The Balanced Scorecard at Heidelberger Druckmaschinen AG by Vanessa Günther, Alina Sachapow, Nadja Scheibler, Hanna Tresselt
1. Faculty 3, the Department of Economics I
Course: Bachelor of International Business
Management Accounting
Summer Semester 2011
Innovative Controlling Tools:
The Balanced Scorecard at
Heidelberger Druckmaschinen AG
Written by: Vanessa Günther
Alina Sachapow
Nadja Scheibler
Hanna Tresselt
Berlin, 30.05.2011
2. CONTENT
EXECUTIVE SUMMARY ............................................................................................................3
1. Introduction ..................................................................................................................................3
2. The Balanced Scorecard at Heidelberg ......................................................................................4
3. The main advantages of the system and its key differences to the common practices ..............5
4. Costs and benefits of the system vivid in Heidelberg’s case ....................................................6
5. Internal and external reporting ....................................................................................................8
6. Conclusion ....................................................................................................................................8
BIBLIOGRAPHY ...........................................................................................................................9
ANNEX ..........................................................................................................................................11
3. EXECUTIVE SUMMARY
In our today’s world filled with rapid change and tremendous new opportunities no company’s future is
secure unless it advances innovation in all aspects of its production process including management
accounting. Thus, the focus of this paper is on unique features, benefits and costs of one innovative
controlling tool – the balanced scorecard – as experienced by Heidelberger Druckmaschinen AG.
Heidelberger Druckmaschinen AG is a very innovative company that not only employs the balanced
scorecard but also constantly improves it. Although it has incurred considerable installation and running costs
and is still more dependent on cyclical fluctuations than targeted, it definitely benefits from the shorter
processes, more accurate strategic and situational overview as well as the ability to meet customers’ needs
and expectations and to adapt faster to certain cyclical movements. Moreover, the corporation is able to keep
a position ahead of competition, successfully following its strategies. This is clearly a competitive advantage
and the benefits gained from the company’s BSC-approach.
1. Introduction
Innovation is an essential element for international companies to persist and operate successfully in a fast
changing business world. Enterprises that want to stay alive should constantly promote innovative practices
in all aspects of production. This definitely includes management accounting, which is an indispensable part
of any production process. Thus, the aim of this paper is to evaluate one of the today’s most innovative
controlling tools – the balanced scorecard (the BSC).
The balanced scorecard was introduced in an article of the Harvard Business Review 1992, written by Robert
S. Kaplan and David P. Norton.1 It goes without saying that a lot of time has passed since then. However,
even today not so many companies use this instrument in their day-to-day business. One of the brightest
German examples of an enterprise that probably employs this technique to its fullest advantage is
Heidelberger Druckmaschinen AG (later referred to as Heidelberg).
Hence, this report will examine how Heidelberg’s unique system differs from the common practices. It will
further discuss the main costs and benefits of the system and will scrutinise the main ways the company
reports its good and bad experience internally and externally. To deal with the above-mentioned problems the
paper will draw on various pieces of scientific literature such as books and journals as well as the company’s
information and scholarly articles found online.
1
See Schmeisser / Clausen / Popp / Ennemann / Drewicke (2011), p. 194.
~3~
4. 2. The Balanced Scorecard at Heidelberg
Heidelberg was founded in 1850 and is a company focusing on the development and production of precision
printing presses, equipment and supporting software. Currently they have production sites in seven different
countries and over 250 sales offices worldwide that cover the needs of over 200.000 customers. The
company’s workforce consisted of 16.496 employees in the financial year 2009/10 and was able to earn
revenues amounting to €2.306 million.2
In fact, the enterprise introduced their first BSC already in 1995 as a part of a Total Quality Management
programme. The programme aimed at implementing not only this new controlling tool but also SMART
Objectives and action plans in order to improve the strategic planning within the company. 3 Thus, this move
was comparatively crucial for the organisation and was aimed at setting worldwide standards in the
development and production of high quality printing equipment with the key objective of profiting from the
company’s worldwide reputation and competitive advantage. It further wanted to sell a well-adapted and
broadly diversified range of products (well-suited to fit a various number of target groups) in the industrial
countries and in the emerging markets in order to further grow its market share.4
As a matter of fact, Heidelberg’s BSC follows the traditional scheme and encompasses the following four
perspectives: financial, customer-related, internal business processes as well as learning and growth. All the
four areas are interconnected and depend on one another. Thus, the financial aspect aims at evaluating the
company’s strategy and its profitability, increasing its value and share prices, making Heidelberg less
dependent on economic fluctuations. The customer-related perspective specifies the targeted segments in
terms of customers and markets and assesses how successful the enterprise is in them. Heidelberg’s
preferences in this sphere are to become the partner of choice, help to enhance effectiveness and add value to
print communication and production processes. The organisation- and process-related projection concentrates
on internal business processes that should assist the company to realise its strategy and to refine its value by
becoming more customer-centric and functionally integrated as well as by providing tailored solutions.
