Case 3 Case 3
The Coors Case The Coors Case Balanced Scorecard Balanced Scorecard
Hugh Grove, School of Accountancy Hugh Grove, School of Accountancy
Daniels College of Business, University of Denver Daniels College of Business, University of Denver To
Tom Cook, Department m Cook, Department of Financeof Finance
Daniels College of Business, University of Denver Daniels College of Business, University of Denver en !ichter, "ro#uct $uality Control %anager en !ichter, "ro#uct $uality Control %anager Coors Bre&ing Company
Coors Bre&ing Company
By the end of 1997, Coors had finished the implementation of a By the end of 1997, Coors had finished the implementation of a three-year computer-integrated logistics (CI! pro"ect to impro#e its supply year computer-integrated logistics (CI! pro"ect to impro#e its supply chain management$ Coors defined its supply chain as e#ery acti#ity chain management$ Coors defined its supply chain as e#ery acti#ity in#ol#ed in mo#ing production from the supplier%s supplier to the in#ol#ed in mo#ing production from the supplier%s supplier to the
customer%s customer$ (Since &y federal la', Coors cannot sell directly customer%s customer$ (Since &y federal la', Coors cannot sell directly to consumers, Coors customers are its distri&utors 'hose customers to consumers, Coors customers are its distri&utors 'hose customers are retailers 'hose customers are consumers$! Coors%s supply chain are retailers 'hose customers are consumers$! Coors%s supply chain included the follo'ing processes purchasing, research and
included the follo'ing processes purchasing, research and de#elopment, engineering, &re'ing, conditioning, fermenting, de#elopment, engineering, &re'ing, conditioning, fermenting,
pac)aging, 'arehouse, logistics, and transportation$ This CI pro"ect pac)aging, 'arehouse, logistics, and transportation$ This CI pro"ect 'as a cross-functional initiati#e to reengineer the &usiness processes 'as a cross-functional initiati#e to reengineer the &usiness processes
&y 'hich Coors%s logistics or supply chain 'as managed$ This &y 'hich Coors%s logistics or supply chain 'as managed$ This
reengineering pro"ect impro#ed supply chain processes and applied reengineering pro"ect impro#ed supply chain processes and applied information technology to pro#ide timely and accurate information to information technology to pro#ide timely and accurate information to those
those
in#ol#ed in supply chain management$ The pro"ect o&"ecti#e 'as to in#ol#ed in supply chain management$ The pro"ect o&"ecti#e 'as to increase company profita&ility &y reducing cycle times and operating increase company profita&ility &y reducing cycle times and operating costs and increasing customer (distri&utor! satisfaction$ The soft'are costs and increasing customer (distri&utor! satisfaction$ The soft'are #endor used for this pro"ect 'as the *erman company Systems
#endor used for this pro"ect 'as the *erman company Systems +pplications
+pplications roducts ( roducts (S+!, 'hich pS+!, 'hich pro#ided thro#ided the financial ae financial andnd materials planning soft'are modules$ The S+ planning soft'are materials planning soft'are modules$ The S+ planning soft'are &ecame Coors%s load configurator soft'are, 'hich ta)es distri&utor &ecame Coors%s load configurator soft'are, 'hich ta)es distri&utor demand forecasts and the production schedule and creates a shipping demand forecasts and the production schedule and creates a shipping schedule for the follo'ing 'ee)$ The follo'ing ma"or supply chain
schedule for the follo'ing 'ee)$ The follo'ing ma"or supply chain pro&lems 'ere corrected &y this CI pro"ect
pro&lems 'ere corrected &y this CI pro"ect . meeting seasonal demand,
. meeting seasonal demand, . meeting demand surges from
. meeting demand surges from sales promotions,sales promotions,
. supporting the introduction of more than three ne' &rands each year, . supporting the introduction of more than three ne' &rands each year, . filling routine customer (distri&utor! orders,
. filling routine customer (distri&utor! orders, . filling rush
. mo#ing &eer from production through 'arehouse to distri&utors &efore the &eer spoiled$
