E2760MG
Repsol YPF - a complete implementation model of balanced scorecards in the oil and gas sector
SeUGI 19 – Florence, June 2001
Accenture’s Vision and Experience Background: Weaknesses and Limitations of the Traditional Management Model Company cost structure has changed in recent years: Indirect and overhead costs are increasingly higher ¾ Processes are more automated (production, logistics, etc.) and tend to be outsourced ¾
There is greater emphasis on detailed analysis of the
past rather than on anticipating the future
It is hard to know if corporate decisions are really
generating value for companies
New management techniques are progressively being
implemented (ABC, ABM, VBM, etc.) but without a perspective that will allow competitive advantages to be gained
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Accenture’s Vision and Experience Balanced Scorecard It is important for company heads to be able to provide an efficient
response to questions such as:
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Are we focused on the right market with the appropriate products/services?
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Can the profitability of our products be improved?
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Do we focus on improving the processes that represent the highest cost in our products?
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And on those that add most value?
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Are our clients loyal?
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Are our employees motivated?
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What is level of skills and innovation capability in the company?
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Are we sure that our efforts are geared to the objectives we pursue?
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Etc. 3
Accenture’s Vision and Experience Balanced Scorecard One of the basic needs of every business organization is performance
management. This performance management has two fundamental objectives:
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To be aware at all times of the progress of the business in such a way as to facilitate decisionmaking for the heads: the results, identification of problems and opportunities for improvement, knowledge of the assets of top executives’ management, etc.
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To ensure that everybody in the organization is aligned with company strategy, thus increasing the effectiveness and efficiency of the organization
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Accenture’s Vision and Experience Balanced Scorecard – Concept and Characteristics One of the basic pillars of the current trends in performance management is
the implementation of Balanced Scorecards due to the following characteristics:
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Fast (few indicators), sure picture of the company’s situation/evolution
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Focused on the external image (shareholders and clients) and internal improvement (processes and people)
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A balance is applied among the multiple dimensions of performance, which makes it possible to ensure that positive results in one area are not camouflaged by negative results in another
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Focused on the future and on establishing ongoing improvement systems, not only analyses of the past
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Possibility of extending towards the lower levels of the organization
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Accenture’s Vision and Experience Balanced Scorecard - Concept and Characteristics The Balanced Scorecard evaluates, at top level, the company’s ability to
People perspective and internal growth
Are we in a process of ongoing improvement?
Are our employees motivated?
Are the shareholders satisfied? Financial perspective
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How do our clients/consumers regard us?
Internal perspective
Client perspective
direct its efforts towards creating value or achieving business objectives, thus making it possible to respond to four questions:
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Accenture’s Vision and Experience Balanced Scorecard - Concept and Characteristics The Balanced Scorecard is built on the basis of four fundamental components: ¾
Perspectives Objectives by Indicator
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Business Objectives
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Indicators
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Perspectives: four “top-down” perspectives of the company’s performance Business objectives: a limited number of feasible objectives aligned with the company’s strategy Indicators: performance management metrics that provide support for the objectives (KPI) Objectives by indicator: quantified expectations of the level of performance to be reached by each indicator
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Accenture’s Vision and Experience Piloting the Value Chain Financial Perspective Can the profitability of our products be improved? How much does it cost us if a current client leaves us?
Increase Profits F1
F5
Optimize Net Current Assets ©Accenture 2001
Internal Perspective
Are we tackling the right market with the appropriate products? Are our clients loyal? C2
F3
Increase Sales
F2
Create Value
Client Perspective
F4
Optimize Operating Costs
C1
Client Satisfaction/ Image
Top Quality Products C3
Products on Time in Minimum Periods
People & Skills Perspective
Are our Do we focus on employees improving the motivated? processes that represent the What is level of highest cost in skills and our products? innovation And on those capability in the company? that add most value?
I2
P1
Optimize Operations (Ing./Log/Fab)
Develop Strategic Skills / Innovation
I1
P2
Optimize Procurement
Are we sure that our efforts are directed towards the objectives we pursue?
