This report describes the transition of Tesco from its old balanced scorecard to a new one, explaining the new categories and their results in management analysis.

2. TESCO
HOW TO IMPROVE ITS
BALANCED SCORE CARD?
2017

3. 1. INTRODUCTION 6
PART ONE
2. TESCO 8
2.1. BALANCED SCORECARD 9
2.2. HOW DID TESCO UTILISE BALANCED
SCORECARD?
9
2.3. NORTON AND KAPLAN’S BALANCED SCORECARD 11
PART TWO
3. HOW AND WHY THE ABANDONED TESCO
BALANCED SCORECARD COULD HAVE BEEN
IMPROVED?
14
3.1. THE BIG SIX 14
3.2. BALANCED SCORECARD ANALYSIS 16
3.2.1. CUSTOMER 16
3.2.2. PEOPLE 17
3.2.3. OPERATIONS 17
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? III
LIST OF CONTENT

4. 3.2.4. FINANCE 18
3.2.5. COMMUNITY 18
4. CONCLUSIONS 20
5. REFERENCES 22
6. APPENDICES 25
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? IV

5. FIGURE 1. Tesco Steering Wheel 10
FIGURE 2. The balanced scorecard links performance to measure 11
FIGURE 3. The Big Six 13
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? V
LIST OF FIGURES

6. This report aims at exploring the key
performance indicators of Tesco and proposes
new ones as a complement to the existing
measurements of performance, based on the
Tesco's balanced scorecard.
Regarding this, the report is presented with a
critical view, indicating the strengths and flaws
of the ideas contemplated to define the most
appropriate performance's indicators of the
balanced scorecard’s categories.
This revision of performance indicators is
made in response to the Tesco's concern
about the profits drop.
For this reason, it will be explored new ways
to improve the indicators, explaining how
and why the proposed indicators will benefit
the company and how to implement this
knowledge in any other organisation.
Finally, the report ends with conclusions and
final thoughts about the indicators suggested
to measure the business performance in
order to explain how it is done in general
terms to apply this analysis in other
organisations.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 6
INTRODUCTION1

7. TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 7

8. Tesco is an international British retail group,
which, has operations in more than 4000
stores across 14 countries and provide
employment to almost 500.000 people, being
the “largest private sector employer” in the
UK (Marr, 2016).
When Tesco was founded, it focused on drink
and food. Now, it offers a wider range of
products, which, include health, clothing,
Internet, electronics, insurance, financial
services, among others (Marr, 2016).
In the light of the multiple sectors Tesco is
currently involved, it is fundamental to have
precise indicators of performance and its
preferred financial technique is the balanced
scorecard.
In fact, Tesco clearly states that “we use our
balanced scorecard – the Steering Wheel –
to manage and measure our business
performance. Through its five segments –
Community, Operations, People, Finance
and Customer – we are able to measure our
non-financial performance through our key
performance indicators (KPIs) to give us a
more balanced view than using financial data
alone” (Tesco, 2014).
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 8
TESCO2

9. 2.1. BALANCED SCORECARD
The balanced scorecard was created in 1992 by Kaplan and Norton with the idea of providing
a general measurement to determine the performance of a company (The Economist, 2008).
To conceptualise this term, McLaney and Atrill (2014: 711), remarked that balanced scorecard
is a “framework for translating the aims and objectives of a business into a series of key
performance measures and targets“.
Before, performance measurements were mostly for financial performance and therefore, it
only favoured improvements in the financial area, but Tesco prefers to consider all factors
involved.
2.2. HOW DID TESCO UTILISE BALANCED SCORECARD?
The Tesco's balanced scorecard, called Tesco's Steering Wheel, was an adaptation of the
original Kaplan and Norton balanced scorecard, which include the following categories:
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 9

10. FIGURE 1. Tesco Steering Wheel (Tesco, 2016)
► Customer. It is related to how well we provide customers with what they expect and need.
► People. Which, refers to how people feel about working in Tesco.
► Finance. It considers the administration of costs and efficient operations to meet
stakeholder expectations.
► Operations. It is associated with our working environment and productivity.
► Community. It is connected to our activities at a local level and our role as a community
member.
Having considered the elements on the Tesco balanced scorecard, it is relevant to note the
differences it has compared to the original Norton and Kaplan’s balanced scorecard.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 10

11. 2.3. NORTON AND KAPLAN’S BALANCED SCORECARD
FIGURE 2. The balanced scorecard links performance to measure (Kaplan and Norton, 1992:
72)
► CUSTOMER PERSPECTIVE, which, refers to the costumer's perception of the company.
► INTERNAL PERSPECTIVE, which, seeks to determine the internal strengths.
► INNOVATION AND LEARNING PERSPECTIVE, which, remark the areas to improve in a
company.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 11

