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E2760MG
Repsol YPF - a complete implementation model of balanced scorecards in the oil and gas sector
SeUGISeUGI 19 19 –– Florence, June 2001Florence, June 2001
2©Accenture 2001
Accenture’s Vision and Experience
Background: Weaknesses and Limitations of the Traditional Background: Weaknesses and Limitations of the Traditional Management ModelManagement Model
Company cost structure has changed in recent years:Company cost structure has changed in recent years:
Indirect and overhead costs are increasingly higherIndirect and overhead costs are increasingly higherProcesses are more automated (production, logistics, Processes are more automated (production, logistics, etc.) and tend to be outsourcedetc.) and tend to be outsourced
There is greater emphasis on detailed analysis of the There is greater emphasis on detailed analysis of the past rather than on anticipating the future past rather than on anticipating the future
It is hard to know if corporate decisions are really It is hard to know if corporate decisions are really generating value for companies generating value for companies
New management techniques are progressively being New management techniques are progressively being implemented (ABC, ABM, VBM, etc.) but without a implemented (ABC, ABM, VBM, etc.) but without a perspective that will allow competitive advantages to perspective that will allow competitive advantages to be gainedbe gained
3©Accenture 2001
Accenture’s Vision and Experience
Balanced ScorecardBalanced ScorecardIt is important for company heads to be able to provide an efficIt is important for company heads to be able to provide an efficient ient response to questions such as:response to questions such as:
Are we focused on the right market with the appropriate Are we focused on the right market with the appropriate products/services?products/services?Can the profitability of our products be improved?Can the profitability of our products be improved?
Do we focus on improving the processes that represent the highesDo we focus on improving the processes that represent the highest cost in t cost in our products?our products?
And on those that add most value?And on those that add most value?
Are our clients loyal?Are our clients loyal?
Are our employees motivated?Are our employees motivated?
What is level of skills and innovation capability in the companyWhat is level of skills and innovation capability in the company??
Are we sure that our efforts are geared to the objectives we purAre we sure that our efforts are geared to the objectives we pursue?sue?
Etc.Etc.
4©Accenture 2001
Accenture’s Vision and Experience
Balanced ScorecardBalanced Scorecard
One of the basic needs of every business organization is performOne of the basic needs of every business organization is performance ance management. This performance management has two fundamental objemanagement. This performance management has two fundamental objectives:ctives:
To be aware at all times of the progress of the To be aware at all times of the progress of the business in such a way as to facilitate decisionbusiness in such a way as to facilitate decision--making for the heads: the results, identification making for the heads: the results, identification of problems and opportunities for improvement, of problems and opportunities for improvement, knowledge of the assets of top executives’ knowledge of the assets of top executives’ management, etc.management, etc.
To ensure that everybody in the organization is To ensure that everybody in the organization is aligned with company strategy, thus increasing aligned with company strategy, thus increasing the effectiveness and efficiency of the the effectiveness and efficiency of the organizationorganization
5©Accenture 2001
Accenture’s Vision and Experience
Balanced Scorecard Balanced Scorecard –– Concept and CharacteristicsConcept and Characteristics
One of the basic pillars of the current trends in performance maOne of the basic pillars of the current trends in performance management is nagement is the implementation of Balanced Scorecards due to the following the implementation of Balanced Scorecards due to the following characteristics:characteristics:
Fast (few indicators), sure picture of the company’s Fast (few indicators), sure picture of the company’s situation/evolutionsituation/evolutionFocused on the external image (shareholders and clients) Focused on the external image (shareholders and clients) and internal improvement (processes and people)and internal improvement (processes and people)A balance is applied among the multiple dimensions of A balance is applied among the multiple dimensions of performance, which makes it possible to ensure that performance, which makes it possible to ensure that positive results in one area are not camouflaged by positive results in one area are not camouflaged by negative results in anothernegative results in anotherFocused on the future and on establishing ongoing Focused on the future and on establishing ongoing improvement systems, not only analyses of the past improvement systems, not only analyses of the past Possibility of extending towards the lower levels of the Possibility of extending towards the lower levels of the organization organization
6©Accenture 2001
Accenture’s Vision and Experience
Balanced Scorecard Balanced Scorecard -- Concept and Characteristics Concept and Characteristics
The Balanced Scorecard evaluates, at top level, the company’s aThe Balanced Scorecard evaluates, at top level, the company’s ability to bility to direct its efforts towards creating value or achieving business direct its efforts towards creating value or achieving business objectives, thus objectives, thus making it possible to respond to four questions: making it possible to respond to four questions:
Are the shareholders satisfied?
