BALANCED SCORECARD

Lord Kelvin a prominent British scientist

I often say that when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind.

If you can not measure it, you can not improve it

Background

Business competition based on information

Companies ability to exploit intangible assets has become more decisive than their ability to invest in and manage their physical assets

Intangible assets played a central role in value creation

Companies want to improve the management of their intangible assets, they had to integrate the measurement of intangible assets into their management systems

Financial Perspective

Objectives

Measures

Targets

Initiatives

1 2 3

Learning and Growth Perspective

Objectives

Measures

Targets

Initiatives

1 2 3

Customer Perspective

Objectives

Measures

Targets

Initiatives

1 2 3

Internal Business Process Perspective

Objectives

Measures

Targets

Initiatives

1 2 3

Business Strategy

To succeed financially, how should we appear to our shareholders?.

To satisfy our shareholders and customers, what business processes must we excel at?.

To achieve our vision,how will we sustain our ability to change and improve

To achieve our vision, how should we appear to our customers?.

BALANCED SCORECARD (Kaplan and Norton)

The Four Perspectives of BSC

The four BSC perspectives provides a robust structure for companies to express their strategic objectives

The financial objective would include a high-level objective for sustained shareholder value creation and supporting sub-objectives for revenue growth, productivity, and risk management.

The customer perspective would include objectives for desired customer outcomes, such as to acquire, satisfy, and retain targeted customers, and to build the share of their spending done with the company

Objectives in the process perspective reflected how the company would create and deliver the differentiated value proposition and meet the financial objectives for productivity improvements.

Objectives in the learning and growth perspectives described the goals for employees, information systems, and organizational alignment

BALANCED SCORECARD

Enables companies to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they would need for future growth

BSC wasnt a replacement for financial measures, but it is the complement

BSC addresses a serious deficiency in traditional management system which is their inability to link a companys long-term strategy with it short-term actions

Four new management process that linking long-term strategic objectives with short-term actions

Vision and strategys statement must be expressed as an integrated set of objectives and measures

Translating the vision

Manager must communicate their strategy up and down the organization and link it to departmental and individual objectives

Communicating and Linking Enables company to integrate

their business and financial plans

Manager can undertake and coordinate those initiatives that move them toward long-term strategic objectives

Business Planning

Company can monitor short-term results from three additional perspectives customers, internal business process, and learning & growth and evaluate strategy in the light of recent performance

Feedback and Learning

How one company linked measures from the four perspectives

THE IMPLEMENTATION OF BSC EXAMPLE North America Marketing and Refining

EXAMPLE

North America Marketing and Refining :

product leadership strategy : brand image and product characteristic

competitor pursued similar strategy

NAMR lose competitive advantage

NAMR adopted business strategy

Revenue Growth Strategy

Productivity Strategy

FINANCIAL PERSPECTIVE

INCREASE ROCE TO 12 %

Revenue Growth Strategy Productivity Strategy

ROCE Net Margin vs Industrty

New Sources of

Non-gasoline

Revenue

Increase Customer

Profitability through

Premium Barnds

Become Industry

Cost Leader

Maximize use of

Existing Assets

Non-gasoline revenue and margin

Volume vs industry Premium Ratio

Cash Expense (Cents per gallon)

vs

Industry

Cash Flow

CUSTOMER PERSPECTIVES

ROAD WARRIORS

16 %

Generally higher-income, middle-aged men who drive 25.000 to

50.000 miles a year.. Buy premium gasoline with credit card Purchase sandwiches and drinks from convenience storewill Sometimes wash their cars at the carwash

TRUE BLUES

16 %

Usually men and women with moderate to high incomes who

Are loyal to a brand and sometimes to a particular station Frequently buy premium gasoline and pay in cash

GENERATION F3

27 % Fuel, Food and Fast : Upwordly mobile men and women half under 25 years of age who are constantly on the go..Drive a lot and snack heavily from the convenience store.

HOMEBODIES

21 %

Usually housewives who shuttle their children around during the day

And use whatever gasoline station is based in town or along their

route or travel

PRICE SHOPPERS

20 % Generally arent loyal to either a brabd or a particular station, and Rarely buy the premium lone frequently on the tight budgets.

SERVICE PROFILE

Immediate access to a gasoline pump Self-payment mechanism at the pump Covered area for gasoline pumps 100 % availability of product, especially premium grades Clean restrooms Satisfactory exterior station appearance Safe, well-lit station Convenience store, stocked with fresh, high-quality merchandises Speedy purchase Ample parking spaces near convenience store Friendly employees Availability of minor services

Speedy

Purchase

Friendly,

Helpful

employee

Recognize

loyalty

More

Consumer

product

Help develop

Business

skill

Basic

Clean Sale Quality Trusted brand

Differentiators

Delight the customer Win-win Dealer

Relationship

Mystery shopper

rating

Share of segment

CUSTOMER PERSPECTIVES

INTERNAL BUSINESS PROCESS PERSPECTIVES

Two important internal processes :

1. Develop new products and services

2. Generate dealer profits from non-gasoline revenues

Create

Non-gasoline

Product and

services

New Product ROI

New product Acceptance

Rate

Understand

Customer

Segment

Share of Target segment

Best-In-Class

Franchise

Team

Dealer quality rating

Improve

Hardware

performance

Yield gap Un-planned downtime

On Spec

On Time

Perfect Orders

Improve

Inventory

management

Inventory level Run-out rate

Industry Cost

Leader

Activity cost vs Competitors

Improve

SHE

Environmental Incident

Safety Incident

Build the franchise

Increase customer

value Achieve operational excellence Be a good neighbor

Functional excellence Leadership skill Integrated view

Personal scorecard Employee feedback

Process improvement Y2K

LEARNING AND GROWTH PERSPECTIVES

Aligned Personal growth

A motivated and prepared workforce

Climate for action Competencies Technology

Strategic skill coverage ratio

System milestone

NAMR BALANCED SCORECARD

PERSPECTIVE STRATEGIC THEMES STRATEGIC OBJECTIVES STRATEGIC MEASURES

FINANCIAL Financial Growth F1 Return On Capital

Employed

F2 Asset utilization

F3 Profitability]

F4 Industry cost leader

F5 Profitable growth

ROCE Cash flow Net margin rank Fuel cost per gallon Volume growth rate Premium ratio Non-gasoline revenue and margin

CUSTOMER Delight the customer

Win-win dealer relations

C1 Continuously delight

targeted customer

C2 Build win-win relations

with dealer

Market share in targeted market

Mystery shopper rating

Dealer gross profit growth Dealer survey

NAMR BALANCED SCORECARD

PERSPECTIVE STRATEGIC THEMES STRATEGIC OBJECTIVES STRATEGIC MEASURES

INTERNAL

BUSINESS

PROCESS

Build the franchise

Safe and reliable

Competitive supplier

Quality

Good neighbor

I1 Innovative products and

services

I2 Best-in-Class Franchise

teams

I3 Refinery performance

I4 Inventory management

I5 Industry cost leader

I6 On spec, on time

I7 Improve SHE

New product ROI New product acceptance rate

Dealer quality score

Yield gap Unplanned down time

Inventory level Runout rate

Activity cost vs competitor

Perfect orders

Number of environmental incidents

Days away from work rate

LEARNING

AND

GROWTH

Motivated and prepared

workforce

L1 Climate for action

L2 Core competencies

and skills

L3 Access to strategic Inf.

Employee survey Personal BSC Strategic Competency av. Strategic Inf. availability