Finally, the employees-related and innovation aspect specifies the firm’s goals concerning its performance
potential and internal capabilities. They should be utilised by the company in order to be more successful and
flexible in today’s highly competitive markets. This includes life-long learning, customer orientation,
integrated culture as well as loyal, energetic and creative workforce.5 The balanced scorecard under
consideration was implemented for the period of seven years from 2004 till 2010 (see Appendix 1).
2
See Heidelberger Druckmaschinen AG – Heidelberg (2011), http://www.heidelberg.com/www/html/en/startPage.
Accessed 23.05.2011.
3
See Forum Balanced Scorecard (2010), http://www.scorecard.de/bsc-einfuhrung/anwender-berichte. Accessed 24.05.2011.
4
See Heidelberger Druckmaschinen AG – Heidelberg (2011), http://www.heidelberg.com/www/html/en/startPage.
Accessed 24.05.2011.
5
See Horngren / Datar / Foster (2009), pp. 493-494 and Appendix 1.
~4~
5. 3. The main advantages of the system and its key differences to the common practices
By implementing the BSC already at the end of 1995 Heidelberg was one of the first enterprises to make use of
this tool. The company’s approach to the BSC is also innovative in a sense that they use it in a very progressive
way. Being able to learn from the past, they constantly improve their BSC (an example might be their
introduction of BSC for 2004-2010 after the crisis of 2000). As a part of this ongoing learning process they also
improve their guidelines when implementing a new BSC. This includes top-down execution, making managers
responsible, adapting planning and controlling instruments, connecting rewarding system, starting with 60-80%
solutions and improving later on. All in all, they try to allow certain flexibility as well as to avoid conventional
practices, software solutions, and strictly interconnected key performance indicators (KPIs).6 Moreover, since
2006 Heidelberg has been stating and communicating the firm’s environmental and sustainability goals by using
the BSC.7 Further, its experts as well as professionals from other organisations are now offering workshops and
seminars that are aimed at helping their customers with a successful implementation of their own BSCs.8
However, the company is very innovative not only because of being one of the first to employ the idea of the
BSC and constantly improving it. It is also one of a few in Germany that apply the instrument in their business.
In fact, not many German organisations use the BSC. For example, the empirical study conducted by
Wissenschaftliche Hochschule für Unternehmensführung in 2000 argues that only 7% of German enterprises of
various economic sectors apply the scheme (see Appendix 2).9 Brabänder/Hilcher’s study of 2001 found out that
only around 16% of the companies they interviewed had already implemented the model and were using it.10
Indeed, most firms nowadays still prefer to have a classical system of KPIs to evaluate their effectiveness and
performance. Although a lot of researchers identify the BSC with the classical KPI system and the former uses
the latter for its main aspects, the two models are not 100% identical and have a number of differences.
Firstly, through the interdependence of the KPIs employed in any particular BSC, the latter enables a better
information gathering and evaluation.11 Moreover, the BSC allows for flexibility and is very helpful in
understanding and realising the company’s strategy while the classical model of KPIs has a focus on
monetary planning and control and has a fixed scheme for each enterprise that decides to apply it. 12
Thus, the BSC has a number of advantages over KPIs. Firstly, it is not limited to certain economic sectors or
companies’ sizes. Secondly, empirical studies show that in most enterprises that use the classical KPI model
financial indicators usually overweigh non-financial ones, when evaluating the company’s effectiveness. For
6
See Forum Balanced Scorecard (2010), http://www.scorecard.de/bsc-einfuhrung/anwender-berichte. Accessed 25.05.2011.
