In the Midst of the Major Recognition and New Strategic Directions at Usm&r, Why Did Bob McCool Initiative Yet Another Initiative, the Balanced Scorecard?

Question 1

In the midst of the major recognition and new strategic directions at USM&R, why did Bob McCool initiative yet another initiative, the balanced scorecard?

In the 1990s USM&R faced an unfavorable environment that has managed with a deep reorganization attempting to stabilize the business. In fact, the company has not been producing any positive cash flow, expenses have increased, margins and volumes have flattened and competition has strengthened. The purpose of such reorganization was to generate future growth for the business. To do this McCool, after conducting major internal studies, concluded that the best way to grow up was to exploit existing assets and focus on customer. Nevertheless, to concentrate on the customer intangible assets, that were difficult to measure, would be necessary and would assure the success in that competitive market. In order to distinguish itself from the competitors, the company had to develop these assets and to quantify how much they contribute to the achievement of the strategy: the best way to do that was using the balanced score card which allowed to translate mission and strategy in objectives and measures. For this purpose, from an organizational point of view, McCool decided to delegate more duties to decentralized managers who were closer to the customer (17 Natural Business Units and 14 Service Companies). The reorganizational process had been undertaken also due to the limits shown by an highly functional organization, where employees' main concern was only to do better their own individual job that pleased them, rather than to focus all their energies in producing outputs that would satisfy the customer and, indirectly, the manager too. The positive relationships with customers usually creates greater satisfaction among the staff that in turn gets to know the client better by ensuring a higher service to a potentially lower cost, creating a virtuous circle. Until the reorganization, the fact that decisions were taken centrally did not allow flexibility in marketing programs by reducing the responsiveness to changing consumer needs. This reorganization combined with the implementation of a customer segmentation strategy. All of these considerations, arising from the company need to reorganize itself to cope with unfavorable economic conditions, led Mc Cool to state that the company needed a new measurement system. In fact, the old measures were found inadequate to the new .strategy as it aimed to review the past rather than driving the future. McCool wanted the new measures to become part of a process of communication through which all employees within the organization could understand and apply the strategy of the company so that their actions were not only moved by the desire to do better than before, acting as a controller, but to reflect the strategy in their actions. Balance scorecard is the way to control the operations of the manager, independently from the financial results of short period that come along. The scorecard lets us know how effective is the manager's behavior is.

It was the instrument that tied measures to the mission and strategy of the company (which the previous financial measures, although excellent, and many did not).

Question 2

Comment on the scorecard development process. What elements seem critical to the success of the BSC project?

The company started to use the balance score card process in order to reorient the old management, which was developed in a top down and functional structure, to acquire a strategic vision as general management profit oriented, rather than following specific functional orientation. Therefore, the new organization and strategy needed a new measure system that was necessary to link the planning process to actions, to encourage people to do the things that the organization was committed to assume a long period orientation.

USM&R's senior management team launched a BSC project in early 1994, assisted by Renaissance solution, a consulting company to help in the process. There was a senior level steering committee providing oversight and guidance for the BSC project. The starting point was the attempt to involve all team members in order to understand how they perceived the new strategy.

The new strategy required a commitment to improve all service stations so that they could offer fast, friendly, safe service on the three targeted customer segments (Road Warriors, True Blues and Generation F3). Besides, USM&R wanted to change the role of "convenience stores"(C-store), from simple snack shop to real destination stop for frequently purchasing food and snack items.

The team summarized all the received information and the workshops helped in leading new objectives and measures that were developed for the four BSC perspectives: financial, customer, internal business process and learning and growth- to be aligned to the new strategy.

A customer focus is a major differentiator for Mobil USM&R. The main issue was to link the Balanced Scorecard to this new strategy and consequently, reframing the structure of the balanced scorecard in order to include strategic objectives and measures for 2 types of customers: the network of dealers who purchased gasoline and petroleum products from Mobil and the millions of consumer who purchased Mobil products from independent dealers and retailers. This seemed to be a critical point in the project of the BSC because the firm was aware of having to adopt customized measures related to each targeted customer segment. For this reason, the project team involved a lot of managers and split into eight sub- teams two of whom were devoted to the Customer: one focused on dealers and the other on consumer. These two types of customers had different needs and networks so therefore each customer segment had been associated with an aligned strategy. The aim for consumer customer was to delight the targeted consumer whereas, for dealers it was to improve the profitability. The basic problem was to find suitable measures to verify the implementation level of the thinking strategy. For consumers the mystery shopper program was developed through which they were assigned the score of 23 different items related to different aspects of the service: The result of these performance scores gave the measure to be included within the Division of BSC.

The aim of the dealer-focused customer sub-team was to support the dealer development strategy thanks to setting a tool kit that has allowed marketing representative to give a rating to dealers to identify strengths and opportunities to enhance dealers development. The goal was to increase the profit of dealers and wholesale marketers of Mobil products as measured by Total Gross Profit of

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