Modify Compensation Scorecard
Lance is an eighty year old consumer products company and one of the largest producers and distributors of snack foods. They have a long history of strong regional brand name recognition and its primary sales channel is direct store delivery. However, over a period of years, Lance's sales had steadily declined and the company was performing well below all industry averages. Faced with declining growth and falling stock values, the Board expressed concern over the fact that the management team had missed its goals on a consistent basis, and asked the management team to review how it would meet the current year's objectives and begin to turn the company around.
Historically, executives were allowed to negotiate their own department goals that did not necessarily coincide with the corporate goals or those of other departments. It was clear the organization needed to implement an aligned, cohesive and executable plan for a turnaround and Findley Davies was engaged to assist.
Several objectives were developed to support an effective strategy for the company. Implementation of the process was accomplished through a modified balanced scorecard that identified corporate-wide short term strategic goals in four areas:
- Financial stability
- Operational efficiency
- Customer needs
- People/structure to support the corporate goals
Utilizing these four areas, each department was asked to create a plan that aligned with the corporate strategy and would be supported by the other organizational units.
Using a disciplined approach significant results were achieved quickly. Within 12 months, Lance was able to achieve considerable financial and performance results in each area of the scorecard.
- Financial sales and profit goals were reached which assisted in the stock value increasing by 25%;
- Operational efficiency initiatives helped to reduce field inventory significantly resulting in a savings of $1.33M;
- A customer needs analysis resulted in the launch of a new product and sales exceeded goal by 40%;
- People/structure initiatives increased sales routes average sales and decreased voluntary field sales turnover.
The management team was much more focused and execution oriented, and able to deliver. Despite the fact the management team missed the mark in a few areas of the plan, the overall performance and perceived turnaround was so dramatic the board was able to reward the management team for their results through a targeted short term incentive plan.