7
See Heidelberger Druckmaschinen AG – Heidelberg (2011), http://www.heidelberg.com/www/html/en/startPage.
Accessed 15.05.2011.
8
See Management Circle (2009), http://www.ecg-consulting.com/pdf/Seminare2010/BSC%20in%20der%20IT-Master-
2009-11-09.pdf. Accessed 24.05.2011.
9
See Weber / Sandt (2001), p. 22.
10
See Schmeisser / Clausen / Popp / Ennemann / Drewicke (2011), p. 33.
11
See Weber / Sandt (2001), p. 19.
12
See Horvath / Kaufmann (1999), p. 359.
~5~
6. instance, many firms often have more than 10 KPIs for evaluating their financial success and only 5 to assess
each non-financial aspect.13 Arguably, they do not have a rounded picture of their market position. Hence, the
BSC is better at balancing short-term and long-term development plans, financial and non-financial perspectives
of the company as well as external and internal performance indicators. It unites three different approaches –
value-, market- and resource- based – and is founded on numeric as well as non-numeric information.14
Another argument in favour of the BSC is that it focuses the organisation on a set of important indicators by
limiting the number of possible goals to 20 KPIs per a BSC.15 In fact, Heidelberg opts for having only 15
goals in its BSC of 2004-2010. The aims are almost equally divided among the four key projections and the
company employs three main KPIs for their assessment: return on investment, customer satisfaction and
personnel motivation indices.16 Heidelberg is furthermore able to combine its controlling instrument with
other techniques and individual indicators that measure performance.17
4. Costs and benefits of the system vivid in Heidelberg’s case
It goes without saying that any technique should be weighted in terms of the costs and benefits of its
implementation and usage. Thus, this chapter will look into the main advantages and expenses Heidelberg’s
BSC has provided or put the company into. As far as costs are concerned, one should not forget that
Heidelberg introduced the BSC of 1995 top-down in all departments. Worldwide workforce consisting of
about 1.000 managers and employees were involved in its development process. Additionally, the enterprise
was supported by PA Consulting, Frankfurt and an internal international group of advisors. All these
participants definitely put Heidelberg to expense, as did software licensing, installation, testing, evaluation,
maintenance and upgrading later on.18
As far as benefits are concerned, the BSC has constantly given the company a good overview of its current
situation and has simultaneously highlighted its main objectives. Heidelberg has known exactly what they
had to focus on and improve regarding their financial independence of cyclical fluctuations, organisational
structure and customer service. They have always been able to react and change more quickly than most of
their rivals and have, therefore, managed to stay ahead of competition.
For example, after the introduction of the Total Quality Management measures in 1995, Heidelberg’s stock
price started to rise from about €40 and reached its peak of €70 in May 2000. Unfortunately, in 2000 the
13
See Weber / Sandt (2001), pp. 12-13.
14
See Schmeisser / Clausen / Popp / Ennemann / Drewicke (2011), pp. 31-32.
15
See Horvath / Kaufmann (1999), p. 359.
16
See Forum Balanced Scorecard (2010), http://www.scorecard.de/bsc-einfuhrung/anwender-berichte. Accessed 25.05.2011.
17
See Horvath / Kaufmann (1999), p. 359.
18
See Forum Balanced Scorecard (2010), http://www.scorecard.de/bsc-einfuhrung/anwender-berichte. Accessed 25.05.2011.
~6~
7. financial crisis started and the corporation was heavily affected. As a result, their stock prices fell to a trough
of about €15 in February 2003 (see Appendix 3). Their net profit decreased from €283 million in the financial
year 2000/2001 to €-695 million in 2003/2004 (see Appendix 4).
Heidelberg learnt a lot from this lesson and as a consequence introduced new measures including their new BSC
with the goals and strategies for period 2004-2010 (see Appendix 1). Already one year later they had a net profit
of €59 million (see Appendix 5). Furthermore, from February 2003 onwards the company continuously
recovered, as far as its stock price is concerned, and reached a mid-term high of €40 in 2006 (see Appendix 3).
