Source: Managerial/Cost Accounting, University of Texas at Austin
Tags: balanced scorecard, performance evaluation, Citibank, customer satisfaction, financial performance, non-financial measures, strategy implementation, James McGaran, BSC, KPI, key performance indicators
Difficulty: Intermediate | Prerequisites: Basic understanding of management control systems, performance measurement concepts.
This case sits at the intersection of performance measurement and management control systems. It examines what happens when an organisation rolls out a balanced scorecard (BSC) and a high-performing manager excels on financial metrics but falls short on customer satisfaction. The tension here is central to managerial accounting: should a manager be rewarded for strong financial results when non-financial indicators are lagging? If you have covered basic management control and performance evaluation, you are ready for this.
Citibank introduced a six-category performance scorecard. The LA branch, under James McGaran, posted excellent financial results but only "par" on customer satisfaction. The case forces you to weigh whether financial performance alone should drive ratings, or whether non-financial measures like customer satisfaction deserve equal weight in evaluation decisions.
Balanced scorecard (BSC)
A strategic performance management tool that measures organisational results across multiple perspectives, not just financial ones. Typically includes financial, customer, internal process, and learning/growth perspectives.
Think of it as a report card for a business that grades it on several subjects, not just profit.
Performance scorecard (Citibank's version)
Citibank's proprietary evaluation framework with six categories: Financial, Strategy Implementation, Customer Satisfaction, Controls, People, and Standards.
In simple terms, this is Citibank's customised version of the balanced scorecard, tailored to what the bank considers its most important performance drivers.
Non-financial performance measures
Metrics that capture dimensions of performance beyond revenue and profit, such as customer satisfaction ratings, employee engagement, or process compliance.
Think of it as everything that matters to the long-term health of the business but does not show up directly on the income statement.
"Par" rating
In the Citibank scorecard system, a rating indicating that a manager meets the minimum acceptable standard in a given category, but does not exceed expectations.
In simple terms, "par" means you passed, but only just.
Customer satisfaction measures
Survey-based or metric-based assessments of how well a branch serves its customers. In the Citibank case, these measures captured services that sometimes fell outside the branch manager's direct control.
Think of it as being graded on the full customer experience, including parts you cannot influence.
Controllability principle
The management accounting principle that managers should only be evaluated on outcomes they can influence or control. When measures include factors beyond a manager's reach, evaluation fairness becomes questionable.
In simple terms, you should not be penalised for things you cannot fix.
Citibank adopted a performance scorecard to evaluate managers and branches across six dimensions:
Financial performance
Strategy Implementation
Customer Satisfaction
Controls
People
Standards
The scorecard was designed to prevent over-emphasis on any single metric, particularly financials.
Each category received a rating, and all six contributed to the manager's overall performance evaluation.
James McGaran managed the LA branch and was considered a high performer within Citibank.
His branch delivered strong financial results consistently.
However, customer satisfaction ratings at the LA branch were lower than the bank's expectations, signalling a gap between financial output and service quality.
After the new scorecard was implemented, the LA branch scored well across five of the six categories.
Customer satisfaction was rated "at par," meaning it met the minimum standard but did not exceed it.
This created a dilemma: McGaran's overall evaluation was pulled down by one category despite excellence elsewhere.
McGaran attempted to improve customer satisfaction scores after the scorecard flagged the issue.
Two structural problems made improvement difficult:
The LA branch served a highly diverse customer base, making it harder to satisfy all segments equally.
Customer satisfaction surveys measured some services that the branch itself could not control (e.g., products, policies, or processes set at the corporate level).
This raised questions about the fairness of holding a branch manager accountable for outcomes beyond their direct influence.
The balanced scorecard is used widely across industries, from banking and healthcare to manufacturing and tech. Companies like Kaplan and Norton's original clients adopted it precisely because financial metrics alone failed to predict long-term performance. The Citibank case illustrates a common real-world tension: retail bank branches are often evaluated on customer experience scores that partly reflect decisions made at head office (pricing, product design, IT systems), not just the branch team's effort.
