STRATEGIC LEADERSHIP, VIKRAM PRATAP, PGDM(E) BATCH, ROLL NO.

18PGDM05A027

“Case Study: Mobil USM&R (A): Linking the Balanced Scorecard”

PREPARED BY

VIKRAM PRATAP

ENROLLMENT NO: 18PGDM05A027

PROF NAME: Dr. Sunil Maheshwari

NSB (NTPC SCHOOL OF BUSINESS)

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 STRATEGIC LEADERSHIP, VIKRAM PRATAP, PGDM(E) BATCH, ROLL NO. 18PGDM05A027

“Case Study: Mobil USM&R (A): Linking the Balanced Scorecard”

Case Analysis:

Introduction:

➢ Mobil Corporation, headquartered in Fairfax, Virginia, and with operations in more than 100
countries is, with Exon and Shell, among the world’s top three integrated oil, gas, and
petrochemicals companies.
➢ Mobil’s 1995 return-on-capital-employed of 12.8% ranked it 4th among the 14 major integrated
oil companies; its 19.1% average annual return to shareholders from 1991 to 1995 was the
highest among the 14 major oil companies and exceeded the average annual return on the S&P
500 by more than 2 percentage points.
➢ The corporation consists of five major divisions: Exploration & Producing (the “upstream”
business), Marketing & Refining (the “downstream” business), Chemical, Mining & Minerals, and
Real Estate.
➢ In the early 1990s, USM&R faced an environment with flat demand for gasoline and other
petroleum products, increased competition, and limited capital to invest in a highly capital-
intense business.
➢ In 1992, USM&R had reported an operating loss from its refining and marketing operations, and
ranked 12 out of 13 oil companies in profitability from U.S. marketing and refining operations.
➢ A climate survey in 1993 revealed that employees felt internal reporting requirements,
administrative processes, and top-down policies were stifling creativity and innovation.
➢ McCool, with the assistance of external consultants, initiated major studies of business
processes and organizational effectiveness.
➢ He concluded that to it had to make the most of its existing assets and to focus more intensively
on customers.

Reorganization: 1994
USM&R was reorganized into 17 Natural Business Units (NBUs) and 14 Service Companies. The NBUs
included (1) sales and distribution units, (2) integrated refining, sales and distribution units, and (3)
specialized product (e.g., distillates, lubricants, gas liquids) and process (stand-alone refinery) units.

Reason for Reorganization:

➢ To get our staff costs under control.
➢ To learn to focus on the customer.
➢ To get everyone in the organization thinking.

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 STRATEGIC LEADERSHIP, VIKRAM PRATAP, PGDM(E) BATCH, ROLL NO. 18PGDM05A027

➢ USM&R’s reorganization occurred simultaneously with a newly developed strategy on customer

segmentation.

Goal of reorganization:

➢ USM&R decided that its efforts should be focused on the first three of these segments (59% of
Gasoline buyers).
➢ Upgrade all service stations so that they could offer fast, friendly, safe service to the three
targeted customer segments.
➢ Redesign and reorient its C-stores so that they would become a destination stop, offering
consumers one-stop, and convenient shopping for frequently purchased food and snack items.

USM&R Balanced Scorecard:

Starting in January 1994, Lewis and his project team conducted two-hour individual interviews with all
members of the leadership team to understand each person’s thoughts on the new strategy. The team
synthesized the information received from the interviews and, with David Norton facilitating, led
several workshops to develop specific objectives and measures for the four balanced Scorecard
perspectives: financial, customer, internal business process, and learning and growth.
By August 1994, the eight sub-teams had developed specific strategic objectives for the four balanced
Scorecard perspectives (Exhibit 5).

Linking the Balanced Scorecard to NBUs and Servcos:

After the reorganization, staff functions became free-standing service units that sold services to the
NBUs after getting an agreement from them on prices and level of service provided.

Linking the Balanced Scorecard to Compensation:

All salaried employees of USM&R were tied to the Mobil corporate award program. This program was
based on performance relative to Mobil’s top seven competitors on two financial measures: return-on-
capital employed and earnings-per-share growth.

Reviewing the Balanced Scorecards:

It’s enabled them to teach the NBU managers about strategy; about lead and lag indicators; and to think
across the organization, nor just in functional silos. It’s exposed the managers to issues outside their
expertise and to understand the linkages they have with other parts of the organization. People now
talk about things that are outside their immediate responsibility, like safety, environment, and Cstores.
The scorecard has provided a common language, a good basis for communication.

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 STRATEGIC LEADERSHIP, VIKRAM PRATAP, PGDM(E) BATCH, ROLL NO. 18PGDM05A027

Result:

➢ USM&R’s 1995 income per barrel of $1.02 greatly exceeded the industry average of $0.65.
➢ Global operating return from refining, marketing and transportation operations of 10.1% per
dollar of assets was the highest in the industry (up from 8.6% and 5th place in 1994).
➢ McCool concluded that In 3 to 4 years, we have come from an operation that was worst in its
peer group, draining a half billion dollars a year, to a company that ranks #1 in its peer group,
and generates hundreds of millions of dollars of positive cash flow.