment banking division, they have
managed to create long-term growth strategies. Focused on client strategy building the franchise
with institutional investors, the transformation of product mix, reducing loans on balance sheet
and implanting new governance process.

Summary
The Balance scorecard acts as a top-down tool for performance evaluation. In this case, the
assessment is at Bank of America. The dashboard used evaluates qualitative and measurement
aspects of the business and alignment with strategic goals.
Implementation of the balanced scorecard to yield the required targets is as shown:
Benchmark Actual

Financial

Revenue Growth ?IT/Sales >5 6.28 but lower than
internal target

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BALANCED SCORECARD PERFORMANCE MEASUREMENT

Funding Structure Deposits/Long
term debt

<30 17% Above Target

Source of income Interest Non-
interest income

50/50 On target

Customer Maintaining
Transaction Size

Annual
Transaction per
customer

$1,500 $2325.281(Above

Target

Improve Customer
Satisfaction

Median score
industry

>75% 69(Below Target)

Trademark Index Brand value >20 Billion $30.27 Billion

AD spend Median average 89 Million
Coupled with effectiveness Effective

Internal Maintain Market Share Company
Benchmark

>9% (Worst
case Scenario

10.73%

Expense Agency Cost Historical
Average p.a

<2 Billion $1.2 Billion

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BALANCED SCORECARD PERFORMANCE MEASUREMENT

Labor productivity
growth

Industry average <20% 30(Below Target

Learning

Average
Compensation

Sector average Dependent on

class

Above Target

Education and
innovation

Tuition
reimbursement

>$5250 p.a Mild Adjustable

Equality Male/Female >50 Above target(56%)

References

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BALANCED SCORECARD PERFORMANCE MEASUREMENT
Bank of America | Investor Relations | Financial Releases. (2017). Bank of America Investor
Relations. Retrieved 26 June 2017, from
http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-
newsArticle&ID=231151#fbid=oY8UoK7Y45V
Comoreanu, A. (2017). Bank Market Share by Deposits and Assets. WalletHub. Retrieved 26
June 2017, from https://wallethub.com/edu/bank-market-share-by-deposits/25587/
Cox, J. (2017). Five biggest banks now own almost half the industry. CNBC. Retrieved 26 June
2017, from http://www.cnbc.com/2015/04/15/5-biggest-banks-now-own-almost-half-the-
industry.html
Creelman, J., & Makhijani, N. (2013). Creating a balanced scorecard for a financial services
organization. Hoboken, N.J.: Wiley.
Leading banks in the United States as of December 31, n. (2017). Largest U.S. banks by some
employees 2016 | Statistic. Statista. Retrieved 26 June 2017, from
https://www.statista.com/statistics/250220/ranking-of-united-states-banks-by-number-of-
employees-in-2012/
Maxfield, J. (2017). How Satisfied Are Bank of America’s Customers? -- The Motley Fool. The
Motley Fool. Retrieved 26 June 2017, from https://www.fool.com/investing/2017/04/29/how-
satisfied-are-bank-of-americas-customers.aspx
Ratings. (2017). Report card puts Bank of America behind rivals in customer satisfaction
–again. Charlotte Observer. Retrieved 26 June 2017, from
http://www.charlotteobserver.com/news/business/banking/bank-watch-
blog/article150031007.html