Are we in a process of ongoing improvement?
Are our employees motivated?
Financial perspective
Clie
nt p
ersp
ectiv
eInternal
perspective
Peop
le p
ersp
ectiv
e an
d in
tern
al g
row
th
How do our clients/consumersregard us?
7©Accenture 2001
Accenture’s Vision and Experience
Balanced Scorecard Balanced Scorecard -- Concept and CharacteristicsConcept and Characteristics
The Balanced Scorecard is built on the basis of four fundamentaThe Balanced Scorecard is built on the basis of four fundamental components: l components: PerspectivesPerspectives: four “top: four “top--down” down” perspectives of the company’s perspectives of the company’s performanceperformanceBusiness objectivesBusiness objectives: a limited number of : a limited number of feasible objectives aligned with the feasible objectives aligned with the company’s strategycompany’s strategyIndicatorsIndicators: performance management : performance management metrics that provide support for the metrics that provide support for the objectives (KPI)objectives (KPI)Objectives by indicatorObjectives by indicator: quantified : quantified expectations of the level of performance expectations of the level of performance to be reached by each indicatorto be reached by each indicatorIndicatorsIndicators
Business Business ObjectivesObjectives
PerspectivesPerspectives
Objectives Objectives by by
IndicatorIndicator
8©Accenture 2001
Accenture’s Vision and Experience
Piloting the Value ChainPiloting the Value Chain
Create Value
Increase Profits
Optimize Net Current
Assets
F1
F2
F5
C2
Increase Sales
Optimize Operating
Costs
Client Satisfaction/
Image
Top Quality Products
Products on Time in
Minimum Periods
F3
F4
C1
C3
Optimize Operations
(Ing./Log/Fab)
Optimize Procurement
I2
I1
Develop Strategic Skills /
Innovation
Information Systems
P1
P2
Financial Perspective
Client Perspective
Internal Perspective
People & Skills Perspective
Do we focus on improving the processes that represent the highest cost in our products?And on those that add most
value?
Are we tackling the right market with the appropriate products?Are our clients loyal?
Can the profitability of our products be improved?
How much does it cost us if a current client
leaves us?
Are we sure that our efforts are directed towards the objectives we pursue?
Are our employees motivated?
What is level of skills and innovation
capability in the company?
9©Accenture 2001
Accenture’s Vision and Experience
Information SystemsInformation Systems
Vision of the Management Reporting Model Vision of the Management Reporting Model
Basic Hardware and Software and Telecommunications Infrastructure Integrated Master Files /Common Functions
EISExecutive
Information System
DSSDecision Support
System
Operational planning: Promotions, HR Projects, etc.
Com
mer
cial
Fina
nce
HR
Purc
hase
s
Prod
uctio
n
Logi
stic
s
Oth
er A
reas
Balanced Scorecard
Exception Reporting, Budgeting
Standard Reporting
Level of Transactional Application
Top Management
Analysts
Operating Management Information
Strategic Management
Gathe
ring
Info
rmat
ion
In-d
epth
Nav
igat
ion
Operating Management
10©Accenture 2001
Accenture’s Vision and Experience
Information SystemsInformation SystemsImplementing a Balanced Scorecard involves checking the informatImplementing a Balanced Scorecard involves checking the information systems ion systems to ensure that they adapt to the new needs:to ensure that they adapt to the new needs:
Monitoring Action Plans by Business Monitoring Action Plans by Business Unit and Person in ChargeUnit and Person in ChargeDeveloping utilities for:Developing utilities for:
AlarmsAlarmsMessagesMessages
UsabilityUsabilityFlexibility for adding/modifying Flexibility for adding/modifying indicatorsindicatorsFlexibility to adapt to organizationalFlexibility to adapt to organizationalchanges changes
Extensive reporting possibilitiesExtensive reporting possibilitiesMaximum advantage taken of the current systemsMaximum advantage taken of the current systems
DrillDrill--DownDownEtc.Etc.
