14 (CONTINUED) EACH OF THESE HYPOTHESES IS QUESTIONABLE TO...

Exercise 10-14 (continued) Each of these hypotheses is questionable to some degree. For example, Ariel’s customers may define effectiveness as a function of minimizing their tax liability which is not necessarily the same as minimizing the number of errors in a tax return. If some of Ariel’s customers became aware through a knowledgeable third party that Ariel overlooked legal tax minimizing opportunities, it is likely that the “customer satisfaction with effectiveness” measure would decline. This decline would probably puzzle Ariel because, although the firm prepared what it believed to be error-free returns, it overlooked important tax minimization strategies. In this example, Ariel’s internal business process measure related to the average number of errors per tax return does not capture all of the fac-tors that drive the customers’ satisfaction with effectiveness. The fact that each of the hypotheses mentioned above can be questioned does not invalidate the balanced scorecard. If the scorecard is used correctly, management will be able to identify which, if any, of the hypotheses are invalid and then modify the balanced scorecard accordingly. 3. The performance measure “total dollar amount of tax refunds gener-ated” would motivate Ariel’s employees to aggressively search for tax minimization opportunities for its clients. However, employees may be too aggressive and recommend questionable or illegal tax practices to clients. This undesirable behavior could generate unfavorable publicity and lead to major problems for the company as well as its customers. Overall, it would probably be unwise to use this performance measure in Ariel’s scorecard. However, if Ariel wanted to create a scorecard measure to capture this aspect of its client service responsibilities, it may make sense to focus the performance measure on its training process. Properly trained em-ployees are more likely to recognize viable tax minimization opportuni-ties.