Abstract

The case examines the implementation of Balanced Scorecard in the Netherlands-based Royal Philips NV. The Balanced Scorecard model, developed by Dr. Robert Kaplan and David Norton in the early 1990s, proposed that organizations should be mission driven rather than finance driven. During the late 1990s, rapid changes in the external environment necessitated Philips to make its operations flexible, innovative and value adding. This led the company to introduce a program called Business Excellence through Speed and Teamwork (BEST) in July 1999. Several tools were used in BEST, and one such tool was the Balanced Scorecard. There were four perspectives in Philips' Balanced Scorecard - competence, processes, customers, and finance. Philips identified critical success factors (CSFs), which were important to create value and grouped them under these four perspectives. Each of the business units had their own CSFs which were established with the help of the guidelines provided by the corporate quality department at Philips. The success of the CSFs was measured through performance indicators. To measure the performance of the key indicators, a traffic light system was used.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand how the implementation of Balanced Scorecard model can help in improving the performance of the organization
• Examine the use of Balanced Scorecard as a tool to communicate corporate strategy
• Appreciate the role of senior management in initiating and implementing business transformation initiatives
• Know the importance of goals and strategies in guiding an organization.

Keywords

Philips NV, Balanced Scorecard, Business Excellence through Speed and Teamwork, Philips Business Excellence Model, Critical Success Factors, Business Performance Review, European Foundation for Quality Management (EFQM) Excellence Model, BBS Online, Result Measurement, Traffic Light System, Vision, Mission and Values, Strategic Direction, Business Enablers, Business Transformation, Corporate Communication