Balanced Scorecard

8/5/2012 Starbucks Balanced Scorecard Project Starbucks BSC - Agenda •Company Overview •Purpose of Starbucks BSC •Star

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8/5/2012

Starbucks Balanced Scorecard Project

Starbucks BSC - Agenda •Company Overview •Purpose of Starbucks BSC •Starbucks Strategy at the Store Level •Starbucks BSC •Causality Relationships for the Proposed BSC •Consequences of New BSC •Feasibility of Proposed Metrics •Conclusion

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Company Overview Established in 1971, since then have grown to become the leading retailer, roaster, and brand of specialty coffee in the world with locations in North America, Latin America, Europe, Middle East, and Asia Pacific. AS OF 2006 •Net revenue 7.8 Billion •Net earnings 564 Million •Earnings per common share diluted $0.71 •Number of countries Starbuck’s is located in 37 •Total retail stores world wide (excluding franchises) 12,440 •Number of partners (employees) worldwide 145,800

BSC Purpose The purpose of this BSC is to develop metrics that allow individual Starbuck’s stores to measure current performance as they align with the overall store strategy. This scorecard incorporates both lagging and leading metrics to create a holistic view of performance as it pertains to the Cybernetic Feedback Model.

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Starbuck’s Individual Store Strategy 1. To provide a clean and comfortable store experience with consistent quality products and service 2. Contribute positively to our communities & environment 3. Provide a great work environment and treat each other with respect and dignity 4. Recognize that profitability is essential to success •

Source: Starbucks CSR brochure, tailored to the store level

Balance Scorecard FINANCIAL PERSPECTIVE

CUSTOMER PERSPECTIVE

Starbuck’s Strategy

INTERNAL PROCESS PERSPECTIVE

LEARNING AND GROWTH PERSPECTIVE

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LEARNING & GROWTH GOAL

MEASURE

STRATEGY ALIGNMENT

Knowledgeable Employees •Test scores on completed training units

(Leading) • Number of products tested (Leading) •Number of training sessions completed (Leading) •Number of employee suggestions submitted (Lagging)

Employee Satisfaction

•Strategy 1, 3, 4

•Employee work referrals (Leading) •Strategy 1, 2, 3, 4 •Length of employee tenure (Lagging) •Percent employee absenteeism (Lagging) •Employee satisfaction surveys (Lagging)

LEGEND Starbucks Store Strategy 1. Quality products/service

2. Contribute to communities

3. Great work environment

4. Profitability

CUSTOMER PERSPECTIVE GOAL

MEASURE

STRATEGY ALIGNMENT

Customer SatisfactionProduct Mix

•Survey (Lagging) •Percent total sale of new products (Lagging)

•Strategy 1, 4

Customer SatisfactionProduct (Drinks, pastries, etc.)

•In Store audits (Leading) •Number of returned drinks (Lagging)

•Strategy 1, 4

Customer SatisfactionService

•Number of complaints (Lagging)

•Strategy 1, 3, 4

Continuous Community Involvement

•Number of projects/month (Leading) •Number of volunteer hours/month (Leading)

•Strategy 2, 4

LEGEND Starbucks Store Strategy 1. Quality products/service

2. Contribute to communities

3. Great work environment

4. Profitability

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INTERNAL OPERATIONS Goal

Measure

Strategy Alignment

Minimize Solid Waste

•Number of customers using their own mug (Both) •Internal audit of solid waste (Lagging) •Percentage of products packaged in recycled/recyclable materials (Leading)

•Strategy 2

Initialize Quality Assurance

•Randomly take temperatures of hot drinks (Both) •Test employees product knowledge (Leading)

•Strategy 1, 4

Maintain a Clean, Safe, and Orderly Store

•Perform and document cleaning and •Strategy 1, 4 maintenance inspections hourly (Leading) •Injury rate per hours worked (Lagging)

LEGEND Starbucks Store Strategy 1. Quality products/service

2. Contribute to communities

3. Great work environment

4. Profitability

FINANCIAL PERSPECTIVE Goal

Measure

Strategy Alignment

Achieve Profitable YoY Growth

•YoY net revenue growth (Lagging) •YoY Operating Margin Growth (Lagging) •Revenue per employee (Lagging)

•Strategy 1, 3, 4

Make a Meaningful Contribution to the Community

•Measure % of net revenue going to community (Leading)

•Strategy 1, 2, 3

LEGEND Starbucks Store Strategy 1. Quality products/service

2. Contribute to communities

3. Great work environment

4. Profitability

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Causality Relationships for Strategic Objectives Contribute positively to our communities and environment Financial

Contribution to the community

Profitable Growth Continuous Community Involvement

Customer

Internal

Minimize Solid Waste Employee Satisfaction

Learning/ Growth

Causality Relationships for Strategic Objectives Provide a great work environment and treat each other with respect and dignity Profitable growth

Financial

Customer

Customer SatisfactionService Maintain a clean, safe, and orderly store

Internal

Learning/ Growth

Employee Satisfaction

Knowledgeable employees

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Causality Relationships for Strategic Objectives To provide a clean and comfortable store environment with consistent quality products and service Profitable growth

Financial

Customer

Internal

Customer SatisfactionProduct Minimize Solid Waste

Customer SatisfactionService Initialize Quality Assurance

Employee Satisfaction

Learning/ Growth

Maintain a clean, safe, and orderly store

Knowledgeable employees

Causality Relationships for Strategic Objectives Recognize that profitability is essential to success. Profitable growth

Financial

Customer SatisfactionService

Customer

Internal

Learning/ Growth

Minimize Solid Waste

Initialize Quality Assurance

Product Mix Maintain a clean, safe, and orderly store

Knowledgeable employees

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Consequences and Behavior Changes RELEVANT STAKEHOLDERS • PARTNERS/EMPLOYEES – Conflict between commitment/expectations of employees and compensation • ex. A barista getting paid minimum wage may not feel the need to put forth extra effort/time into community service

• SHAREHOLDERS – Setting profitability as a strategy illustrates to shareholders that Starbucks is keeping them in mind

• CUSTOMERS – BSC will ensure consistent quality for the customer for each visit

Questions… FINANCIAL • Achieve Profitable YoY Growth • Make a meaningful contribution to the

INTERNAL • • •

minimize solid waste initialize quality assurance maintain a clean, safe, and orderly store

• •

knowledgeable employees employee satisfaction

community

CUSTOMERS • •

customer satisfaction - product mix customer satisfaction - product (drinks, pastries, etc.) • customer satisfaction - service • continuous community involvement

LEARNING & GROWTH

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