(The shelf li#es for Coors products 'ere /0 days for &eer )egs and 11 days for all other &eer pac)ages$! 2att ail, head of Coors%s Customer Ser#ice 4epartment, had &een the CI pro"ect leader since the
inception of the pro"ect$ 5e had de#eloped such e6pertise 'ith supply chain management that he had "ust &een hired &y a supply chain
consulting firm$ In early 199, on his last day of 'or) for Coors, he 'as tal)ing 'ith 8en ider, head of Coors :uality +ssurance 4epartment$
8en had "ust &een placed in charge of the ne' &alanced scorecard (BSC! pro"ect at Coors$ The initial moti#ation for this pro"ect 'as to assess 'hether the supply chain impro#ements 'ere &eing
maintained$ 5o'e#er, the pro"ect 'as &roadened to &ecome a
company-'ide BSC$ +ccordingly, the pro"ect strategy 'as to implement a performance measurement process that (1! focused on continuous impro#ement, (! re'arded reasona&le ris) ta)ing and learning to impro#e performance, and (3! ena&led employees to understand the opportunity and re'ard for 'or)ing producti#ely$
Matt The supply chain management pro"ect 'as really challenging and
re'arding$ I hate to lea#e Coors, &ut the consulting firm made me such an attracti#e offer that I could not refuse it$ I hope you ha#e such
positi#e e6periences 'ith this follo'-up &alanced scorecard pro"ect$
Ken This ne' pro"ect 'ill &e a real challenge$ ;e need to &uild on all
the impro#ements made &y your supply chain pro"ect$
Matt 2y pro"ect team 'as e6cited to see that our C<= discussed the
supply chain pro"ect in his 1997 shareholder letter$ 5e said that significant producti#ity gains in 1997 'ere due to our pro"ect, 'hich streamlined purchasing, &re'ing, pac)aging, transportation, and administration of the supply chain$
Ken erhaps an economic #alue-added (<+! analysis could &e done
to assess these supply chain producti#ity gains$
Matt That%s an interesting idea, to analy>e performance in the financial
Ken +nother challenge for my pro"ect is ho' to translate the Coors
#ision statement and related &usiness strategies into operational performance measures$
Matt @ou also need to identify any gaps &et'een the #ision statement,
&usiness strategies, and current performance$
Ken 4o you ha#e any e6periences from your pro"ect that I could useA
Matt ;ell, 'e did o&tain some &enchmar)ing data to de#elop targets
for some performance measures for our supply chain pro"ect$ I can gi#e you these measures, &ut they are limited due to confidentiality pro&lems in o&taining such data$ 2ay&e Coors should "oin one of the commercial &enchmar)ing data&ases$
Ken Than)s$ I am also a'are of certain employee resistance to
de#eloping a ne' set of performance measures for this &alanced scorecard approach$
Matt ;e had similar employee resistance to changes in the &usiness
processes of the supply chain$ ;e 'ere a&le to use the follo'ing crisis moti#ation$ +t that time, Coors could not support all the ne' &eer &rand introductions proposed &y our mar)eting people, due to the anti?uated 1970s soft'are that 'as then &eing used for our supply chain
management$ The mar)eting people 'anted to introduce three ne' &rands each ?uarter, and 'e could support only three ne' &rands each year ;e also learned that 'e needed to get more employee
in#ol#ement in the pro"ect$
Ken That%s a good idea$ In fact, I%#e already de#eloped a list of the
most fre?uently as)ed ?uestions (+:s! a&out the &alanced scorecard from initial meetings 'ith employees in#ol#ed in the supply chain$
Matt @ou ha#e lots of challenges a'aiting you$ *ood luc) in your ne'
pro"ect$ 2a)e sure that today%s impro#ements in supply chain performance don%t &ecome tomorro'%s pro&lems
Balanced Scorecard Bac)ground
The &alanced scorecard is a set of financial and nonfinancial measures relating to the company%s mission, strategies, and critical success
factors$ The &alanced scorecard puts #ision and strategy at the center of the management control system$ ision and strategy dri#e
performance measures, as opposed to the traditional performance measurement systems that pro#ided their o'n limited measures to management 'hether they 'ere needed or not$ The goal is to maintain an alignment of an organi>ation%s #ision, strategy, programs,
