Balanced Scorecard Implementation at Philips

Case Background

Philips was founded in 1891 by Gerard Philips (Gerard) who established a facility at Eindhoven, a small town in the Netherlands, to produce carbon filament lamps and electrical products. Gerard's younger brother, Anton, joined the business in 1895 as a salesperson

By the early 1900s, Gerard's company had emerged as one of the largest producers and marketers of carbon-filament lamps. Philips laid strong emphasis on research right from its inception. Before the start of the First World War, the company had established marketing companies in the US and France

In the 1920s, Philips began the mass production of consumer goods, and started to diversify its product range. X-ray radiation and radio reception were key focus areas for Philips and the company's innovations in these areas were protected through patents.

Where is the need for these Balance Score Cards

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...

Implementation of this 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.

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.

So, in your opinion is balance score card implementation helpful or not for an organization .