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Balanced Scorecard Implementation at
Philips

Management Control Systems

QURESHI NAZNEEN SADIK HUSAIN
RAGINI KUMARI
RAHAT...
INTRODUCTION
 Netherland based Loyal Philips, due to its dismal financial
performance, it embarked on a reconstructing ex...
BACKGROUND NOTE
In October Founded In 1891 By Change In The Top Produce Carbon
 Philips Was 1996, After Yet AnotherGerard...
What is Need of Balance Scorecard?



Unable to adjust & make changes in current
processes to changing external environme...
How They Formulate Base to Implement
BEST


Company first review its operations in especially those
business which lacked...
PBE Model(EFQM based model)


Leadership: Leaders define the goals and show direction. They set the

priorities, lead by ...
Critical Success Factors


Factors that were crucial for running the business
and creating value.



Four perspectives :...
Linkage to the Balance Scorecard



Converting factors like customer satisfaction,
product sales into CSF’s.



Corporat...
Indicators to measure CSF’s
Perspective
Perspective
Financial
Customers

Processes
Competence

Indicators
Indicators
•Prof...
Philips Vision, Mission and Strategy


Mission: To be the leading provider of
semiconductor-based solution for mass marke...
Balanced Scorecard at Philips Domestic
Appliances and Personal Care Division
Perspective

Indicator
CLIP

Customers

Renew...
Balanced Scorecard at Philips
Consumer Electronics
Perspective
Finance

Customers

Indicator
Contribution
Margin
Sales
End...
IMPLEMENTING BALANCE SCORECARD



Established Annual targets for entire company



Identifying the factors



Shared be...
MEASURING RESULTS


Evaluate actual performance against the targets and
to monitor future plan.



Philips used traffic ...
Financial Data Analysis
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Sales

29658

30459

31459

37862

32339

26788...
What Philips doing now?


Philips having 40% Healthcare,26% Lifestyle, 34%
Lightning.



Eco-vision targets for 2010-201...
THANK YOU
Mcs balance score card @phillips final
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Mcs balance score card @phillips final

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Mcs balance score card @phillips final

