New Delhi, Nov 17: For companies on the look out for ways to integrateinternal management initiatives under one umbrella in a bid to align theseto the organisation's strategic vision-there are lessons to be learnt fromthe Godrej GE Appliances experience. The Mumbai-based consumer appliancemanufacturing company has linked up a host of its on-going managementinitiatives-such as Six Sigma, Cost Take Out, and Target Ten-under oneumbrella with the help of the Balanced Scorecard framework of strategicplanning.``The Balanced Scorecard is a framework that focuses on shareholder,customer, internal and learning requirements of a business in order tocreate a system of linked objectives, measures, targets and initiativeswhich collectively describe the strategy of an organisation and how thatstrategy can be achieved,'' explains Renaissance Worldwide Consultingexecutive director, Sanjiv Anand, at the first plenary session ofConfederation of Indian Industry's (CII) seventh Quality Summit. RenaissanceWorldwide is the implementing partner for the Balanced Scorecard at GodrejGE Appliances Limited. Starting with the company strategy and vision inApril 1998, Godrej GE Appliances interviewed a cross-section of peopleincluding internal and external customers to arrive at a `linkage diagram',the crux of the Balanced Scorecard process. Following this a detailedworkshop with the senior management helped ratify the different componentsof the diagram: linked objectives, measures, targets and initiatives.
Godrej GE then began to zero in on measurements and management initiatives.The two exercises that ran parallel to each other helped the company arriveat a 31-item measurement template (from sales to growth targets) and atemplate for management initiatives. The exercise helped the companyprioritise 20 initiatives from the series of on-going managementinitiatives.
The non-priority initiatives were either discarded or the implementationdeferred. The measurement template helped the company set measurable longterm and short term targets. Thus prepared, the movement was rolled outacross the company in October 1998.
``The Balanced Scorecard has helped us tie the Six Sigma initiatives withthe quality movements viz, ISO 9000 and ISO 14000. It has also provideddirection and impetus to the CII Excellence For Quality Management (EFQM)business model,'' said Godrej GE Appliances, vice-president, quality, GSunderraman.
More specifically, the Balanced Scorecard has reaped mixed results for thecompany so far. On the positives side:
All the supply chain initiatives tied to the Balanced Scorecard onsupplier management have added to the bottomline, with a gross impact ofover Rs 9 crore in savings.
Close to 72 per cent of the suppliers are below the 1,000 parts permillion defects (4.5 Sigma) benchmark.
The process has resulted in a strong upstream supply chain and animproved vendor base backbone.
Raw material inventory turns have improved from 25 to just 16.
Cost Takeout and value engineering process has contributed to over Rs 5crore.
The company has reported a profit Rs 21 crore in 1998-99 against Rs 3crore in the previous year.On the other hand, Godrej GE has run into problems like inaccurateassumptions on account of a change in the strategic context. Further, thesecond-level drivers in the organisation could not be educated due to theshort time. Also, at Rs 21 crore the company fell short of the targetedbottomline.
Over the next two years, Godrej-GE now plans to recast the original supplychain; deploy the Balanced Scorecard to the next level in key functions viz,materials, resources, manufacturing and finance; pilot the implementation ofIT-based data warehousing for Balanced Scorecard data analysis andpresentation; link the concept to pay and performance; and finally, organiseregular quarterly meetings where the CEO of the company will share theperformance and areas of improvement.
Overall, the process has yielded certain `powerful' lessons, saysSunderraman. For one, all internal management initiatives have to be alignedto key statistical objectives. Two, companies have to hit upon the rightstrategy, and all actions have to be measurement driven. Three: the BalancedScorecard works on a foundation of robust processes and practices.
Improvements flow from detailed analysis, innovation and specific actions.And finally, cross-functional workers and the organisation culture play acritical role. In other words, the key to scoring is balancing yourresources with your priorities.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.