MBA 620 Module 2 Project Milestone One Balanced Scorecard example

Milestone One: A Balanced Scorecard for Evaluating Regional Airline Acquisition Candidates

[Student Name]

Southern New Hampshire University

MBA 620: Measuring Success in an Organization

Module Two Project Milestone One

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Milestone One: A Balanced Scorecard for Evaluating Regional Airline Acquisition Candidates

The Strategic Purpose

Meridian Airways, a composite mid-size U.S. carrier with 180 aircraft, is considering the acquisition of one of two regional airlines. Coastline Air serves leisure routes in the Southeast; Prairie Connect serves business routes in the Midwest. The board's purpose is stated in its strategic plan: to add routes that feed Meridian's two hubs, improve the reliability that its business customers value and do so without weakening the company's balance sheet. A balanced scorecard is useful here because it translates that purpose into measures across several perspectives, so the choice does not rest on price or revenue alone (Kaplan & Norton, 1996).

The Scorecard

Table 1 sets out the objectives, measures, targets and weights.

Table 1

Balanced Scorecard for Acquisition Evaluation

Note. Composite targets set by the acquisition team.

Why These Measures

Several measures reflect airline economics specifically. Cost per available seat mile excluding fuel shows whether the target's operation is efficient independent of fuel prices, which Meridian cannot control; if the target's costs are much higher, integration savings will have to be large to justify the price. Load factor is deliberately absent as a separate target, because a high load factor on low-fare leisure routes can coexist with weak profitability; operating margin and hub feed capture what matters. Hub feed, the share of the target's passengers who would connect to Meridian's network, is the clearest measure of the strategic purpose: an acquisition that adds routes nobody connects through does little for the core business.

The learning and growth measures address the most common reason airline mergers disappoint: integration. Pilots and mechanics work under seniority-based union contracts, and combining seniority lists has caused long disputes in past airline mergers. A target that looks cheap on paper can become expensive if its workforce and systems cannot be combined. Turnover and contract compatibility are therefore included as early warning measures.

How the Perspectives Connect

A balanced scorecard is more than four lists; its perspectives are linked by cause and effect. For this acquisition, the chain runs from the bottom up. If the target keeps its skilled pilots and mechanics and its labor contracts can be combined with Meridian's, the operation can run reliably after the merger. Reliable operations, measured by on-time arrivals and competitive unit costs, keep business travelers loyal and allow more passengers to connect to Meridian's hubs. Stronger hub feed and loyal customers then produce the revenue and margin that justify the price. Laying the chain out this way shows why a target with attractive financials but high turnover or incompatible contracts is risky: the foundation of the chain is weak, and the financial results at the top are unlikely to last. It also tells the integration team where to look first after a deal closes, since problems in the lower perspectives appear months before they reach the income statement.

Weights

The weights reflect the board's purpose. Financial measures carry 30 percent because the balance sheet must stay sound and the price must be fair. Customer and internal process measures each carry 25 percent because hub feed and reliability are the reasons for the acquisition. Learning and growth carries 20 percent because integration risk, though less visible, has historically decided whether airline combinations succeed. Each candidate will be scored from 1 to 5 on each KPI against its target, averaged within each perspective and weighted to produce an overall score.

How Scoring Will Work

To show how the scorecard converts evidence into a decision, consider one measure. Suppose a candidate's on-time arrival rate is 76 percent against the 80 percent target. On the five-point scale, results at or above target score 5, results within 2 points below score 4, within 5 points score 3, within 8 points score 2 and anything lower scores 1, so 76 percent earns a 3. The same approach applies to each KPI, with scales set before any candidate data are reviewed, so that the scoring cannot be adjusted to favor a preferred target. Scores are averaged within each perspective, multiplied by the perspective weight and summed. A candidate scoring 4 on financial measures, 3 on customer, 3 on process and 2 on learning and growth would earn 3.1 out of 5, which would be compared with the other candidate and with a minimum acceptable score of 3.0 set in advance by the board.

Using the Scorecard Responsibly

Three cautions apply. First, due diligence data from a seller may be incomplete, so each score will carry a confidence rating and weak data will be flagged rather than guessed. Second, the scorecard supports judgment but does not replace it; a candidate that scores well overall but fails a critical threshold, such as an unmergeable labor contract, may still be rejected. Third, mergers can raise concerns about competition and fares, which past research on airline consolidation has documented (Kim & Singal, 1993), so the evaluation should note routes where the combined airline would dominate and where regulators might object. Performance measurement systems work best when they are revisited as conditions change (Neely et al., 1995), and this one will be reviewed after the first round of due diligence.

Next Steps

Milestone Two will apply the scorecard to Coastline Air and Prairie Connect using their financial statements, operating data and due diligence findings, compare the results and recommend which acquisition, if either, Meridian should pursue.

References

Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Harvard Business School Press.

Kim, E. H., & Singal, V. (1993). Mergers and market power: Evidence from the airline industry. American Economic Review, 83(3), 549-569.

Neely, A., Gregory, M., & Platts, K. (1995). Performance measurement system design: A literature review and research agenda. International Journal of Operations & Production Management, 15(4), 80-116. https://doi.org/10.1108/01443579510083622