EXERCISE 10-14 (CONTINUED)

2. The hypotheses underlying the balanced scorecard are indicated by the arrows in the diagram. Reading from the bottom of the balanced score-card, the hypotheses are: ° If the amount of compensation paid above the industry average in-creases, then the percentage of job offers accepted and the level of employee morale will increase. ° If the average number of years to be promoted decreases, then the percentage of job offers accepted and the level of employee morale will increase. ° If the percentage of job offers accepted increases, then the ratio of billable hours to total hours should increase while the average num-ber of errors per tax return and the average time needed to prepare a return should decrease. ° If employee morale increases, then the ratio of billable hours to total hours should increase while the average number of errors per tax re-turn and the average time needed to prepare a return should de-crease. ° If employee morale increases, then the customer satisfaction with service quality should increase. ° If the ratio of billable hours to total hours increases, then the revenue per employee should increase. ° If the average number of errors per tax return decreases, then the customer satisfaction with effectiveness should increase. ° If the average time needed to prepare a return decreases, then the customer satisfaction with efficiency should increase. ° If the customer satisfaction with effectiveness, efficiency and service quality increases, then the number of new customers acquired should increase. ° If the number of new customers acquired increases, then sales should increase. ° If revenue per employee and sales increase, then the profit margin