2005 Best Practice Awards

Category: Business Performance Management - Best Scorecard Implementation
Winner: HP

HP is a mainstream supplier of computer equipment, services and IT solutions.

As a large multi-national organization HP had developed a number of diverse and independent reporting systems over many years. The adoption of the balanced scorecard sought to resolve these issues and required a bespoke infrastructure framework to report the Balanced Scorecards. This lead to the development of the PMMS system (Performance Measurement and Management System).

The “Before” Scenario. Before 2001, the current $12 billion Technology Solutions Group [TSG] division of Hewlett Packard had no means of measuring performance against company objectives in a consistent fashion across different regions and groups or holding individuals accountable for their performance. And it had dozens of reporting systems with overlapping or contradictory metrics that made it impossible for users to find performance data quickly and easily and cost significant sums of money to maintain.

HP TSG adopted the balanced scorecard as a means of reinforcing its vision and business strategy. The PMMS project has generated a three-year $26.1 million return on investment (ROI) and vastly improved individual/group performance and accountability.

Single Version of Truth

The Performance Measurement and Management System (PMMS), provides a single place where executives, managers, and supervisors at all levels within HP TSG can check the status of their group’s performance against strategic objectives and examine detailed reports on exception conditions. The solution offers a single, easy-to-use Web interface that provides critical data enabling users to make better and faster decisions. PMMS now displays over 300 metrics that provide a single view of the business for 10,000 HP TSG workers throughout the world.

Cascading, Transparent Scorecards

PMMS is more than just an “executive scorecard,” although that is how it was first deployed in 2001. Since then, HP TSG has rolled out balanced scorecards to each of the division’s four worldwide operating regions at multiple levels within the organization, sometimes down to individual field offices where a supervisor may manage a dozen engineers. Each scorecard in this hierarchy has a relationship to the one above it so performance metrics roll up from the bottom to the top of the organization. The performance information is widely publicized so users and groups can compare their performance to others at their level and below.

As a result, PMMS now meets the information needs of 80 percent of the division’s employees and has significantly improved worker productivity and accountability. “Managers and supervisors no longer waste time creating custom reports using ad hoc business intelligence tools, and they can’t ‘spin’ the numbers to make their performance look better than it is. As everyone across all business units and regions can see the results, people are more motivated to do well.

Tangible Benefits

In 2004, HP TSG balanced scorecard generated $20.5 million in cost-savings on $1 million total expenditures. Increased worker productivity accounted for $10.6 million in cost savings. Reduced training costs accounted for $1.3 million in savings and lowered reporting costs accounted for another $8.6 million in savings. The productivity gains are based on saving several thousand HP TSG employees 30 minutes per month looking for reports and information and the decrease in reporting costs come from shutting down dozens of reporting systems that overlap with PMMS.

While these gains have made HP TSG more efficient internally, the use of scorecards has also helped the company make strides towards achieving its strategic objectives. For example, since the introduction of PMMS, HP TSG has raised its customer satisfaction scores three to five percentage points in its four major divisions. It has also helped the regions reduce the number of service-level commitments it misses by an order of magnitude or more. As a testament to its effectiveness, Carly Fiorina, (the then CEO of Hewlett Packard), announced in 2003 that the entire company will standardize on PMMS platform for all future balanced scorecard initiatives.

HP TSG is using strategic balanced scorecards right from the off to communicate executive decisions but even more importantly is then also using them to ensure that strategy becomes action.

The system was entirely developed ‘in house’ using office web components creating substantial savings on software licenses. It is not a static system but business led, creating a flexible solution which can adapt to the demands of the business.

Contact:
Martin Summerhayes
PMMS Program Director
Martin.Summerhayes@hp.com