Gath
erin
g In
form
atio
n In-depth Navigation
Business Units
Top Management
11©Accenture 2001
GenericInformation
RetrievalApplications
RDBMSIntegrated Transactional Level (Relational Database)
Commercial Production Purchases Finance . . .
Transactional Application Level
Balanced ScorecardApplication
Simulation (Planning andForecasting)Application
Profitability Analysis Application
Business Analysis Level MULTI-
DIMENSIONAL DB
StandardInformation
ExceptionInformation
Accenture’s Vision and Experience
Information Systems Information Systems –– Example of ArchitectureExample of Architecture
12©Accenture 2001
Accenture’s Vision and Experience
Information SystemsInformation Systems
In order to prepare a Balanced Scorecard supported on an informaIn order to prepare a Balanced Scorecard supported on an information system tion system that fulfills the characteristics described, it is desirable to that fulfills the characteristics described, it is desirable to have a data have a data management process that will allow onmanagement process that will allow on--line analysis of the information line analysis of the information (OLAP).(OLAP).
Data Sources Data Warehouse Data Marts Operation/
Information
Extr
actio
n an
d D
epur
atio
n
Dat
a D
istr
ibut
ion
Expl
oita
tionRefinery
TransformationSummarizing
13©Accenture 2001
Accenture’s Vision and Experience
References in Performance MeasurementReferences in Performance Measurement
Some important references are:Some important references are:ACBACBAmerenAmerenAntonio PuigAntonio PuigCIBC (Canadian ImperialCIBC (Canadian ImperialBank of Commerce)Bank of Commerce)Coors Brewing Co.Coors Brewing Co.DANONEDANONEDaimlerChryslerDaimlerChryslerDelta AirlinesDelta AirlinesDeutsche TelecomDeutsche TelecomDupontDupontEricssonEricsson
FNMTFNMTHenkel IbéricaHenkel IbéricaNiagara MohawkNiagara MohawkNovartisNovartisPepsicoPepsicoRepsol YPF Área QuímicaRepsol YPF Área QuímicaShellShellSidenorSidenorSmithkline BeechamSmithkline BeechamSonySonyTennecoTenneco
14©Accenture 2001
Implementation of a Balanced Scorecard
Experience of Repsol YPF Chemical Area
15©Accenture 2001
An international petrochemical group, a leader in An international petrochemical group, a leader in profitability in this sector .profitability in this sector .11 plants located in Europe, Central America and 11 plants located in Europe, Central America and South America.South America.Significant capacity for production and Significant capacity for production and distribution of a wide range of petrochemical distribution of a wide range of petrochemical products: olefins, propylene oxide and products: olefins, propylene oxide and derivatives, styrene, polyolefin, synthetic rubber derivatives, styrene, polyolefin, synthetic rubber and fertilizers as well as other groups of and fertilizers as well as other groups of products.products.Constant drive towards growth and leadership. Constant drive towards growth and leadership. Example of recent news in 2000:Example of recent news in 2000:
New plant for OP/SM and derivatives in New plant for OP/SM and derivatives in Tarragona. Investment of over 90,000 Tarragona. Investment of over 90,000 million pesetas, which represents the million pesetas, which represents the largest investment in Spain with own largest investment in Spain with own technology.technology.Urea plant in Bahía Blanca (Argentina), Urea plant in Bahía Blanca (Argentina), with the greatest production capacity in the with the greatest production capacity in the world for this product in a single line. world for this product in a single line. Alliance with the Canadian company Alliance with the Canadian company Agrium, world leader in the fertilizer sectorAgrium, world leader in the fertilizer sector
Experience of Repsol YPF Chemical Area
16©Accenture 2001
Experience of Repsol YPF Chemical Area
Drive Towards TechnologyDrive Towards Technology--Supported ManagementSupported Management
Constant concern for the application of excellent management Constant concern for the application of excellent management practices to support achievement of their strategic objectivespractices to support achievement of their strategic objectives
Optimum application of CRM (Client Relationship Management) Optimum application of CRM (Client Relationship Management) capabilities.capabilities.Geared to the use of technological opportunities: internet/intraGeared to the use of technological opportunities: internet/intranet, net, eEnterprise achievements, partner of ChemConnect (main portal foeEnterprise achievements, partner of ChemConnect (main portal for r purchase and sale in the sector).purchase and sale in the sector).Organization and management by processes supported by integratedOrganization and management by processes supported by integratedinformation systems.information systems.