measurements, and re'ards$ +n inno#ati#e aspect is that the
components of the scorecard are designed in an integrati#e manner to reinforce each other as indicators of &oth current and future prospects for the company$ The &alanced scorecard ena&les management to measure )ey dri#ers of o#erall performance, rather than focusing on short-term financial results$ It helps management stay focused on the entire &usiness process and helps ensure that actual current operating performance is in line 'ith long-term strategy$ 8aplan and Dorton
(199! are generally gi#en credit for creating the &alanced scorecard in the early 1990s$
+ recent sur#ey found that 0E of large +merican companies 'ant to change their performance measurement systems (Birchard 199F!$ +nother recent sur#ey found that /0E of ortune 1,000 companies
ha#e or are e6perimenting 'ith a &alanced scorecard (Sil) 199!$ Such changes ha#e &een dri#en &y the e#ol#ing focus on a team-&ased,
process-oriented management control system$ The &alanced scorecard has four perspecti#es or ?uadrants that generate performance
measures to assess the progress of a company%s #ision and strategy, as follo's
. Customer perspecti#e ho' do customers see usA . Internal &usiness perspecti#e 'hat must 'e e6cel atA
. Inno#ation and learning perspecti#e can 'e continue to impro#e and create #alueA
. inancial perspecti#e ho' do 'e loo) to shareholdersA
The BSC is a set of discrete, lin)ed measures that gi#es management a comprehensi#e and timely e#aluation of performance$ The BSC tries to minimi>e information o#erload &y pro#iding a limited num&er of
measures that focus on )ey &usiness processes &y le#el of
management$ or e6ample, top management needs summari>ed,
and employees may need &oth monetary and nonmonetary measures on a more fre?uent &asis$ +lso, such measures need to trac) progress concerning the gap &et'een a company%s performance and
&enchmar)ed targets$
The BSC considers fre?uency of measurement, depending on the type of measure$ *enerally, nonmonetary measures are reported more
fre?uently than monetary measures$ or e6ample, nonmonetary operating measures, such as machine do'ntime, percentage of
capacity used, and de#iations from schedule, may &e measured daily$ =ther nonmonetary measures, such as manufacturing cycle time, deli#ery accuracy, customer complaints, and spoilage, may &e
measured 'ee)ly$ Some nonmonetary and monetary measures, such as in#entory days, accounts recei#a&le days, product returns, and 'arranty costs, may &e measured ?uarterly$ =ther nonmonetary and monetary measures, such as ne' products introduced, mar)et share, total cost of poor ?uality, return on in#estment, and employee training, may &e measured annually$
Company Bac)ground
Coors had &een a family-o'ned and operated &usiness from its
inception in 173 until 1993 'hen the first non-family mem&er &ecame president and chief operating officer$ 5o'e#er, Coors family mem&ers still held the positions of chairman of the &oard of directors and chief e6ecuti#e officer and also held all #oting stoc)$ =nly non#oting, Class B common stoc) 'as pu&licly traded$ Coors has &een financed primarily &y e?uity and has &orro'ed capital only t'ice in its corporate history$ The first long-term de&t, G0 million, $FE notes, 'as issued in 1991, and the final GH0 million of principal 'as to &e repaid &y the end of 1999$ The second long-term de&t, G100 million, 7E unsecured notes, 'as issued in a 199F pri#ate placement$ =f this principal, G0 million is due in 00 and the last G0 million is due in 00F$ In the mid-1970s Coors 'as a regional &re'ery 'ith an 11-state mar)et, selling one &rand in a limited num&er of pac)ages through appro6imately 00 distri&utors$ Traditionally, Coors &eer had &een a non-pasteuri>ed, premium &eer$ (5o'e#er, 'ith a recently de#eloped sterili>ation
process, its products no' ha#e the same shelf life as its competitors% pasteuri>ed products$! The Coors plant in *olden, Colorado, 'as its only production facility, and it had no other distri&ution centers$ =#er
