Balanced Scorecard Implementation at Philips

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Case Details:

Case Code : BSTR270
Case Length : 18 Pages
Period : 1995-2007
Pub Date : 2007
Teaching Note :Not Available
Organization : Philips
Themes: Growth Strategy | Balanced Scorecard
Industry : Consumer Electronics
Countries : Netherlands

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

The Need for Balanced Scorecard

During the late 1990s the external environment was changing rapidly and Philips needed to respond quickly to these changes. However, the existing organization structure at Philips did not support this kind of change. The company's operations were spread across several countries, and the products were most often sold in the country in which they were manufactured.

With growing wage levels, selling and manufacturing in the same country was not a lucrative value proposition. This was especially the case in some of Philips' major markets in Western Europe where the cost of manufacturing had increased significantly.

At the same time, the growing influence of Asian companies like LG and Samsung increased competition in the businesses in which Philips was operating. These changes made Philips realize that its operations needed to be more flexible, more innovative, and value adding. A silo mentality had developed in the organization due to years of bureaucracy...

Implementing Balanced Scorecard

At Philips, the initiative to implement the Balanced Scorecard system came from the top management at its headquarters in the Netherlands. All the subsidiaries of Philips across the world were instructed by their quality departments on how to go about the implementation...

Measuring Results

During the periodical management reviews, the Balanced Scorecard was used as an instrument to evaluate actual performance against the targets and to monitor future plans.

Philips used the traffic light system with the green light indicating a target that had been met, amber indicating performance in line with the target, and red denoting a problem area, to measure the level of achievement of the key indicators.

The employees were more loyal to the business unit in which they were working rather than the company as a whole...

Exhibits

Exhibit I: Philips Divisional Structure
Exhibit II: Philips - Selected Financial Data (1997-2001)
Exhibit III: Philips - Selected Financial Data (2002-06)
Exhibit IV: EFQM Excellence Model
Exhibit V: Philips Vision, Mission and Values
Exhibit VI: Philips Strategy
Exhibit VII: Philips Lighting - Vision Statement
Exhibit VIII: One Page Strategy Document - Philips Semiconductors (2005)