repsol ypf - a complete implementation model of balanced ... · pdf filee2760mg repsol ypf - a...

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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


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


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


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


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


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


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


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


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


Information Systems Information Systems –– Example of ArchitectureExample of Architecture

12©Accenture 2001


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


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


16©Accenture 2001


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


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


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


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


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 %


22©Accenture 2001


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


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


• N/A





Hierarchy

24©Accenture 2001


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).

+ +

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