the ne6t F years, Coors changed dramatically &y e6panding into all F0 states and #arious foreign mar)ets$ By the end of the 0th century, Coors had production facilities in *olden, Colorado, 2emphis,
Tennessee, <l)ton, irginia, and arago>a, Spain$ It had e6panded to using 1 Jsatellite redistri&ution centersK in the Lnited States &efore the CI pro"ect reduced this num&er to eight$ Beer shipments 'ere made &y &oth truc) and railroad cars$ Coors had appro6imately /F0 domestic &eer distri&utors, although a&out 00 of them accounted for 0E of Coors%s total sales$ Coors also had se#eral "oint #entures and
international distri&utors in Canada, the Cari&&ean, atin +merican, <urope, and the acific$ Coors had 1/ &eer &rands, including a specialty line, Blue 2oon, that competed 'ith the domestic micro &re'ing industry$ 5o'e#er, Coors continued to focus on its four )ey premium &rands
Coors ight, =riginal Coors, 8illian%s Irish ed, and ima$ Coors ight 'as the fourth largest selling &eer in the Lnited States$ In pac)aging, Coors had to compete 'ith the ma"or competitors% #alue pac)aging, such as 1-pac)s and 30-pac)s$ In 19F9, Coors introduced the nation%s first all-aluminum &e#erage can and in the late 1990s, it had introduced a &ase&all &at &ottle and a foot&all pigs)in &ottle$ There 'ere also
numerous state la&eling la's to meet, such as returna&le information, and pac)aging graphics to reinforce the oc)y 2ountains image for Coors &eer$
Competition in the &eer industry 'as strong, especially in the Lnited States$ +nheuser-Busch (+MB! 'as the mar)et leader 'ith
appro6imately HHE of the L$S$ mar)et, 0 million &arrels sold, G &illion &eer sales, and G1 &illion net profit$ 4ue to its si>e, +MB 'as the ac)no'ledged price leader in the industry$ +MB also had 13 domestic production plants, including one in t$ Collins, Colorado, to achie#e its customer ser#ice goal of ha#ing no ma"or domestic distri&utor more than F00 miles a'ay from one of its &eer production plants$ Dum&er t'o in this mar)et 'as 2iller, o'ned &y hilip 2orris, 'ith
appro6imately E mar)et share, H0 million &arrels sold, GH &illion &eer sales, and GH/0 million net profit$ 2iller had se#en domestic
production plants$ Coors 'as num&er three 'ith an 11E mar)et share, 0 million &arrels sold, G &illion &eer sales, and G0 million net profit$ Coors had three production plants in the Lnited States$ Its Colorado plant 'as the largest &re'ery in the 'orld and ser#ed 70E of the L$S$ mar)et 'ith its 10 can lines, si6 &ottle lines, and t'o )eg lines$ Do other domestic &re'ers had mar)et share in e6cess of FE$ In the late 1990s,
there had &een consolidation of the larger companies in the domestic &eer industry$ The most recent e6ample 'as Stroh Bre'ing Company (SBC! 'ith a&out FE mar)et share$ SBC had signed agreements to sell its ma"or &rands to 2iller and the remaining &rands to a&st Bre'ing Company$ SBC 'ould then e6it the &eer industry &y 000$ rom 193 through 199, Coors 'as the only ma"or L$S$ &re'er to
increase its sales #olume each year, although industry sales had gro'n only a&out 1E per year in the 1990s$ Coors had outpaced the industry #olume gro'th rate &y one or t'o percentage points each year$ Coors had accomplished this gro'th &y &uilding its )ey premium &rands in )ey mar)ets and strengthening its distri&utor net'or), recently 'ith impro#ed supply chain management$
Coors%s ision Statement and Business Strategies Coors%s #ision statement 'as as follo's
=ur company has a proud history of #isionary leadership, ?uality
products and dedicated people 'hich has ena&led us to succeed in a highly competiti#e and regulated industry$ ;e must con tinue to &uild on this foundation and &ecome e#en more effecti#e &y aligning and uniting the human, financial and physical aspects of our company to
&ring great tasting &eer, great &rands and superior ser#ice to our distri&utors, retailers and consumers and to &e a #alued neigh&or in our communities$ =ur continued success 'ill re?uire team'or) and an e#en stronger dedication &y e#ery person in our organi>ation to a
