Perspective
Objective
Measure
Target
Initiative
Financial
Maximise shareholder wealth
Dividend Payout Ratio
Increase by 5%
Through use of good capital budgeting i. e. only recognizing positive NPV investment appraisals
Increase overall revenue
Last year's Statements
Increase by 10%
Only partake in profitable projects. Use of task appraisal methods
Customer
Increase amount of Biofuel open to customers
Compare how much produced this season with previous year
Increase production by 15%
Invest in dedicated team to determine how to cost effectively produce more Biofuel
Win new customers
Sales figures
Increase sales by 10%
Develop and offer products and services that offer value in terms of Price, quality, basic safety and environmental Impact
Maintain loyalty of existing customers
Number of commitment cards issued last year
Increase loyalty credit card customers by 20%
Increasing advertising campaign of the perks of being a loyalty card holder
Business
Process
Decrease operational oil spills
By amount delivered
Decrease spillage by 75%%
Enforcement of redrafted procedures of the handling of oil
Produce Bitumen without triggering environmental damage
Amount of "Tailings left after mining
No contamination of environment or wildlife
Asses and manage all tailings remaining from sand mining
Become more "green by minimizing transport emissions
Amount of CO produced
Reduce Carbon Emissions by 45%
Use Biofuel on all appropriate settings of transportation
Improve company/staff relations
"Shell People Review
Increase employee engagement index by 4%
Continuous development of the "Changeover 2009 programme
Reduce staff fatalities
Number of fatalities previous year
Zero fatalities
Introduce a set of safety rules to address specifically the work-time procedures with the greatest risk to life
Find more sources of oil and gas
Amount of discoveries
At least 5 new discoveries per year
Continue to make good relations with countries to permit offshore exploration
ROYAL DUTCH SHELL PLC - Well balanced SCORECARD
According to Gumbus and Lussier (2006), a well-balanced Scorecard (BSC) can help a small business in several ways. It encourages expansion because the BSC does not focus on short term goals, but instead centers towards reaching the long-term objectives of an company. In addition, it allows performance to be supervised by comparing results to a goal. Furthermore, the BSC can increase accountability.
Shell expresses that their main strategy is to ensure that they remove and deliver coal and oil profitably and in environmentally and socially dependable ways (Shell, 2010). Every one of the goals in the BSC relate to this strategy, as each one coincides with another to for romance which helps to meet Shells long term strategy. A good example of a cause and effect relationship in the total amount scorecard could be by bettering company and worker relations, staff will be more motivated to work effectively realizing that they feel just like they are area of the company. That is convert will better business processes such as lowering oil spillage. If the spillage is reduced, Shell can point out this in reviews and through the marketing. This will make an impression on clients as Shell would state to be less of a risk to the surroundings. In turn, by appealing to new custom, overall income will increase.
Another example of a cause and effect romance from the BSC is the fact that if Shell discovers new locations of coal and oil, they can place outside set amounts of oil to carefully turn into Biofuel. This can lead to more of their modes of transport, including suppliers, working on Biofuel. The Biofuel may then be transferred to petrol channels where its availability would increase for customers. As this might meet the needs of customers, they will get more custom and therefore undergo jobs which would gain shareholders prosperity maximisation. Furthermore, implementation of this BSC will permit Shell to meet up with the needs of most of their stakeholders.
Meeting the needs of Shells shareholders is really important. With this realization, both goals under the financial perspective of the BSC associate directly to getting together with the shareholders' needs. Maximising shareholder riches is the main top priority of Shell, and this can be measured in lots of ways. By looking at the quantity of dividends paid over two years it is possible to observe how well Shell is doing with regards to its shareholders. Shell must build however that shareholders do not only want high dividends by means of dividends. Considering that the shareholders are financing Shell, they have to know that the business is accomplishing with them in mind and not simply on short term success. Implementation of the aforementioned BSC will therefore be a positive as it's initiatives in achieving the financial aims address long terms goals. By recognizing and undergoing assignments which is not only profitable, but allow Shell to help expand spend money on such assignments will maximise shareholders wealth. Furthermore, if Shells earnings increased, it will mean that there is certainly more expenditure available to invest in projects. By looking at different appraisal methods, Shell can distinguish which projects to simply accept and which to reject.
When filling up at a Shell petrol place, customers want the cost effective because of their money. That is true for both new and existing custom. As the BSC areas, Shell can meet this need by expanding and providing products and services which offer value in terms of price, quality, security and environmental impact. This shows that Shell isn't only aware of the price with their customers, but also that customers are also becoming more concerned about being eco-friendlier. Among Shells BSC targets is to raise the amount of Biofuel to customers. This demonstrates they are willing to become eco-friendlier because the using of Biofuel produces less CO emissions. To get this done however, Shell would need to commit money into finding ways to remove and produce more Biofuel. This links into pleasing shareholders also, as projects such as this would only be carried out if Shell realized that might be profitable from themselves and their shareholders.
Shell may possibly also make customers feel like they are reaching affordability by stimulating customers to be part of the loyalty scheme. This could be attained by increasing the advertising of the advantages of becoming a loyalty member. Incentives such as saving 5p per litre of petrol each time you gain a certain amount of items on your loyalty100 in a Shell petrol station is just one example of how Shell can also draw in new custom as well as maintaining their current customer foundation.
