Balanced Scorecard Implementation at
Management Control Systems
QURESHI NAZNEEN SADIK HUSAIN
RAHUL KUMAR AGARWAL
Netherland based Loyal Philips, due to its dismal financial
performance, it embarked on a reconstructing exercise, to turn the
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
Balanced Score Card( a tool of BEST), used to communicate
strategy in all its divisions consisting of around 120000 employees
spread over 150 countries.
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
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
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
How They Formulate Base to Implement
Company first review its operations in especially those
business which lacked strategic edge.
Felt need of re-organised and reduction of business
Encourage different units to work together
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.
Critical Success Factors
Factors that were crucial for running the business
and creating value.
Four perspectives : Competence
Linkage to the Balance Scorecard
Converting factors like customer satisfaction,
product sales into CSF’s.
Corporate Quality Department Guidelines :
Indicators to measure CSF’s
•Rank in from operations
•Operational Cash Flow
•Repeat order rate
•% reduction in process
•% of patentengineering
•Number of protected
•Training days per employee
•Quality improvement team
•Order response time
Philips Vision, Mission and Strategy
Mission: To be the leading provider of
semiconductor-based solution for mass market
consumer and communication applications in the
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.
Balanced Scorecard at Philips Domestic
Appliances and Personal Care Division
Committed Line Item Performance - measuring
deliverability during product performance
Time frame between new product release and time
Sales per SKU
Market share in value
Sales per stock keeping unit to balance product
Score on process survey for demand generation
Score on Philips Business Excellence model
% Personal MD
% of people having a personal management
% participation in % of people participating in Quality Improvement
Balanced Scorecard at Philips
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
a period as planned and agreed
Commercial release Number of commercial releases within the agreed time
tolerance per period
Total training hours/no. of employees
Number of fulfilled performance appraisal /number of
Score on Philips Business Excellence Model
IMPLEMENTING BALANCE SCORECARD
Established Annual targets for entire company
Identifying the factors
Shared best practices with the owner
Literature and Company information
Reporting system-Lotus notes
Evaluate actual performance against the targets and
to monitor future plan.
Philips used traffic light system:
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.
What Philips doing now?
Philips having 40% Healthcare,26% Lifestyle, 34%
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.