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Cases Case 14-1: Global Oil12 In 1995, Global Oil Corporation 's Marketing and Refining (M&R) Division refiner with 7,700 Global-branded service stations selling about 23 million gallor cent of the nation's gasoline. All the service stations are company owned. In 1990 among its peers in profitability and was annually draining $500 million of cash from t In 1993, M&R reorganized from a centralized functional organization tion, Warehousing. Retail, and Marketing) into 17 geographic business units (sales and distia tion) and 14 service companies. The functional organization was slow to react to changin conditions and the special customer needs that differed across the country. The new de organization was designed to better focus on the customer. New ns per day, or 7 Per , M&R ran marke centralized marketing strategies could be better tailored to local markets by giving local managers more decision-making authority A new corporate strategy to focus on the less price-sensitive customer who buy Glo would not onl imultaneously bal gas but also shop in its convenience gas-store outlets was implemented simulta with the reorganization. Global's new strategy was to redesign its convenience stores so they vw bec ome a "destination stop." offering one-stop shopping for gas and snacks. The old organization used a variety of functional measures: manufacturing cost, volumes, and health and safety metrics. Afte sales margins and r changing its corporate strategy and organizational st rformance metrics and began investigating the balanced scorecard ruc- Balanced scorecard (BSC) at M&R M&R formed project teams of managers to design performanc different metrics were identified. These included Financial (ROA, cash flow, volume grow Customer (share of segment, mystery shopper, etc.), Internal (safety incidents, refinery ROA, in tory level, etc.), and Learn mystery shopper" is a third-party vendor who purchases gas and snacks at each station monthl During each visit, the mystery shopper rates the station on 23 items related rest rooms, and so forth. A brochure describing the BSC was prepared and distributed 11,000 employees in August of 1994. Extensive meetings with employees explained the new metrics and the BSC concept. gers to design performance metrics for its operations. Thirty-two ing (strategic skills accumulation, quality of information syste to external appearance, to M&R's Compensation plans All salaried employees of M&R received up to a 10 percent bonus if Global ranked fir seven competitors on ROA and earnings per share (EPS) growth. In addition to th new program was added that awarded bonuses of up to 20 percent to managers. Th depends on the average performance of three factors t among its I is exisplan, a Global's competitive ranking on ROA and EPS growth M &R's balanced scorecard metrics. Own business unit's balanced scorecard In 1995, M&R generated more income per barrel of oil than the industry average, ne RO exceeded the industry's average. a. Critically evaluate M&R's implementation of the balanced scorecard. Identit strengths and weaknesses of the program b. Was the adoption of the balanced scorecard at M&R responsible for the turnaround in its financial performance? This case is based on R. Kaplan, "Mobil USM&R(A): Linking the Balanced Scorecard." Harvard Bu School Case 9-197-025 (May 7, 1997) Cases Case 14-1: Global Oil12 In 1995, Global Oil Corporation 's Marketing and Refining (M&R) Division refiner with 7,700 Global-branded service stations selling about 23 million gallor cent of the nation's gasoline. All the service stations are company owned. In 1990 among its peers in profitability and was annually draining $500 million of cash from t In 1993, M&R reorganized from a centralized functional organization tion, Warehousing. Retail, and Marketing) into 17 geographic business units (sales and distia tion) and 14 service companies. The functional organization was slow to react to changin conditions and the special customer needs that differed across the country. The new de organization was designed to better focus on the customer. New ns per day, or 7 Per , M&R ran marke centralized marketing strategies could be better tailored to local markets by giving local managers more decision-making authority A new corporate strategy to focus on the less price-sensitive customer who buy Glo would not onl imultaneously bal gas but also shop in its convenience gas-store outlets was implemented simulta with the reorganization. Global's new strategy was to redesign its convenience stores so they vw bec ome a "destination stop." offering one-stop shopping for gas and snacks. The old organization used a variety of functional measures: manufacturing cost, volumes, and health and safety metrics. Afte sales margins and r changing its corporate strategy and organizational st rformance metrics and began investigating the balanced scorecard ruc- Balanced scorecard (BSC) at M&R M&R formed project teams of managers to design performanc different metrics were identified. These included Financial (ROA, cash flow, volume grow Customer (share of segment, mystery shopper, etc.), Internal (safety incidents, refinery ROA, in tory level, etc.), and Learn mystery shopper" is a third-party vendor who purchases gas and snacks at each station monthl During each visit, the mystery shopper rates the station on 23 items related rest rooms, and so forth. A brochure describing the BSC was prepared and distributed 11,000 employees in August of 1994. Extensive meetings with employees explained the new metrics and the BSC concept. gers to design performance metrics for its operations. Thirty-two ing (strategic skills accumulation, quality of information syste to external appearance, to M&R's Compensation plans All salaried employees of M&R received up to a 10 percent bonus if Global ranked fir seven competitors on ROA and earnings per share (EPS) growth. In addition to th new program was added that awarded bonuses of up to 20 percent to managers. Th depends on the average performance of three factors t among its I is exisplan, a Global's competitive ranking on ROA and EPS growth M &R's balanced scorecard metrics. Own business unit's balanced scorecard In 1995, M&R generated more income per barrel of oil than the industry average, ne RO exceeded the industry's average. a. Critically evaluate M&R's implementation of the balanced scorecard. Identit strengths and weaknesses of the program b. Was the adoption of the balanced scorecard at M&R responsible for the turnaround in its financial performance? This case is based on R. Kaplan, "Mobil USM&R(A): Linking the Balanced Scorecard." Harvard Bu School Case 9-197-025 (May 7, 1997)