Shells employees need to believe that they are an integral part of the business enterprise. By utilizing the BSC above, one of Shells aims would be to improve relations between your company and its employees. This can be achieved through the continual development and implementation of Shells "Transition 2009 programme. The programme focuses on reorganising the composition of Shell and expressing the changes with employees either in person or via staff councils. By doing this it implies that Shell appreciate their employees and make an effort to communicate with individuals as privately possible. Also mixed up in "Changeover programme is the "Shell people study which is a questionnaire that employees are given the opportunity to cast the emotions on whether they feel part of the business enterprise. Affiliation and determination is measured using the results and Shell can see from here if they need to boost relationships with employees.
Employees also need to feel that they may be safe when undertaking certain jobs. Among the BSC goals is to lessen staff fatalities, as the reality is that a few of the jobs are really dangerous and life threatening. By utilizing the BSC above, it demonstrates Shells desire to have zero fatalities. This can be achieved by launching a set of safety rules to address specifically the work-time methods with the best risk to life. These rules will help staff to recognise the potential potential issues involved in their careers, thus hopefully producing a diminished amount of fatalities.
Shell identifies their suppliers as their partners, thus the activities of one immediately impacts the other. Their suppliers need to find out that Shell will treat them with integrity and credibility, and as such, effectively as employees. The BSC suggests that Shell would like to reduce transportation emissions, and this complies with the needs of suppliers as this will enable their suppliers never to only assist in Shells objective of becoming "greener, but also could reduce suppliers petrol costs if Shell will provide them with Biofuel. Another need of the suppliers is usually to be paid on time. Among the objectives of the business enterprise process perspective is to reduce oil spillage, and if suppliers can deliver the correct amount of olive oil to Shells petrol stations and depots they can ensure that they can be paid promptly. This can be attained by redrafting the strategies that suppliers must go through when dealing with the transport of engine oil. However, a challenge Shell face when essential oil is spilt is a backlash from population.
Shell needs to ensure that they can offer a audio service to culture, whilst also guarding the environment. It is associated with Shells aim of reducing petrol spills, and also their aim to produce bitumen without causing significant environmental harm. By evaluating the "tailings left behind when mining for Bitumen, Shell can learn how to manage the "tailings better, reducing contamination and harm to the environment and wildlife. This implies that the BSC would show culture that Shell takes exterior stakeholders views significantly, which pays to especially nowadays where being green is one of the main pressures oil companies such a Shell face. Other needs of world such as local investment and creating jobs can be found by Shell by employing the BSC. This past year Shell saved eleven well known discoveries of new oil and gas locations across the world, and a target of the BSC is to continue to find more resources of oil and gas (Voser, 2010). This is achieved by building good relations with countries that Shell operate in to allow the company to permit offshore exploration. This can create careers in LEDC's such as Brazil and Mexico where they have got started to draw out olive oil from new discoveries (Voser, 2010). By investing money into these countries to allow Shell to create coal and oil, the countries are benefiting from new work crops which will help never to only produce jobs, but to also help promote Shells cause to safeguard the surroundings.
It is not only benefits which happen from putting into action a BSC. Many limits and risks can be discovered if Shell was to implement the BSC also. Likierman (2006) suggests that it may be difficult for a company to analyse just how successful applying a BSC can be for these people. In Shells circumstance, maybe it's hard to analyse the BSC's success as there are twelve goals that they must be aiming to achieve. It might be difficult for those to evaluate their success on just these goals. Non-financial measures as well as other performance measures would need to be assessed to see how well Shell did. Then, contrasting these studies with those of the BSC, it might be possible to see if it has been successful. However, being a long process, it coincides with Likierman's (2006) views. Davis and Albright (2004) state "no study has generated a strong causal hyperlink between BSC consumption and improved upon financial performance. Thus By implementing this BSC for Shell, though it claims to increase income and shareholder wealth, this is merely a theoretical aim. Used however, the reason and effect relationships may differ, thus resulting in a possibility of the decrease in earnings. This is also stated by Gould and Murphy (2005), where they question the validity of the focuses on found in the BSC to monitor the cause and effect connections. With regards to the BSC for Shell, the goals for the perspectives are obscure. These focuses on are just estimates, whereas if they were to use other non-financial measurements, Shells focuses on for the short-term for example, would be noticeably different to those laid out in the BSC.
"The declare that the balanced scorecard is a proper control model that is able to handle the situation of strategy implementation also offers its shortcomings (Norreklit, 2003). This is again true for Shells BSC as it can be costly to put into practice and operate, especially since a few of the initiatives require redrafting of procedures and the intro of new teams which would need to be trained. This may lead to bafflement of if the BSC has indeed helped to meet its strategy of extracting and providing oil and gas profitably and in environmentally and socially in charge ways. Also, matching Norreklilt (2003), the BSC model will not monitor Shells competition or take a look at changes in technology. This is again a poor of Shells BSC as not just one of the aims connect to the performance of the competition. This may leave Shell very thin minded, not focusing on what developments competition is making, thus resulting in a lack of market share.
From the BSC however, Shell would be looking at new technology and strategies to help meet aims, such as Biofuel and discovering new engine oil locations, but by not looking at what technologies your competition is utilizing, they could again land behind to competition in conditions of market share. This would lead to bogus cause and effect relationships as they would indeed not be accumulating the revenue or shareholder prosperity that the BSC seeks to achieve. This is described by Norreklit (2003) claims that "there is not as stated by Kaplan and Norton (1996) a cause-and effect relationship between customer satisfaction and loyalty, and between devotion and financial results. Again, cementing Norreklit's theory that cause and impact relationships can be very fickle, and in Shells case, possibly unjustified.