  1. 1. Balanced Scorecard Implementation at Philips Management Control Systems QURESHI NAZNEEN SADIK HUSAIN RAGINI KUMARI RAHAT TANDAN RAHUL AGARWAL RAHUL KUMAR AGARWAL RAJ SHAH RAJAS SAWARDEKAR RAJAT AGRAWAL RAJIV PANDEY RAJKUMAR BHALODIA RAKSHIT MUJURA RAMEEZ KHAN RASHMIN KAUR RATNADEEP KEER
  2. 2. INTRODUCTION  Netherland based Loyal Philips, due to its dismal financial performance, it embarked on a reconstructing exercise, to turn the company around.  Rapid changes in external environment and growing competition of Asian manufacturers , made to shift focus from High Volume to High Value business.  To made this change, a improvement program called BEST, embarked by Philips aimed to improve the business and financial performance.  Balanced Score Card( a tool of BEST), used to communicate strategy in all its divisions consisting of around 120000 employees spread over 150 countries.
  3. 3. BACKGROUND NOTE In October Founded In 1891 By Change In The Top Produce Carbon  Philips Was 1996, After Yet AnotherGerard Philips-- To Management And Intensive Restructuring Exercise That Included Job Cuts, Outsourcing Filament Lamps ,Electrical Products Component Manufacturing, And Selling Off Unprofitable As Well As Non core Businesses. Joined In 1895 As A Salesperson Brother, Anton,  1900s, Gerard’sYears, Philips’ Profits Plunged ToLargest Producers &  After Two Good Company Was One Of The € 1.59 Billion In The Fiscal     1999, Partly Of Carbon-filament Lamps. A Failed Joint Venture With Marketers Due To The Losses Incurred On Lucent Technologies For Manufacturing Cell Phones In 1927, The Company Introduced Its First Radio. Within A Span Of In The Financial Year 2001-02, Philips Suffered Huge Five Years, It Was Able To Sell A Million Radios Losses Of € 3.2 Billion, Leading To Around 55,000 Layoffs The Great Depression Of The 1930s That Followed The Stock Market By 2005, Philips Crash Of 1929 Had Become A Lean And Focused Organization, With Had A Negative Impact Centralized Planning, Logistics, And Accounting Functions.  1967, The Company Introduced ColorDown To Three, And The Number Tvs In The Netherlands. 1972, The Number Of Business Units Had Come Philips Established A Music 12. Of Creating Teams From 21 ToCompany Called Polygram.  Philips Slipped Back Into The Red, Reporting Losses Of Around Dutch Guilders 590 Million In 1996 
  4. 4. What is Need of Balance Scorecard?  Unable to adjust & make changes in current processes to changing external environment.  Wide spread operations across several countries.  Competition from LG & Samsung.  Absence of Goal Congruence
  5. 5. How They Formulate Base to Implement BEST  Company first review its operations in especially those business which lacked strategic edge.  Felt need of re-organised and reduction of business units.  Encourage different units to work together
  6. 6. PBE Model(EFQM based model)  Leadership: Leaders define the goals and show direction. They set the priorities, lead by example, inspire commitment, and manage the overall process. This holds good for management in general but is especially true for managing improvement.  Processes: Sustainable excellent results cannot be achieved by luck. They will only be achieved consistently with world-class processes that deliver outstanding results in a predictable way. Processes must therefore be robust, simple, and dynamic. They need to be adaptable to changing business requirements and improve over time.  Results: Great companies achieve great results on a sustainable basis. Measuring all the business´ results ¾ not only financial performance ¾ is critical in determining how far we are on the road to business excellence. These results are measured by our customers, our employees, society at large, and of course, the financial community.
  7. 7. Critical Success Factors  Factors that were crucial for running the business and creating value.  Four perspectives : Competence Process  Customers  Financial 
  8. 8. Linkage to the Balance Scorecard  Converting factors like customer satisfaction, product sales into CSF’s.  Corporate Quality Department Guidelines : Inclusion  Continuity  Robustness
  9. 9. Indicators to measure CSF’s Perspective Perspective Financial Customers Processes Competence Indicators Indicators •Profit realised •Incomecustomer survey •Rank in from operations •Working capital •Market share •Operational Cash Flow •Repeat order rate •Inventory Turns •Complaints •Brand index •% reduction in process •Leadership competence cycle time •% of patentengineering •Number of protected turnover changes •Training days per employee •Capacity utilisation •Quality improvement team •Order response time participation •Process capability
  10. 10. Philips Vision, Mission and Strategy  Mission: To be the leading provider of semiconductor-based solution for mass market consumer and communication applications in the industry.  Vision: A world where everyone can always connect to information, entertainment and services.  Strategy: Grow market share of firm from 5% to 8% in the year 2005 and to be engaged in Chinese standard efforts to generate long-term business.
  11. 11. Balanced Scorecard at Philips Domestic Appliances and Personal Care Division Perspective Indicator CLIP Customers Renewal Rate Value share Description Committed Line Item Performance - measuring deliverability during product performance Time frame between new product release and time to market Sales per SKU Processes Market share in value Sales per stock keeping unit to balance product portfolio PST DG Score on process survey for demand generation PBE Score Score on Philips Business Excellence model % Personal MD % of people having a personal management Competencies files development file % participation in % of people participating in Quality Improvement QIT Teams
  12. 12. Balanced Scorecard at Philips Consumer Electronics Perspective Finance Customers Indicator Contribution Margin Sales End user satisfaction Brand index Trade user satisfaction Description Contribution to fixed cost and profitability Value of product sold Satisfaction survey of end users Market share in value/Market share in volume Satisfaction survey among the trade users Forecast accuracy of sales plan. Actual sales compared Sales plan reliability with quarterly rolling forecast Commercial release Number of first mass shipments / Stroke no. delivered in on volume a period as planned and agreed Commercial release Number of commercial releases within the agreed time on time tolerance per period Training Total training hours/no. of employees Employee Number of fulfilled performance appraisal /number of Competencies performance employees PBE score Score on Philips Business Excellence Model Processes
  13. 13. IMPLEMENTING BALANCE SCORECARD  Established Annual targets for entire company  Identifying the factors  Shared best practices with the owner  Literature and Company information  Circulated Brochure  Reporting system-Lotus notes
  14. 14. MEASURING RESULTS  Evaluate actual performance against the targets and to monitor future plan.  Philips used traffic light system: Problem Area Performance in line with the target Target has been met  All the quarterly business reviews of all subsidiaries were carried out using Balanced Scorecard.  Create the right conditions for improvement of programs and performance breakthroughs at Philips.
  15. 15. Financial Data Analysis 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sales 29658 30459 31459 37862 32339 26788 24049 24855 25775 26976 Net Income (loss) 2602 5900 1590 9662 (2475) (3206) 695 2836 2886 5383 High Volume Electronics Healthcare, Lifestyle
  16. 16. What Philips doing now?  Philips having 40% Healthcare,26% Lifestyle, 34% Lightning.  Eco-vision targets for 2010-2015  Recent News: Philips sold its audio-visual equipment business to Japanese company Funai, Philips leader in lightning but well behind in consumer durables.  As per annual report of 2012: Net Sales is $32.5 bn & Net Income of 300mn.
  17. 17. THANK YOU

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