common purpose, our ision$ +chie#ing our ision re?uires that 'e &egin this "ourney immediately and 'ith urgency for it 'ill re?uire significant change for us to thri#e and 'in in our industry$ Lsing this #ision statement, top management had decided to focus on four fundamentals
impro#ing ?uality, impro#ing ser#ice, &oosting profita&ility, and
de#eloping employee s)ills$ In the 1997 Coors annual report, &oth the C<= and the president discussed the follo'ing general &usiness
strategies or Jsi6 plan)sK to dri#e these fundamentals in the future
1$ Baseline gro'th 'e 'ill profita&ly gro' )ey &rands and )ey mar)ets$ $ Incremental gro'th 'e 'ill in#est selecti#ely to gro' high potential mar)ets, channels, demographics, and &rands$
3$ roduct ?uality 'e 'ill continuously ele#ate consumer percei#ed ?uality &y impro#ing taste, freshness, pac)age integrity, and pac)age appearance at point of purchase$
H$ 4istri&utor ser#ice 'e 'ill significantly enhance distri&utor ser#ice as measured &y impro#ed freshness, less damage, increased on-time arri#als, and accurate order fill at a lo'er cost to Coors$
F$ roducti#ity gains 'e 'ill continuously lo'er total company costs per &arrel so Coors can &alance impro#ed profita&ility, in#estments to gro' #olume, mar)et share and re#enues, and funding for the
resources needed to dri#e long-term producti#ity and success$ /$ eople 'e 'ill continuously impro#e our &usiness performance through engaging and de#eloping our people$
The operations and technology (=T! department of Coors 'as in charge of the supply chain management and had de#eloped its o'n #ision to ela&orate the o#erall Coors #ision statement as follo's ;e are partners 'ith our internal &usiness sta)eholders, 'ith our suppliers and 'ith our
communities$ ;ith our partners, 'e ha#e de#eloped an aligned and integrated supply chain
that deli#ers our commitments and meets the re?uirements that delight our distri&utors,
retailers, and consumers, esta&lishing our company as the supplier of choice$ The processes
re?uired to design, safely produce, and deli#er great tasting &eer at its freshest, 'ith superior
pac)aging integrity, competiti#e cost, are 'ell-defined, understood, consistently follo'ed,
and continually impro#ed &y e#ery person in our organi>ation$ The ?uality and inno#ation
'e employ in all 'e do encourage &eer drin)ers to see) out our &rands and ma)e Coors the
en#y of our competition$ =ur use of current, accurate information, and appropriate technology
ena&les all indi#iduals in our organi>ation to monitor and control their 'or), &e fle6i&le
and mo#e 'ith speed$ ;e #alue learning and e6ercise a tenacious approach to eliminate 'aste
and reduce cost$ ;e reali>e that in a competiti#e 'orld, 'e must &ring #alue to our &rands
and continually aspire to a higher le#el of performance to compete successfully$
The =T department had also adopted and e6tended the follo'ing supply chain guiding
principles from the 'or) of the CI supply chain pro"ect team to create its o'n &usiness strategies
. Simplify and sta&ili>e the process$
. <liminate non-#alue-added time and 'aste . elentlessly pursue continuous impro#ement$ . In#entory is a lia&ility, not an asset$
. eople doing the 'or) are critical to lasting impro#ement$ . Short cycle time N relia&ility O fle6i&ility$
. ind and fi6 the root cause$ . 8no' your costs$
. 8no' your customers% e6pectations$
. 2a)e decisions 'here 'or) is performed$ . Balance and optimi>e the o#erall process$ . ;hat gets measured gets done$
Benchmar)ing and erformance *aps
=nly limited &enchmar)ing information 'as a#aila&le since Coors had not yet decided to "oin any of the commercial &enchmar)ing data&ases$ (The largest one in the Lnited States, the 5ac)ett *roup Study,
sponsored &y the +merican Institute of C+s, has a&out 700
competitors 'ere noted &y the follo'ing financial information o&tained from annual reports
Ta'le () Benchmarking Analysis
Beer *n#ustry %anufacturing Cost S,G + A Cost Competitor per Barrel per Barrel et "rofit
+nheuser-Busch GH$00 G7$F0 G1$F0
2iller GF0$00 G7$00 G11$00
Coors GFF$00 G9$00 GH$00