Recent initiative in the design and application of a Balanced ScRecent initiative in the design and application of a Balanced Scorecard orecard for the Management Committeefor the Management Committee
Based on the Norton and Kaplan Balanced Scorecard theory.Based on the Norton and Kaplan Balanced Scorecard theory.The model has been in use for about one year.The model has been in use for about one year.A support computing system utilizing SAS tools has recently beenA support computing system utilizing SAS tools has recently been put into put into operation.operation.
17©Accenture 2001
Experience of Repsol YPF Chemical Area
What is the Repsol YPF Chemical Area?What is the Repsol YPF Chemical Area?
Technical Support Units
Support Units
Planning andControl
Legal Consultancy
HumanResources
Production andLogistics
Sales and TA&D
ExecutiveVice-presidency
Polyethylene Polypropylene Basic Rubber
Polyolefin Petrochemical
Intermediate Industrial
General Managements /Business Units
18©Accenture 2001
Experience of Repsol YPF Chemical Area
What it Represents What it Represents
13 Lines of Business and 62 product groupings13 Lines of Business and 62 product groupings
13 companies worldwide13 companies worldwide
11 industrial complexes11 industrial complexes
Different Information SystemsDifferent Information Systems
19©Accenture 2001
Experience of Repsol YPF Chemical Area
Results / ProcessResults / Process
Means to transmit the new organization of the Chemical ViceMeans to transmit the new organization of the Chemical Vice--presidency and presidency and its strategic approachits strategic approachManagement tool for the Management CommitteeManagement tool for the Management CommitteeAllows the information that is distributed in different systems Allows the information that is distributed in different systems to be grouped in to be grouped in a single support.a single support.
The conceptual design of the Balanced Scorecard and the prototypThe conceptual design of the Balanced Scorecard and the prototype completed e completed in 2 monthsin 2 monthsWhen the design was completed and until a support tool was impleWhen the design was completed and until a support tool was implemented, a mented, a Balanced Scorecard that had been prepared manually was edited anBalanced Scorecard that had been prepared manually was edited and d distributed monthly to the members of the Management Committee adistributed monthly to the members of the Management Committee and their nd their teamsteamsThe support tool that automates the data retrieval process and pThe support tool that automates the data retrieval process and presentation resentation was selected and implemented, in accordance with the characteriswas selected and implemented, in accordance with the characteristics tics established in the prototype. established in the prototype.
20©Accenture 2001
FinancialPerspective
ClientPerspective
Internal Processes
People and Growth
�� The strategic objectives for each perspective are The strategic objectives for each perspective are defined and assigned.defined and assigned.
�� The cause/effect relationships between the different The cause/effect relationships between the different objectives are established.objectives are established.
�� The indicators or measures that indicate The indicators or measures that indicate achievement of the objectives are defined.achievement of the objectives are defined.
�� The goals for each indicator and its weighting The goals for each indicator and its weighting relative to measurement of the objective and relative to measurement of the objective and perspective are established.perspective are established.
