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Dow Jones Sustainability Index

“Supersector leader” in the Dow Jones Sustainability Index in 2012 and 2011, and 124 design awards in 2012. How is that possible? By having implemented a realistic performance management approach. Philips Electronics understood the importance of using performance management tools to effectively and efficiently monitor their targets, so as to reach their objectives.

Dow Jones Sustainability Index

Performance management refers to how to monitor, control and manage the strategic and operational direction of an organization. It aims to drive continuous organizational improvement through constant reviewing and taking corrective actions, while continuing to make necessary adjustments within the organization.

In 2001, when the Balanced Scorecard – a specific performance management tool – was introduced at Philips, the project responsible confessed that the aim for adopting this instrument was “to consistently communicate strategy deep down into Philips’ 80 businesses and support more than 10,000 managers with tools to turn strategy into action by sharing knowledge, aligning actions, monitoring progress and learning”.

The Balanced Scorecard is used to evaluate actual performance against targets and to monitor future plans. Philips believed that understanding what drives present performance is the basis for determining how to achieve future results.

Philips’ top management identified the key factors needed to create value, and grouped them under four perspectives: competence (knowledge, technology, leadership and teamwork), process (drivers for performance), customers (value propositions) and financial (value, growth, and productivity).

Through the Balanced Scorecard, company’s vision was aligned and cascaded down throughout the organization. Top management sets annual operational targets, which are translated into goals for the divisions worldwide and objectives at the business unit level. This system links short-term actions with long-term strategy, making employees see how their day-to-day activities help achieve company’s goals.

So, accelerate! Through a comprehensive multi-year change and performance management program, Philips continues to develop and unlock its full potential for long-term success.

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