Information Systems
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Accenture’s Vision and Experience Information Systems Vision of the Management Reporting Model EIS Executive Information System
Strategic Management
Analysts
Standard Reporting as r Are e h t O
s Logistic
Purchases
HR
Fina nce
Co mm erc ial
ion
Na h pt
Operational planning: Promotions, HR Projects, etc.
Product
vig
at
fo In g in er
Exception Reporting, Budgeting
io
n
rm
at
io
n
DSS Decision Support System
In -d e
th Ga
Operating Management
Top Management
Balanced Scorecard
Level of Transactional Application
Operating Management Information
Integrated Master Files /Common Functions Basic Hardware and Software and Telecommunications Infrastructure
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Accenture’s Vision and Experience Information Systems Implementing a Balanced Scorecard involves checking the information systems
Na
rm
ati
n
rin
io at
gI
g vi
nfo
th
¾
ep
¾
-d In
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Top Management
the
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Monitoring Action Plans by Business Unit and Person in Charge Developing utilities for: z Alarms z Drill-Down z Messages z Etc. Usability Flexibility for adding/modifying indicators Flexibility to adapt to organizational changes
Ga
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on
to ensure that they adapt to the new needs:
Business Units Extensive reporting possibilities ¾ Maximum advantage taken of the current systems ¾
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Accenture’s Vision and Experience Information Systems – Example of Architecture Balanced Scorecard Application
Business Analysis Level
Profitability Analysis Application Simulation (Planning and Forecasting) Application
Integrated Transactional Level (Relational Database)
MULTIDIMENSIONAL DB
Generic Information Retrieval Applications
Standard Information
Exception Information
RDBMS
Transactional Application Level Commercial ©Accenture 2001
Production
Purchases
Finance
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Accenture’s Vision and Experience Information Systems In order to prepare a Balanced Scorecard supported on an information system
that fulfills the characteristics described, it is desirable to have a data management process that will allow on-line analysis of the information (OLAP). Data Warehouse
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Exploitation
Refinery Transformation Summarizing
Operation/ Information
Data Marts
Data Distribution
Extraction and Depuration
Data Sources
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Accenture’s Vision and Experience References in Performance Measurement Some important references are: ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾
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ACB Ameren
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Antonio Puig CIBC (Canadian Imperial Bank of Commerce) Coors Brewing Co.
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DANONE DaimlerChrysler Delta Airlines Deutsche Telecom Dupont Ericsson
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FNMT Henkel Ibérica Niagara Mohawk Novartis Pepsico Repsol YPF Área Química Shell Sidenor
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Smithkline Beecham Sony
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Tenneco
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Experience of Repsol YPF Chemical Area
Implementation of a Balanced Scorecard
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Experience of Repsol YPF Chemical Area ¾ ¾ ¾
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An international petrochemical group, a leader in profitability in this sector . 11 plants located in Europe, Central America and South America. Significant capacity for production and distribution of a wide range of petrochemical products: olefins, propylene oxide and derivatives, styrene, polyolefin, synthetic rubber and fertilizers as well as other groups of products. Constant drive towards growth and leadership. Example of recent news in 2000: ¾ New plant for OP/SM and derivatives in Tarragona. Investment of over 90,000 million pesetas, which represents the largest investment in Spain with own technology. ¾ Urea plant in Bahía Blanca (Argentina), with the greatest production capacity in the world for this product in a single line. Alliance with the Canadian company Agrium, world leader in the fertilizer sector 15
Experience of Repsol YPF Chemical Area Drive Towards Technology-Supported Management Constant concern for the application of excellent management
practices to support achievement of their strategic objectives ¾ ¾
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Optimum application of CRM (Client Relationship Management) capabilities. Geared to the use of technological opportunities: internet/intranet, eEnterprise achievements, partner of ChemConnect (main portal for purchase and sale in the sector). Organization and management by processes supported by integrated information systems.
