Read the case and then answer the corresponding questions. When you first came to H & R Block four years ago, you had a vision: increase the scope of the company and transform it from a simple tax preparation service to a full-service financial services provider. Moreover, why not? Block has roughly 17 million customers, and converting only a fraction of them to financial services clients would mean substantial growth for the 60-year-old company. Couple that with the company’s recent expansion into mortgage financing, and Block could become a financial services powerhouse. Eagerly you set about mapping the company’s growth. You bought Olde Financial, a discount-brokerage business, and quickly found yourself with around $50 billion in assets under management. You hired financial advisers, and then to get them more clients, you instructed tax preparers to refer new financial prospects to them. Another way you planned to fuel growth was by aggressively opening new tax preparation outlets. Today, Block has more U.S. storefronts (over 11,000) than Barnes & Noble (2,356), Gap (3,051), and even growth-happy Starbucks (6,409)! Over 1,000 outlets were added just this year to expand coverage during tax-filing season. Despite all the good ideas, H & R Block is not producing the results you expected. In fact, it is struggling. Assets under management in the financial services division have declined by more than 30 percent (around $28 billion) since the division was acquired, and its advisers are leaving faster than they can be replaced. Outwardly, you say that the economic upswing is creating more demand for junior advisers, the largest percentage of your financial managers, but you also know that even new advisers are going to follow the money. In addition, the money seems to be flowing out of Block. Mortgage refinancing, which at its peak contributed an incredible 70 percent of pretax income, now contributes only 28 percent per year, or $112 million. Mortgage activity has dropped since the Federal Reserve began increasing interest rates, and competitive pricing among lenders has not subsided as you expected it would. On the tax front, the company faces serious competition from smaller upstarts like Jackson Hewitt and Liberty Tax Service, which are both experiencing increases in the number of returns prepared at Block’s expense. This tax season Jackson Hewitt handled nearly 6 percent more returns than last year. Compare that with Block, which has lost over one million customers in the past three years. Aggressive cost cutting is minimizing damage to the bottom line, but it is also having some adverse effects, including waits as long as two to three hours for some customers. Digitally, Block is being surpassed by Intuit’s TurboTax software. Even though Intuit’s TurboTax costs 50 percent more than Block’s  competing TaxCut software, Intuit has three times the market share of TaxCut, and is growing by double digits each tax season. All this trouble has caused Block’s revenues to slide over 5 percent from last year. As you hang up the phone from yet another apologetic conference call with Wall Street analysts, during whom you revised your expectations for earnings per share sharply downward, you sigh and sink back into your chair. You are getting tired of announcing quarterly losses. Plans should be flexible enough to change if expected results do not materialize, but you really believe in the growth strategy. One analyst even said, “It seems like a smart strategy, and they seem to have the right infrastructure, but for some reason it’s just not happening.” You think to yourself, “There’s got to be a way to get things back on track!” Questions: Look back over the topics to date for additional information. These questions focus on motivation, leadership and control – what we have covered to date can be applied (for example, the job characteristic model, etc.). 1. Build a balanced scorecard for H & R Block that proposes only objectives (goals) and measures for each of the four quadrants of the card (financial, customer, internal, and learning). Make sure there is synchronization between each quadrant (learning should support internal processes; internal processes should support customer needs, customer needs should support financial goals). For example, accuracy might be part of the learning that would support internal processes of improving tax preparation; this in turn would support responsiveness to customers that would support possible gross margin profitability ratio. 3. As a team, identify one area where more control is needed at H & R Block. How involved should your employees be in making this decision? (Hint: Consider using the decision tree Chapter 14 to determine the appropriate level of employee participation in this decision.) 4. “In this firm, the only dimension to measure quality is conformance to management expectations.” Do you agree or disagree with this statement? Why? In answering the case questions, use at least 2 scholarly type references (management journals, organizational behavior articles, etc.). Several are available in Articles for Use in Blackboard; more will be added, hopefully from your research. Source: G. Meyer, “H & R Block Sees Jump in Revenue,” Kansas City Star, 18 March 2005; F. P. Gabriel, Jr., “Block Still Falling Short in Investment Services – Despite Aggressive Campaign, It Can’t Retain Advisers,” Investment News, 6 December 2004, 1; D. Stires, “Taxing Times at H & R Block,” Fortune, 21 March 2005, 181-184; G. Meyer, “H & R Block to Add 1,000 Outlets to Bolster 2005 Tax Office Traffic,” Kansas City Star, 19 September 2004.