There 'ere insignificant differences in price per &arrel as +MB 'as the industry price leaderThere 'ere insignificant differences in price per &arrel as +MB 'as the industry price leader and the other competitors closely follo'ed +MB%s pricing decisions$ +MB had this pricing po'er &ecause its domestic mar)et share of HHE 'as t'ice that of 2iller and four times that of Coors$ The ma"or moti#ation for the CI supply chain pro"ect came from the deficiencies in the supply chain performance$
The CI pro"ect had &ecome fully operational &y the end of 1997, &ut more time 'as needed to reali>e the full &enefits of such a pro"ect$ There 'as still a significant amount of #olatility in the production
process that contri&uted to the Colorado redistri&ution center%s &eing the largest &ottlenec) in the supply chain$ or e6ample, Coors often could not meet its goal to load &eer product directly off the production line into 'aiting railroad cars$ Thus, 8en%s pro"ect team had already added three ne' nonmonetary performance measures and created challenging performance targets for these measures to trac)
anticipated additional efficiencies from the CI pro"ect$ +lso, top management had created financial goals for )ey monetary
performance measures in an attempt to &ecome more competiti#e$ These )ey performance measures are sho'n in Ta&le $
The gaps in current performance at the end of 1997 indicated pro&lems 'ith Coors%s traditional, cost-&ased performance measures$ or
e6ample, direct la&or #ariances 'ere &ecoming less important due to the highly automated nature of the &eer production lines$ +lso, current performance measures 'ere fragmented and inconsistent &et'een plants, unclear, not lin)ing the separate &usiness processes to the organi>ation goals, not &alanced to pre#ent o#eremphasis in one area
at the e6pense of another, not a&le to &e acted on at all le#els, and used to punish rather than re'ard continuous impro#ement$
Ta'le -) ey "erformance %easures
C*. "ro/ect "erformance
"erformance %easure "re "ost Target Gap onmonetary
oad schedule 1! 30E /0E 100E H0E
oad item accuracy (! 90E 9FE 100E FE roduction sta&ility (3! FE F0E 100E F0E %onetary (per &arrel!
2anufacturing cost GF/ GFF GF3 G
S, * + cost G30 G9 G7 G
Det profit G 3 G H G / G
otes (these nonmonetary performance targets are &ased on 'ee)ly schedules generated &y the supply chain soft'are!
(1! Truc) or rail car loaded on time 'ithin t'o hours of scheduled lead time,
(3! roduction of scheduled product and ?uantity at planned time$
Balanced Scorecard and Change 2anagement Issues
8en 'as thin)ing that he could de#elop a crisis moti#ation for his
&alanced scorecard pro"ect, similar to the strategy used &y 2att for his CI pro"ect$ 8en )ne' that Coors%s traditional, cost-&ased performance measures 'ere not dri#ing desired results, as indicated &y the #arious performance gaps$ rom the #ision statement and &usiness strategy analysis, he thought that long-term sustaina&ility and impro#ement in performance could &e achie#ed &y lin)ing the &alanced scorecard to the annual strategic planning process$ 5e also thought that continuous impro#ement re?uired clearly defined, aligned &usiness process and acti#ity measures that support a &alanced scorecard$ 8en had already had preliminary meetings a&out this BSC pro"ect 'ith employees 'ho 'ere in#ol#ed in supply chain management$ 5e had de#eloped a list of fre?uently as)ed ?uestions (+:s!$ 5e thought that these +:s might help guide him in implementing a &alanced scorecard for Coors$
These )ey +:s are listed as follo's
$ ;hat if a measure does not dri#e the correct &eha#ior after
implementationA ;hat process 'ill &e used to e#ol#e the scorecardA 5o' 'ill my input &e heardA
3$ ;on%t the measures reduce our a&ility to &e fle6i&le 'ith our distri&utors and ma)e last-minute changes for themA
H$ ;hy is the 'indo' on the load schedule performance measure so tightA ;hat difference does it ma)e if 'e get a load out 'ithin
plusMminus t'o hoursA If 'e get it out the day it is scheduled, 'on%t the load arri#e at the distri&utor as plannedA
F$ ;e already ha#e plant measures that are 'or)ing$ ;hy 'ould 'e 'ant to change themA
/$ The production sta&ility measure does not gi#e the production lines incenti#e to run ahead$ 4oesn%t it ma)e sense to allo' us to run ahead on ma"or &rands as a cushion for those times 'hen 'e ha#e