Although the recovery was quite successful, Heidelberg did not manage to reach its goal of being
independent of any economic cycles. As before, the company was severely impacted by the recent financial
crisis. The stock fell to a historical low of €3 (see Appendix 3), indicating that the sought benefits had not
been achieved. Having a net profit of €263 million in 2006/2007, the company had a net loss of €249
million in 2008/2009 (see Appendix 5).
Again Heidelberg reacted quickly with several cost cutting measures. This led to a reduction in costs of
more than €100 million. Additionally, they started to observe more accurately the developments of key
figures as sales, profit margins, EBIT and free cash flow. They also lowered the break-even point of sales
to €2,5 billion. Furthermore, Heidelberg restructured its organisation by introducing three divisions:
Heidelberg Equipment, Heidelberg Services and Heidelberg Financial Services. This aimed at shortening
planning time, enabling an easier adaptation to any changes in the marketplace.19 Despite the incurred huge
losses, Heidelberg has managed to lower its negative profit to €-78 million during the first three quarters of
the current financial year20 (see Appendix 7).
It is conspicuous that Heidelberg has managed to keep its competitive advantages of being a high quality
producer and the sole supplier that offers comprehensive and high standard services from maintenance to
consulting, the one that can recover faster and show positive figures already after a relatively short period
of time. This is clearly an improvement in the area of management and organisation. Moreover, they have
cut the reaction time, enhanced the speed of processes and their decision-making. Persuading the existing
and potential customers by an outstanding service offering, expertise and technological lead is also part of
their success that helps them to keep up with the challenge. The BSC of 2004-2010 is one of the reasons
why Heidelberg is able to successfully keep their leading position ahead of competition and react
immediately to any changes in the economy.
19
See Heidelberger Druckmaschinen AG (2011). Accessed 15.05.2011.
20
Compare: It was €-229 million last year (see Appendix 6).
~7~
8. 5. Internal and external reporting
Heidelberg uses both forms of reporting for its BSC: external and internal. On the one hand, the company
gives information about their unique system in its annual and sustainability reports. On the other hand, the
enterprise uses the BSC to agree on and communicate essential aims and project results, responsibilities and
appointments inside the business. BSCs are pinned up on the walls of offices and factories and are visible for
everybody. Employees’ discussions are held regularly to define and answer the main questions for each
worker, including their contribution, forms and results of evaluation, ways to learn and improve.21
Moreover, a constant expansion and support of networks within the company assures a better communication
and a more effective cooperation of the company’s workforce. Keeping in mind that the BSC is not a tool to
patronise employees, but a means to strengthen competences in the lower levels, Heidelberg uses the tool for
decentralisation purposes. Consequently, the enterprise’s units and subsidiaries scattered worldwide have the
possibility to decide by themselves what standards are needed in their BSCs and how to achieve them.22
6. Conclusion
From the above discussion it is obvious that Heidelberg is a very innovative company not only employing the
BSC-tool but also constantly improving it. This is one of the reasons why it still manages to keep a position
ahead of competition, successfully following its goals and strategies. Although it is still more dependent on
cyclical fluctuations than could be wished for, it definitely benefits from its shorter processes, more accurate
strategic and situational overview as well as its ability to meet customers’ needs and expectations and to
adapt faster to certain cyclical movements. This is clearly a competitive advantage and the benefits gained
from the BSC-implementation.
21
See Fischer (1999), http://www.manager-magazin.de/magazin/artikel/0,2828,43028,00.html. Accessed 23.05.2011.
22
See loc. cit..
~8~
9. BIBLIOGRAPHY
Books
1. Ehrmann, H. (2007), Kompakt-Training Balanced Scorecard, 4th edition, Kiehl. – 224 pp.
2. Graumann, M. (2011), Controlling, DW-Verlag. – 831 pp.
3. Horngren, Ch. T., Datar, S. M., Foster, G. (2009), Cost Accounting: a Managerial Emphasis, 13th
edition, international edition, Pearson Prentice Hall. – 896 pp.
