Mcs balance score card @phillips final

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