application of balance scorecard

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Application of Balanced Scorecard In Process Industry: A Case Study of Agro Base Company in Developing Country

Prepared By:Umar Farooq

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Why Balanced Scorecard

• 95% of typical workforce does not understand its organizations’ strategy

• 90% of organizations fail to execute their strategies successfully

• 70% of organizations do not link middle management incentives to strategy

• 85% of Mgt teams Spends less than 1 hr per month On strategy issues

• 60% Of Org Don’t link Strategy & budgets

• 92% of orgs Do not report On lead indicators

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Balanced Scorecard

A balance scorecard translates an organization’s mission and strategy into set of performance

measures that provide the framework for implementing its strategy

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Monsanto Introduction:

• Monsanto is US (St. Louise Missouri) base multinational agriculture organization.

• Established in 1901 Start with Agro chemical business.

• Monsanto came to Pakistan on October 01, 1998

• Strong core business in Pakistan based on DEKALB and Asgrow Corn seed brands

• First agriculture company in Pakistan to invest in all essential components of seed business

• Certified OHSAS 18001, ISO 14001, ISO 9001

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“ We apply innovation and technology to help farmers around the world produce more while conserving more. We help farmers grow yield sustainably so they can be successful, produce healthier foods, better animal feeds and more fiber, while also reducing agriculture's impact on our environment “

Mission Statement of Monsanto:

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• Financial stewardship to ensure that financial standards are met;

• Environmental, safety and health stewardship to protect the safety of our people, communities and the environment;

• And societal engagement to consider whether we are doing the right things and doing them right

Monsanto Stewardship:

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A new vision for agriculture built upon three pillars. These pillars are advanced breeding, biotechnology, and improved agronomic practices. When all three components are fully integrated we can provide the best tools and technology to farmers so that they can meet the goals of feeding, clothing, and fueling the world

New Vision for Agriculture

http://www.monsanto.com/responsibility/sustainable-ag/new_vision_for_ag.asp

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Product of Monsanto:

Hybrid Corn Seed Spring & Autumn Variety:Corn 919, Corn 5219, Corn Opener Corn 6142, Corn 6525

BT Cotton:

Chemistry:Roundup: Herbicides

Vegetable Seeds:Tomato, Cucumber, Green Chili, Cabbage, Watermelon and many other

http://www.monsanto.com/responsibility/sustainable-ag/produce_more.asp

http://connection.monsanto.com/MonsantoNews/LexisNexis/Pages/Geneticallymodifiedcottonstopsonebugbutfostersothers.aspx

http://www.google.com.pk/imgres?imgurl=http://www.recipekey.com/images/browse_pictures/vegetable-recipes.jpg&imgrefurl=http://www.recipekey.com/browse/recipes/Vegetables/1/10&usg=__K_To8y7bzKhOalfWZjpAWpKnTPE=&h=424&w=400&sz=76&hl=en&start=20&itbs=1&tbnid=ntQYf6DvV_ZwsM:&tbnh=126&tbnw=119&prev=/images?q=vegetable&hl=en&sa=X&gbv=2&tbs=isch:1

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Process Detail of Corn Seed:

Intake

Drying

Cleaning

Gravity Separating

Chemical treatment

Packing

Drying/Shelling Process Conditioning Process Packing Process

Temporary Warehouse

Ear Corn

Shelling

Sorting

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Application of Balanced Scorecard

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4 Perspectives in Balanced Scorecard

If we succeed, how will we look to our

shareholders?

Financial Perspective

To achieve our vision, how must we

look to our customers?

Customer Perspective

To satisfy our customers, which

processes must we excel at?

Internal Perspective

To achieve our vision, how must our

organization learn and improve?

Learning & Growth Perspective

The Strategy

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BSC Implementation Steps:

Microsoft Office Word Document

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Improve Cost Efficiency

Enhance Long-term Shareholder Value

Increase Revenue Growth

Customer Satisfaction & Retention Enhance Brand Image

Build High Performance Products

Achieve Operational Excellence

Power Delegation

Drive Demand through Customer Relation

Management

Manage Dramatic Growth through

Innovation

Implement GoodEnvironmental Policy

Build Learning Culture/Employee Satisfaction

Expand Capabilities with Technology

Strategy Map of Monsanto

Financial

Customer

Internal Process

Learning & Growth

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Execution

– 1 –Identify

Initiatives

– 2 –Screen

Initiatives

Marketing Projects,

Activities, etc.

