Post on 22-Jan-2015
description
Balanced Scorecard Implementation at Philips
QURESHI NAZNEEN SADIK HUSAINRAGINI 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 Management Control Systems
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.
INTRODUCTION
BACKGROUND NOTE
Philips Was Founded In 1891 By Gerard Philips-- To Produce Carbon Filament Lamps ,Electrical Products
Brother, Anton, Joined In 1895 As A Salesperson
1900s, Gerard’s Company Was One Of The Largest Producers & Marketers Of Carbon-filament Lamps.
In 1927, The Company Introduced Its First Radio. Within A Span Of Five Years, It Was Able To Sell A Million Radios
The Great Depression Of The 1930s That Followed The Stock Market Crash Of 1929 Had A Negative Impact
1967, The Company Introduced Color Tvs In The Netherlands. 1972, Philips Established A Music Company Called Polygram.
Philips Slipped Back Into The Red, Reporting Losses Of Around Dutch Guilders 590 Million In 1996
In October 1996, After Yet Another Change In The Top Management And Intensive Restructuring Exercise That Included Job Cuts, Outsourcing Component Manufacturing, And Selling Off Unprofitable As Well As Non-core Businesses.
After Two Good Years, Philips’ Profits Plunged To € 1.59 Billion In The Fiscal 1999, Partly Due To The Losses Incurred On A Failed Joint Venture With Lucent Technologies For Manufacturing Cell Phones
In The Financial Year 2001-02, Philips Suffered Huge Losses Of € 3.2 Billion, Leading To Around 55,000 Layoffs
By 2005, Philips Had Become A Lean And Focused Organization, With Centralized Planning, Logistics, And Accounting Functions.
The Number Of Business Units Had Come Down To Three, And The Number Of Creating Teams From 21 To 12.
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 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
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 Process Customers Financial
Linkage to the Balance Scorecard
Converting factors like customer satisfaction, product sales into CSF’s.
Corporate Quality Department Guidelines :- Inclusion Continuity Robustness
Indicators to measure CSF’s
Perspective Indicators
Financial •Profit realised•Income from operations•Working capital•Operational Cash Flow•Inventory Turns
Processes •% reduction in process cycle time•Number of engineering changes•Capacity utilisation•Order response time•Process capability
Perspective Indicators
Customers •Rank in customer survey•Market share•Repeat order rate•Complaints•Brand index
Competence •Leadership competence•% of patent protected turnover•Training days per employee•Quality improvement team participation
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.
Balanced Scorecard at Philips Domestic Appliances and Personal
Care Division Perspective Indicator Description
Customers
CLIPCommitted Line Item Performance - measuring
deliverability during product performance
Renewal RateTime frame between new product release and time
to market
Value share Market share in value
Sales per SKUSales per stock keeping unit to balance product
portfolioProcesses PST DG Score on process survey for demand generation
Competencies
PBE Score Score on Philips Business Excellence model% Personal MD
files% of people having a personal management
development file% participation in
QIT% of people participating in Quality Improvement
Teams
Balanced Scorecard at Philips Consumer Electronics
Perspective Indicator Description
FinanceContribution
Margin Contribution to fixed cost and profitabilitySales Value of product sold
Customers
End user satisfaction Satisfaction survey of end usersBrand index Market share in value/Market share in volumeTrade user satisfaction Satisfaction survey among the trade users
Processes
Sales plan reliabilityForecast accuracy of sales plan. Actual sales compared
with quarterly rolling forecast
Commercial release on volume
Number of first mass shipments / Stroke no. delivered in a period as planned and agreed
Commercial release on time
Number of commercial releases within the agreed time tolerance per period
Competencies
Training Total training hours/no. of employeesEmployee
performanceNumber of fulfilled performance appraisal /number of
employeesPBE score 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 Circulated Brochure Reporting system-Lotus notes
MEASURING RESULTS
Evaluate actual performance against the targets and to monitor future plan.
Philips used traffic light system:
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.
Problem AreaPerformance in line with the
targetTarget has been met
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
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.
THANK YOU