Hot Wings Balanced Scorecard From the Financial

Hot Wings Balanced Scorecard

From the financial perspective, the measures for the balanced scorecard are revenues, profitability (net income) and margins (gross, operating and net margins). These measures are the most important to the shareholders, and they best reflect the industry. Market share is not a good financial measure because the casual dining segment is so heavily fragmented that market share will always be miniscule even when Hot Wings is successful -- achieving a dominating market share is not a realistic objective. Revenue, profit and margin objectives are closely related. Profit and margin reflect the relationship between revenue and costs, and reflect in part the pricing power that the company has with its suppliers and customers. Given that the current state of the industry is oriented towards price competition in casual dining, the ability to maintain superior margins can be seen as both a source of competitive advantage and as antecedent to growth.

From the customer value perspective, the three metrics are repeat guests, customer satisfaction and customer turnover. We want our customers to become habitual customers, and will use loyalty cards to try to track the degree to which customers return to Hot Wings. Customer satisfaction will be measured with satisfaction survey cards, from which a quantitative measure of customer satisfaction will be derived. Customer turnover is also important, especially in the dining area. We hope to have three main meals -- lunch, early dinner and late dinner -- and therefore it is essential that each table be turned over more than once in any given day. This means we are achieving a steady flow of happy customers over the course of the day.

There are many operational measures of success. Three key operational metrics are capacity, average ticket and service time. Capacity is a measure that reflects our occupancy rate. This is important in the casual dining business because empty tables mean lost revenue. Average ticket is important because we want to ensure that when customers come to Hot Wings that they are spending. Service time is also important because faster service means higher turnover rates, happier customers and less risky of kitchen error. Average service time will be the measure -- when an order is entered into the order entry system from the time the order is filled (also entered into the system) will be the source of this measure. Targets for each dish will be developed so that average service time can be compared to a weighted average service time as a means of providing a fair comparison.

Lastly, there will be several employee measures in our balanced scorecard. These include staff turnover, internal promotions and employee satisfaction. The first two are easy to measure. Employee satisfaction will be measured through anonymous surveys that will produce a quantitative output. Staff turnover is important because lower turnover is correlated with lower staff training costs and happier customers. Internal promotions are important because they measure our training program. Additionally, Hot Wings is planning to expand and franchise, so it is in the company's best interests to develop as much talent internally as possible.

The primary risks associated with using these particular objectives in a balanced scorecard relate to the fact that the organization will be oriented towards these behaviors. It is essential, then, that the different objectives in the balanced scorecard are chosen carefully, and that these objectives match the broader strategy of the company well. Most of these objectives work well at the individual restaurant level, and can therefore become part of the management control system that is sold to franchisees. In addition, some of these objectives translate to the opportunity of franchising the Hot Wings concept across the nation. For example, hiring from within will support actions such as training and evaluating for leadership potential that will allow the company to hire from within. This will give Hot Wings a pool of managers and other talent that can be used to help the company expand rapidly.