Balanced Scorecard Case Study: The Tesco Steering Wheel

Kaplan and Norton’s Balanced Scorecard, first introduced in 1992, has now become a key
factor in business decision making for several large corporations. It provides an overview of
key financial and non-financial metrics which may be used to judge an organization’s
performance and consequently to come up with strategies to achieve goals; the balanced
scorecard provides a more holistic view than a balance sheet or some similar counterpart.

Tesco PLC, a British multinational groceries and general merchandise retailer, has used a
balanced scorecard for over 20 years now; owing to its massive success with the process,
their scorecard has been named the “Tesco Steering Wheel”. In a highly competitive industry,
which accounts for 12% of the UK’s economic output it is this strategizing that has helped
Tesco stand out. While a traditional Balanced Scorecard consists of four segments, given in
the previous section of the assignment, Tesco’s Steering Wheel is constituted of five major
segments, viz., (i) people, (ii) finance, (iii) customer, (iv) community, and (v) operations.

Via the “Steering Wheel” model it is evident that Tesco aims to have sound financials and a
sound balance sheet as well, along with prudent investments; they have reduced their
indebtedness by selling assets and have increased their ownership of freehold property, while
also reducing exposure to index-linked inflation. In the customer category, Tesco has vowed
to improve service, the shopping experience, variety of products, and prices. People, are yet
another asset to a retail business, because of which great focus is laid on equal pay for both
genders, skill-building of employees, etc. Operational focus is mainly on the changing
consumer sentiment which has shown a growing popularity of online and app-based
mediums, which prompted the launch of Tesco’s online shopping mediums. The company
also recognizes that operational food waste is a consequence of the industry but is working to
completely eliminate surplus food in their operations in the near future. The final segment of
the “Steering Wheel” was introduced in 2009 which highlights the importance of community
and the environment. Tesco recognizes that a healthy environment and people are essential to
the long-run functioning of a food business and is working on reducing its own carbon
footprint while also contributing to research and funding organizations doing important work
in the same. Community work extends to spheres beyond skill-building, such as the donation
of excess food to the poor through various Food Collection Programs.

Constant evaluation of the same has caused a rapid growth in Tesco; both with regard to
business fundamentals and market share, as well as an organization that attracts good-quality
workers, and one that has attained consumer goodwill due to the constant feedback they take
and the social initiatives they participate in and propagate. This has caused Tesco to grow to a
powerhouse generating revenues of over GBP 60 billion. The company has also been rated as
a great place to work by 81% of its colleagues; female participation has seen a steady rise,
too, with the board of directors now being 30% female, and 57% of all employees being
female as well. The company has also managed to significantly reduce food waste, and a
large portion of what is dubbed as “waste” for the purpose of retail customers is given away
to the poor once the stores close. Tesco has also managed to reduce its CO 2 emissions by 40%
compared to a 2006-07 baseline across the group, while garnering goodwill via their
involvement in the Nepal Earthquakes and their consistent work with the Red Cross.

In conclusion, we can see that the Balanced Scorecard has significantly helped a large
corporation like Tesco in identifying key areas and thereby building strategies that consist of
much more than that which would simply make the balance sheet look good or make stock
prices rise. However, the end result of holistic development via the Balanced Scorecard
model has been that Tesco has become the UK’s largest grocery retailer with a market share
of a mammoth 28.4%. This instance, an the use of a Balance Scorecard by companies such as
Apple and Amazon warrants its use as a metric that must not be ignored, and one that can
significantly assist the growth process of a company.