MethodologyMethodology
The Balanced Scorecard was prepared by applying a methodology iThe Balanced Scorecard was prepared by applying a methodology intended to ntended to structure valuation of the perspectives and objectives definedstructure valuation of the perspectives and objectives defined
Experience of Repsol YPF Chemical Area
21©Accenture 2001
Relationships between Strategic Objectives and WeightingRelationships between Strategic Objectives and Weighting
The strategic objectives are found to be cause/effect related. TThe strategic objectives are found to be cause/effect related. The measures that indicate their evolution are he measures that indicate their evolution are related with each other. Analysis of the evolution of objectivesrelated with each other. Analysis of the evolution of objectives and measures indicates alignment with the and measures indicates alignment with the
strategy. Analysis of correlation among them indicates the alignstrategy. Analysis of correlation among them indicates the alignment of the balanced scorecard.ment of the balanced scorecard.
C4
PeoplePerspective
Internal Perspective
Financial Perspective
Create value
Increase sales
Increase profits Optimize
operatingcosts
Client Perspective
Execute investments
F1
F2
F3
I1
I2
I3
I4
Innovation
Client portfolio
Increase client satisfaction
F4
F5
C1C3
C2
I8Improve
prices
Service levelIntensify presence in
strategic markets
Liability costs
P1
P2
P3
P4
Maximize employee
productivity
Activity
Training
Personnel
Personnel costs
P5
Integrated logistic cycle
Purchase function
I5Quality,
security and environment
I7Support and sales
processes
I6
Improve service to clients
100 %
40 %
20 %40 %
60 %
40 %40 %
60 %
Experience of Repsol YPF Chemical Area
22©Accenture 2001
Experience of Repsol YPF Chemical Area
IndicatorsIndicators
The model to evaluate perspectives and objectives is based on a The model to evaluate perspectives and objectives is based on a set of main set of main indicators assigned to them. Coverage of the actual value over iindicators assigned to them. Coverage of the actual value over its goal ts goal determines the objective/perspective value. This coverage is weidetermines the objective/perspective value. This coverage is weighed when ghed when several indicators are assigned to an objective. several indicators are assigned to an objective.
Additionally, other types of indicators have been defined:Additionally, other types of indicators have been defined:Explicative analyses : They allow the causes of the evolution ofExplicative analyses : They allow the causes of the evolution of a main indicator to a main indicator to be analyzed and explainedbe analyzed and explained
Informative references : Additional indicators referenced at extInformative references : Additional indicators referenced at external variablesernal variables
All the indicators are analyzed multidimensionally by means of dAll the indicators are analyzed multidimensionally by means of different ifferent hierarchies.hierarchies.
23©Accenture 2001
Experience of Repsol YPF Chemical Area
Indicators Indicators -- ExampleExample
Nº Strategic Objective Value Generator Medidas
F3 Increase profits • Maximize profitability by increasing the relative weight of added value products
•Operating cash-flow
•Operating result
References for information:• % contribution to the
Group’s result
•% Sale of specialties relative to total salesExplicative 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.
• Product / Company
• Product / Company
• N/A
• Product / Company
• Product / Company
• Product / Company
• Product / Company
Hierarchy
24©Accenture 2001
Experience of Repsol YPF Chemical Area
ToolsTools
The SAS tools have been selected to build the support informatioThe SAS tools have been selected to build the support information system for n system for the Comprehensive Balanced Scorecard for Repsol YPF Chemical Arethe Comprehensive Balanced Scorecard for Repsol YPF Chemical Area, as it a, as it provides the following features:provides the following features:
Fast Analysis of Shared Multidimensional Information(FASMI) in aFast Analysis of Shared Multidimensional Information(FASMI) in a WEB WEB environment.environment.
EndEnd--toto--end solution in the information delivery processend solution in the information delivery process
Flexibility for adding/modifying/deleting indicators.Flexibility for adding/modifying/deleting indicators.
Flexibility to adapt to organizational changes.Flexibility to adapt to organizational changes.
Usability.Usability.
Options for reporting/graphical display/analysis by default (flaOptions for reporting/graphical display/analysis by default (flags and alarms).gs and alarms).
+ +