Recent initiative in the design and application of a Balanced Scorecard
for the Management Committee ¾ ¾ ¾
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Based on the Norton and Kaplan Balanced Scorecard theory. The model has been in use for about one year. A support computing system utilizing SAS tools has recently been put into operation. 16
Experience of Repsol YPF Chemical Area What is the Repsol YPF Chemical Area? Executive Vice-presidency
Polyolefin
Polyethylene Polypropylene
Production and Logistics Sales and TA&D
Technical Support Units
General Managements / Business Units
Petrochemical
Basic
Intermediate Industrial
Rubber
Planning and Control
Support Units
Legal Consultancy Human Resources
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Experience of Repsol YPF Chemical Area What it Represents 13 Lines of Business and 62 product groupings 13 companies worldwide 11 industrial complexes Different Information Systems
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Experience of Repsol YPF Chemical Area Results / Process Means to transmit the new organization of the Chemical Vice-presidency and
its strategic approach
Management tool for the Management Committee Allows the information that is distributed in different systems to be grouped in
a single support.
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The conceptual design of the Balanced Scorecard and the prototype completed in 2 months
z
When the design was completed and until a support tool was implemented, a Balanced Scorecard that had been prepared manually was edited and distributed monthly to the members of the Management Committee and their teams
z
The support tool that automates the data retrieval process and presentation was selected and implemented, in accordance with the characteristics established in the prototype.
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Experience of Repsol YPF Chemical Area Methodology The Balanced Scorecard was prepared by applying a methodology intended to
structure valuation of the perspectives and objectives defined
Financial Perspective
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The strategic objectives for each perspective are defined and assigned.
Client Perspective
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The cause/effect relationships between the different objectives are established.
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The indicators or measures that indicate achievement of the objectives are defined.
Internal Processes
People and Growth ©Accenture 2001
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The goals for each indicator and its weighting relative to measurement of the objective and perspective are established. 20
Experience of Repsol YPF Chemical Area Relationships between Strategic Objectives and Weighting Financial Perspective
Client Perspective C1
F2
I1
Intensify presence in strategic markets
Increase sales
Internal PerspectiveI3
C3 60 %
Purchase function
I6
Create value
F4
100 %
C2
Improve prices
F3 Increase profits
C4
Client portfolio
20 % F5 Optimize operating costs
Improve service to clients
40 %
Support and sales processes
I7
Liability costs
40 %
I5 Quality, security and environment
Execute investments
I2
Activity
P1
I4
40 %
F1
P2
Integrated logistic cycle
Service level Increase client satisfaction
People Perspective
Maximize employee productivity
P3 Training
60 % P4
Personnel
P5
Personnel costs
I8
Innovation
40 %
The strategic objectives are found to be cause/effect related. The measures that indicate their evolution are related with each other. Analysis of the evolution of objectives and measures indicates alignment with the strategy. Analysis of correlation among them indicates the alignment of the balanced scorecard. ©Accenture 2001
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Experience of Repsol YPF Chemical Area Indicators The model to evaluate perspectives and objectives is based on a set of main
indicators assigned to them. Coverage of the actual value over its goal determines the objective/perspective value. This coverage is weighed when several indicators are assigned to an objective.
Additionally, other types of indicators have been defined: ¾
Explicative analyses : They allow the causes of the evolution of a main indicator to be analyzed and explained
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Informative references : Additional indicators referenced at external variables
All the indicators are analyzed multidimensionally by means of different
hierarchies.
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Experience of Repsol YPF Chemical Area Indicators - Example Nº
Strategic Objective
F3
Increase profits
Value Generator • Maximize profitability by increasing the relative weight of added value products
Medidas •Operating cash-flow •Operating result References for information: • % contribution to the Group’s result
•% Sale of specialties relative to total sales Explicative analysis: • Average margin of product specialties relative to average margin of total products: • Margin over average product variables • Tons of specialties relative to total no. of tons.
Hierarchy • Product / Company • Product / Company • N/A • Product / Company • Product / Company
• Product / Company • Product / Company
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Experience of Repsol YPF Chemical Area Tools The SAS tools have been selected to build the support information system for
the Comprehensive Balanced Scorecard for Repsol YPF Chemical Area, as it provides the following features: ¾
Fast Analysis of Shared Multidimensional Information(FASMI) in a WEB environment.
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End-to-end solution in the information delivery process
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Flexibility for adding/modifying/deleting indicators.
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Flexibility to adapt to organizational changes.
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Usability.
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Options for reporting/graphical display/analysis by default (flags and alarms).
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