4. Horvath, P., Kaufmann, L (1999), “Beschleunigung und Ausgewogenheit im strategischen
Managementprozeß – Strategieumsetzung mit Balanced Scorecard”, in: Hahn, D. / Taylor, B (eds),
Strategische Unternehmensplanung – Strategische Unternehmensführung – Stand und
Entwicklungstendenzen, 8th edition, Physica-Verlag, 1999. – pp. 354-369.
5. Hungenberg, H. (2011), Strategisches Management in Unternehmen: Ziele, Prozesse, Verfahren,
Gabler Verlag. – 500 pp.
6. Schmeisser, W., Clausen, L., Popp, R., Ennemann, C., Drewicke, O. (2011), Controlling and Berlin
Balanced Scorecard Approach, Odenbourg Wissenschaftsverlag GmbH. – 286 pp.
7. Weber, J., Sandt, J. (2001), Erfolg durch Kennzahlen: Neue empirische Erkenntnisse, Vallendar. – 36 pp.
Journals
8. Fischer, O. (1999), “Balanced Scorecard: Alles auf eine Karte“, in: Manager Magazin [Online], 19
November. Available at: http://www.manager-magazin.de/magazin/artikel/0,2828,43028,00.html.
Last accessed 25.05.2011.
The Company’s Resources
9. Heidelberger Druckmaschinen AG – Heidelberg (2011). Available at:
http://www.heidelberg.com/www/html/en/startPage.
10. Heidelberger Druckmaschinen AG (2008), “Heidelberg Predicts Difficult Market Conditions and
Adopts Comprehensive Package of Measures to Enhance the Cost Structure” [Online],
7 October. Available at:
http://www.heidelberg.com/www/html/en/content/articles/press_lounge/company/general/080710_m
easures. Accessed 15.05.2011.
~9~
10. Online Resources
11. Balanced Scorecard Institute (2011). Available at: http://www.balancedscorecard.org/. Last accessed
25.05.2011.
12. Forum Balanced Scorecard (2010), “Anwender-Berichte” [Online]. Available at:
http://www.scorecard.de/bsc-einfuhrung/anwender-berichte. Last accessed 25.05.2011.
13. Management Circle (2009), “Balanced Scorecard in der IT: So setzen Sie Ihre IT-Ziele mit konkreten
Kennzahlen um!” [Online], 9 November. Available at: http://www.ecg-
consulting.com/pdf/Seminare2010/BSC%20in%20der%20IT-Master-2009-11-09.pdf. Last accessed
25.05.2011.
14. Reference for Business (2011), “Balanced Scorecard”, in: Encyclopedia of Business, 2nd edition
[Online]. Available at: http://www.referenceforbusiness.com/encyclopedia/Assem-Braz/Balanced-
Scorecard.html. Last accessed 25.05.2011.
15. Wallstreet: online (2011), “Heidelberger Druckmaschinen Chart” [Online]. Available at:
http://www.wallstreet-online.de/aktien/heidelberger-druckmaschinen-
aktie/chart#t:3m||s:lines||a:abs||v:week. Last accessed 25.05.2011.
16. YahooFinance.com (2011), “Standard Chart: Heidelberger Druckm (GER)” [Online],
25 May. Available at: http://de.finance.yahoo.com/q/bc?s=HDD.DE&t=my&l=on&z=l&q=l&c=.
Last accessed 25.05.2011.
~ 10 ~
12. Appendix 2: Systems of Key Performance Indicators – Status Quo
Source: Weber, J., Sandt, J. (2001), Erfolg durch Kennzahlen: Neue empirische Erkenntnisse. – p. 22.
~ 12 ~
17. Appendix 7: Net Sales, Cash Flow and Net Profit for Q1-Q3 2010/2011
Year Q1-Q3 2010/2011
Net Sales in millions 1883
Cash Flow in millions 26
Net Profit in millions -78
Source: Heidelberger Druckmaschinen AG (2011), Q3 Interim Financial Report 2010 / 2011 [Online].
Available at: http://www.heidelberg.com/www/html/en/binaries/files/investor_relations/reports/2010-
11/110209_q3_1011_report_pdf. Accessed 20.05.2011.
~ 17 ~