pro&lemsA So 'hat should 'e do 'hen 'e are more than an hour ahead, shut the line do'nA
7$ ;hy 'ould you &ase production sta&ility, load schedule
performance, and load item accuracy on the initial 'ee)ly scheduleA The schedule changes constantly$ ;hy measure me against a 'ee)ly
schedule that has changed as a result of something I had no control o#erA
$ ;ill the &alanced scorecard &e used to compare the performance of the three L$S$ plantsA Since each plant is different, ho' can 'e &e e6pected to use the same scorecardA
9$ roduct mi6 can ad#ersely affect the cost per &arrel$ ;ill this &e ta)en into consideration in this measureA
10$ Some important measures may &e e6cluded from the scorecard$ If so, 'ill they e#entually &e added to the scorecardA
11$ ;ill there &e a throughput measure on the scorecardA I cannot affect the num&er of &arrels coming through my plant$ That is
determined &y sales and scheduling that shifts production &et'een plants$
1$ 5o' can you hold me responsi&le for a measure 'hen I am not the only one 'ho can affect itA
13$ 5o' often 'ill the scorecard &e updatedA 1H$ ;ill the scorecard &e used as a clu&A 1F$ ;ho 'ill put together this scorecardA
Balanced Scorecard ro"ect +dditional Thoughts
8en 'as 'ondering 'hether he should do an <+ analysis to
demonstrate its potential for a BSC financial performance measure$ Coors%s net operating profit &efore income ta6es had increased from G7F million in 199/ to G10F million in 1997$ +ccording to &oth the C<=%s shareholder letter and a #alue line analysis, the ma"or reason for this increase 'as the producti#ity impro#ement from the supply chain management pro"ect, 'hich cost G0 million$ This G30 million impro#ement in net operating profit &efore income ta6es 'as also predicted to &ecome a permanent impro#ement for &oth 199 and 1999 operations$8en%s pro"ect team had compiled the follo'ing fi#e annual ad"ustments (all increases! and other financial information "ust in case 8en decided to do an <+ analysis$
Ta'le 0) 12A A#/ustments
A#/ustments 3in millions4 Capital *ncome
1$ +d#ertising costs (three-year life! G 900 G300
$ I= reser#e HF 3
3$ 4eferred income ta6 lia&ility /F 10 H$ Capitali>ation of operating leases 30 F
+t the end of 1997, Coors had total stoc)holder e?uity of G730 million and total lia&ilities of G/70 million$ Total lia&ilities included G170 million of interest-&earing de&t as 'ell as current lia&ilities, deferred income ta6es, and pension lia&ilities$ Coors%s 'eighted a#erage cost of capital 'as 10E$ 8en 'as curious a&out 'hat gaps might e6ist &et'een #ision statements and current &usiness strategies for &oth Coors and the
=T department$ 5o'e#er, he did not 'ant this gap analysis to 'ind up o#erloading the BSC 'ith too many performance measures$ 5e 'as also concerned a&out 'hat performance targets and reporting
fre?uencies to esta&lish for #arious BSC performance measures$ =ther challenges 'ere ho' to lin) BSC performance measures and ho' to gain employee
acceptance of the BSC$ 8en reali>ed that he had some serious
challenges ahead of him in order to create and implement a &alanced scorecard for Coors$ It 'as no' Panuary 199 and top management 'as pressing for a ?uic) installation of the &alanced scorecard in order to use it for e#aluating performance in 199$
:uestions for 4iscussion
1$ in) the Coors #ision statement to Coors%s )ey &usiness strategies or Jsi6 plan)s$K +re there any gapsA
$ in) the Coors =peration and Technology (=T! department #ision statement to the =T strategies or Jsupply chain guiding principles$K +re there any gapsA
3$ ro#ide possi&le e6planations for the performance gaps identified &y Coors &enchmar)ing analysis$
H$ +ns'er the fre?uently as)ed ?uestion (+:s! already raised &y employees a&out the Coors BSC pro"ect$
F$ Considering the prior gap and &enchmar)ing analyses, design specific performance measures 'ith &enchmar)ed targets ('here feasi&le! and reporting fre?uency to create an operational and accepta&le BSC for Coors$
/$ erform an economic #alue-added (<+! analysis to assess its potential as a BSC financial performance measure for Coors$