Development Projects,

Activities, etc.Quality Projects,

Activities, etc.

Corporate Projects,

Activities, etc.

FinancialPerspective

CustomerPerspective

InternalPerspective

OrganizationLearning

Output: Short List of Strategically Aligned Initiatives

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Objectives Measures Targets Initiatives

Financial

"To succeed financially, how should we appear to our shareholers?"


Learning & Growth

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


Internal Business Processes

"To satisfy our sharholeders & customers, what business must we excel at?"


Customer

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

Vision &Strategy

Prospects :

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Customer Perspective identifies Targeted Customer and market Segments and Measures the Organization’s success in these Segments

Customer Prospect:

In today’s business scenario “Customer is the king”

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Customer Prospect:

Price Availability BrandServiceQuality

Customer Acquisition

Customer Satisfaction

Customer Retention Customer Profitability

Market Share

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Customer Perspective:Objective Measures Initiatives Targets

Perfrm.Actual

Perfrm.

Increase Customer Satisfaction

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Perfrm.Actual

Perfrm.


Continuously improve customer satisfaction

• Decrease average lead time •Increase average on time delivery • Average time to resolve customer query• Measure customer satisfaction rate through survey

24 Hrs 85% 3 Days

10% raise frm FY09

25 Hrs80%4 Days

11%

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Perfrm.Actual

Perfrm.




24 Hrs 85% 3 Days

10% raise frm FY09

25 Hrs80%4 Days

11%

Facilitate customer through quality service

• Conduct training and coaching program of former

4 Program in 3 Mnth

4 Program

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Perfrm.Actual

Perfrm.




24 Hrs 85% 3 Days

10% raise frm FY09

25 Hrs80%4 Days

11%



4 Program in 3 Mnth

4 Program

Understand customer needs & requirement

• Make customer friendly environment • Conduct the campaigns to hear the customer needs

20 %5

15 %5

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Perfrm.Actual

Perfrm.




24 Hrs 85% 3 Days

10% raise frm FY09

25 Hrs80%4 Days

11%



4 Program in 3 Mnth

4 Program



20 %5

15 %5

Increase customer Retention rate

% Customer retention rate

• Customer Profitability• Improved quality & accuracy• Customer satisfaction rating

75%10%70%

76%12%75%

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Perfrm.Actual

Perfrm.




24 Hrs 85% 3 Days

10% raise frm FY09

25 Hrs80%4 Days

11%



4 Program in 3 Mnth

4 Program



20 %5

15 %5

Increase customer Retention rate

% Customer retention rate

• Customer Profitability• Improved quality & accuracy• Customer satisfaction rating

75%10%70%

76%12%75%

Minimize the Customer complaints

No of complaints handle during FY10

• Improve the quality of seed to reduce complaints

10 In FY09

8 InFY10

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There are four main themes in this perspective, namely:

• Operations Management Process

• Customer Management Process

• Innovation Process

• Regulatory and Social Process

Internal Business Process Prospective:

This perspective focuses on internal operations That create value for customers that ,in turn, furthers the financial perspective by increasing the shareholder value

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Operations Management

Processes

CustomerManagement

Processes

Innovation Processes

Regulatory and Social Processes

Processes that produce and deliver

products and services

Processes that enhance customer

value

Processes that create new products and

services

Processes that improve communities and the environment

• Supply• Production• Distribution

• Selection• Acquisition• Retention• Growth

• New Ideas• R&D Portfolio• Design/ Develop• Launch

• Environment• Safety & Health• Employment• Community

Strategic Objectives in Internal Process

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Internal Business Process Prospective:Objective Measures Initiatives Targets

Perfrm.Actual

Perfrm.

Produce better quality of seed

Increase germination% of seed by quality parameters

•Regular check & inspection of seed during production and processing of seed

95% 98%

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Perfrm.Actual

Perfrm.




95% 98%

Conserve the resources Reduce the electricity and sui gas cost

•Use effective and efficient way to conserve resources

Reduce 10%

Reduced 12%

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Perfrm.Actual

Perfrm.