Students often think the balanced scorecard replaces financial metrics. It does not. Financial performance remains one of the scorecard's categories. The scorecard adds non-financial dimensions alongside it.
Students sometimes assume "par" means poor performance. In the Citibank system, "par" means meeting the standard. It is not a failure, but it is not strong enough to earn a top overall rating.
A common mistake is to argue that McGaran should simply be excused for low customer satisfaction because of uncontrollable factors. The case asks you to weigh both sides: the controllability principle matters, but so does the organisation's commitment to balanced evaluation.
Students often conflate the generic Kaplan-Norton balanced scorecard (four perspectives) with Citibank's scorecard (six categories). They overlap, but they are not identical.
⚠️ Expect exam questions asking whether McGaran should receive a top rating despite the "par" in customer satisfaction. Be prepared to argue both sides.
⚠️ The controllability principle is a high-frequency exam topic. Know how to explain why holding managers accountable for uncontrollable outcomes can undermine motivation, and why organisations sometimes do it anyway (to encourage cross-functional problem-solving).
⚠️ Be ready to explain the purpose of using multiple performance dimensions rather than financials alone. The standard answer: financial metrics are lagging indicators; non-financial metrics (customer satisfaction, employee development) are leading indicators of future financial performance.
⚠️ Know the six categories of Citibank's scorecard by name: Financial, Strategy Implementation, Customer Satisfaction, Controls, People, Standards.
True or False: Citibank's performance scorecard has four categories, matching the standard Kaplan-Norton balanced scorecard.
Answer: False. Citibank's scorecard has six categories.
Fill in the blank: James McGaran's LA branch scored ______ on customer satisfaction after the new scorecard was implemented.
Answer: "At par."
True or False: The controllability principle suggests managers should be evaluated only on outcomes they can influence.
Answer: True.
Fill in the blank: Two reasons McGaran found it difficult to improve customer satisfaction were the branch's ______ customer base and the fact that satisfaction surveys measured services the branch could not ______.
Answer: Diverse; control.
Q: What are the six categories of Citibank's performance scorecard?
A: Financial, Strategy Implementation, Customer Satisfaction, Controls, People, and Standards.
Q: Should James McGaran receive an "above par" overall rating despite his "par" score in customer satisfaction? Justify your answer.
A: Arguments for: McGaran delivered exceptional financial results and scored well in five of six categories. The customer satisfaction shortfall partly reflected factors outside his control. Arguments against: the entire purpose of the balanced scorecard is to prevent over-weighting financial results. Giving McGaran a top rating despite a weak customer satisfaction score would signal that financials still dominate, undermining the scorecard's credibility.
Q: Explain the controllability principle and how it applies to this case.
A: The controllability principle holds that managers should be evaluated on outcomes within their influence. In this case, customer satisfaction surveys measured services partly determined at the corporate level, not by McGaran's branch. This raises fairness concerns, because the branch is being held to a standard it cannot fully meet through its own actions.
Q: Why do organisations use balanced scorecards rather than relying on financial metrics alone?
A: Financial metrics are lagging indicators: they reflect past performance. Non-financial metrics like customer satisfaction, employee development, and process quality are leading indicators that predict future financial outcomes. A balanced scorecard forces managers to attend to the drivers of long-term value, not just short-term profit.
Q: What difficulties did the LA branch face in improving its customer satisfaction scores?
A: The branch served a diverse customer base, making uniform satisfaction harder to achieve. Additionally, satisfaction surveys captured services the branch could not control, such as corporate-level products or policies.
This case connects directly to management control systems: the broader question of how organisations design incentives and evaluation frameworks to align manager behaviour with strategic goals. If you have covered agency theory, this is a clean example of the principal-agent problem, where the bank (principal) wants balanced performance and the manager (agent) is naturally drawn toward the metric most visible to them (financials).
It also ties into responsibility accounting: the idea that managers should be evaluated as heads of responsibility centres (profit centres, cost centres, investment centres), with clear boundaries around what they own.
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