Balanced Scorecard Supermarket

The fundamental goal of Balanced Scorecard Supermarket is to track financial and non-financial results while concurrently monitoring progress in building the capabilities and acquiring the intellectual assets of a company Balanced Scorecard Supermarket is a management system that translates a supermarket or any other big store’s mission and strategy into tangible objectives and measures. The measures represent a balance between external measures for shareholders and customers, and internal measures of critical business processes, innovation, and learning and growth. Balanced Scorecard is a management tool designed to measure organizational performance in a systemic fashion and simultaneously develop aligned actions to improve organizational performance.

Establishing KPI's and setting up a system to monitor them is an important part of running any business. Generally speaking, the Balanced Scorecard Supermarket business will have a number of objectives that tend to interact, so managers have to try to keep several balls in the air at once. This is formalized in the "balanced scorecard" approach invented by Professor Robert S Kaplan of the Harvard Business School and most effectively disseminated in the book "The Balanced Scorecard - Translating Strategy into Action" (1996) by Kaplan with Dr. David P. Norton from Renaissance Solutions Inc.

This is not rocket science. It is technically very simple, although making it work effectively needs a lot of understanding and co-operation. All you do is workshop your way to a sensible number of KPI's (say about 5) that cover the objectives of the business and can be measured accurately. Then you set up a reporting regime at each management level to collect and report the results, and a plan-do-review process so that the organization can attempt continuous improvement.

Although simple in concept, the "balanced scorecard" approach is indubitably effective. The approach can be applied to any sort of business. And it can be applied to any organization that has objectives - it doesn't have to be a business, it could be a government department, for example, or a supermarket or retail store.

To better understand the concept let’s see “Store Segmentation—A Cap Gemini project in the Retail Sector” as given below:

Client Business Issue: A major UK retailer was undergoing a major change program to improve performance in its branch network of over 500 outlets. Part of the project developed and implemented a balanced set of measures to monitor performance within the store. There was also a need to introduce relevant peer groups to compare performance between stores. There was also a need to tailor each store's offering to its local area while maintaining the control and economies of scale of a centrally controlled buying, marketing and distribution organization.

The organization had vast quantities of customer data from EPoS, a loyalty card and various sources of market research but were unable to convert this into real knowledge which could be used to change the business.

Solution: By collecting data relating to store type, layout, location and performance from many functions across the business, they created a comprehensive database of the attributes describing each store. Making use of loyalty card data, their data mining consultants were able to define catchments areas, at a postal sector level, for each store and then added market research data to profile the socio-economics of each catchment. A combination of statistical and neural network techniques were then applied to segment the stores based on these profiles. These segments were used to help store managers understand the key needs of their catchments and to enable them to share knowledge with other stores with similar catchments. They also formed the basis for devising strategies to tailor range, price and service to better reflect the local customer base.

A second segmentation based on the physical attributes of the store such as size, facilities and layout was also developed and combined with the catchment segments to provide relevant peer groups for comparing store performance using Balanced Scorecard ™ methodology.

Approach: Initially, they collected all the relevant data describing each store's type, layout, catchment and performance from across the organization - the first time it had ever been brought together.

Catchment areas were defined for each store and the percentage of households from each Mosaic category in the catchment was calculated. A combination of statistical and neural network clustering techniques was applied to divide the stores into 7 segments based on the different catchment profiles. A second segmentation based on stores physical attributes was also developed and a matrix of the two was used to further segment the stores for the purposes of comparing performance. A visual spreadsheet model and a series of 'brown paper' exercises were used to validate and communicate the segmentations to store managers.

Benefits of Balanced Scorecard Supermarket:

·       An easy to understand and interpret model for explaining catchments to store managers.

·       Relevant peer groups to compare performance between stores and support the implementation of a Balanced Scorecard ™.

·       A tool to help develop strategies to tailor price, range and service to better reflect local needs.