95% 98%



Reduce 10%

Reduced 12%

Continuously improve processing of seed

Increase the recovery percentage of corn seed

•Minimize the off grade type seed •Control moisture reduction loses •By conducting internal & External compliance audit

2%

5%

2

1.5%

5%

2

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Perfrm.Actual

Perfrm.




95% 98%



Reduce 10%

Reduced 12%

Continuously improve processing of seed

Increase the recovery percentage of corn seed

•Minimize the off grade type seed •Control moisture reduction loses •By conducting internal & External compliance audit

2%

5%

2

1.5%

5%

2

Minimize MTBF of equipments

Minimize the production time lost due to maintenance

•Develop maintenance schedule•Carry out weekly preventive maintenance of equipment

•Percentage of equipment maintained on schedule

2 Hours during Season

80%

2 Hours

85%

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Learning & Growth Perspective

This perspective reflects the capability that a company should have,

namely:

• Human Capital

• Organization Capital

• Information Capital

• This perspective shows us that good human resource

development system, organizational system and information

system forms a solid foundation for improving company

performance.

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Human Capital Organization Capital

Information Capital

• Skills• Knowledge• Attitude

• Systems• Database• Networks

• Culture• Leadership• Organization Development

Learning & Growth Prospect:

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Learning & Growth Prospective:Objective Measures Initiatives Targets

Perfrm.Actual

Perfrm.

Employee Satisfaction % Rating of employee satisfaction obtain by Survey Index

Conduct online anonymous employee satisfaction survey

10% Increase from FY09

11%

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Perfrm.Actual

Perfrm.




11%

Continuously develop and deliver new innovative products & services

•Percentage of sales obtained from new products & services•Average time from initial design to production.

•Increase sales of new products and services

•Reduce development time.

20%

10% from last dev.

15%

8%

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Perfrm.Actual

Perfrm.




11%



•Increase sales of new products and services

•Reduce development time.

20%

10% from last dev.

15%

8%

Recognize and reward appropriate achievements and behaviors

% Rating of performance evaluation on quarterly basis

•Award RRA for outstanding achievement •Recognize the work

90% 90%

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Perfrm.Actual

Perfrm.




11%



• Increase sales of new products and services

• Reduce development time.

20%

10% from last dev.

15%

8%

Recognize and reward appropriate achievements and behaviors

% Rating of performance evaluation on quarterly basis

• Award RRA for outstanding achievement • Recognize the work

90%

40%

90%

50%

Power Delegation Staff empowered to manage processes

• Clerical staff administration & decision making

80% 85%

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In the financial perspective, the strategic goal is the long-term shareholder value. This goal is driven by two factors, namely : revenue growth and cost efficiency.

Financial Prospective:

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Long-term Shareholder Value

Revenue Growth

Improve Cost Structure

Increase Asset Utilization

Cost Efficiency


Expand Revenue Opportunities

Enhance Customer Value

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Objective Measures Initiatives Targets Perfrm.

ActualPerfrm.

Increase Revenue Increase sales volume from last year

Improve customer retention & Loyalty

75% 72%

Cost Reduction Reduce operating and administration cost

• Apply cost cutting policy • Reduce overhead 5% 6%

IncreaseShareholdervalue

Operating IncomeFrom Growth

Build Strong Customer Relationship 100 M 115 M

Continuously improve financial performance.

Decrease costs.Increase sales growthIncrease market shareIncrease return on investment.

Average unit costs.Growth rate in salesCompany's market share.Return on investment.

10%15%20%10%

8%13%22%10%

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Benefits:

•Gives the complete picture of the employee as well as the organizational performance.

•It guides users in determining the critical success factors and performance indicators.

•Strategic review or analysis of the organizational capabilities and performance.

•Focusing the whole organization on the few key things needed to create breakthrough performance.

• Integrating and directing the performance and efforts from the lowest levels in the organization to achieve excellent overall performance.

http://appraisals.naukrihub.com/pa-and-organisational-performance.html

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Conclusion:

BSC implemented the strategic framework in process industry

BSC helped to measure performance of the organization and highlighted the need for business redesign of organization.

It also provided a flexible framework that makes company objectives actionable at all level of organization.

BSC aligned the organization (Monsanto) with strategy

application of balance scorecard

Business

strategy issues

org dont link strategy

developing country

process industry

middle management incentives

umar farooq

lead indicators

mgt teams