12. ► FINANCIAL PERSPECTIVE, which, refers to how the organisation perceives shareholders.
As have been seen, both balanced scorecards differ.
Tesco updated the categories to measure the factors that were not taken into account in the
original balanced scorecard of 1972 and they incorporated a fifth category called community,
which, is an appropriate decision in the modern corporative world because a corporate ethical
behaviour and commitment in the societal economic development is expected today (Johnson
et al, 2014: 128).
Moreover, Tesco's balanced scorecard also focus on stakeholders in its peoples' category
instead of a general category called “internal perspective” and finally, the name of the
“innovation and learning perspective” was simplified to operations.
But, continual losses with “23.5% drop in profits during the first half of its financial year”, falling
67% in Europe and 7.4% in Asia, excluding China (BBC, 2013) made them change their
approach to performance indicators.
Meanwhile, one of the Tesco's rival, Sainsbury's had a 2% growth in the same period (BBC,
2013).
Consequently, it is required to improve the current balanced scorecard to provide a complete
picture of Tesco's performance.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 12

13. TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 13

14. Due to the fact that profits have been falling, new indicators might improve future business
performance and these indicators for Tesco's balanced scorecard perspectives are presented
as follows:
3.1. THE BIG SIX
Tesco (2015) began to utilise new indicators, considered more precise than the former steering
wheel, to simplify processes and it is summarised as follows:
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 14
HOW AND WHY THE ABANDONED
TESCO BALANCED SCORECARD
COULD HAVE BEEN IMPROVED?
3

15. FIGURE 3. The Big Six
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 15
GROW SALES
DELIVER
PROFIT
IMPROVE OPERATING
CASH FLOW
GROW CUSTOMERS
RECOMMEND US
AND COME BACK
TIME AND AGAIN
COLLEAGUES RECOMMEND
US AS A GREAT PLACE
TO WORK AND SHOP
WE BUILD TRUSTED
PARTNERSHIPS

16. The big six comprises diverse factors to analyse, even if it mainly focuses on financial
elements as it has three aspects to describe the financial performance and not one as the
steering wheel.
On the other hand, community and operations do not have their previous importance, even if
they are kept as a part of the big six aspects, such as: we build trusted partnerships or
improve operating cash flow.
3.2. BALANCED SCORECARD ANALYSIS
To improve the former balanced scorecard, Tesco’s CEO focused on keeping the indicators
that matter the most to measure the service to costumers. In practical terms, it was suggested
to consider more financial and costumer’s aspects to bring down prices, increase availability
and incorporate more staff/colleagues because “happy costumers” makes Tesco more
competitive (Tesco, 2015).
Nevertheless, it will be proposed some other indicators to improve the performance’s
measurement.
3.2.1. CUSTOMER
In order to achieve a higher customer satisfaction, which, is one of the main objectives of
Tesco due to the central importance customers have for the business (Tesco, 2015) and
considering that according to the survey executed by Market Force Information, Tesco was
penultimate in availability of products and availability to find items (Davidson, 2015); it is
recommended to take into account the following indicators focused on availability of items:
Best selling products. As one of the focal points of Tesco is improving the availability of
products, finding out what are the best selling products will allow managers to decide what
product should be immediately replaced.
This way, the huge majority of Tesco's customers will find the items they are looking for,
directly impacting in their satisfaction.
Average resolution time. “It is the time it takes to acknowledge a customer's issue” and it is
fundamental to serve customers and solve their complaints in the fastest way possible
(Stanford University, 2014) to keep a high satisfaction and good service.
In particular, this indicator is measured from the exact moment an incident is recorded until the
time, in which, the customer is aware that the problem was solved (Stanford University, 2014)
and this attention would generate more satisfaction in customers as they feel they are heard
and served by Tesco.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 16

17. 3.2.2. PEOPLE
As the CEO also highlighted that people who work at Tesco are one of the company’s centre of
attention, the previous balanced scorecard could be improved by incorporating a
measurement of the Internal perception of managerial staff and Work-life balance, because
these indicators will complement the other basic indicators used by Tesco, showing internal
points of views and ideas to improve the business.
Internal perception of managerial staff. Consulting the employees about managers'
performance makes the organisation more trustworthy.
As a matter of fact, by asking the opinions of employees, it is shown that the company is not
asking what it wants to hear, but asking what it needs to be heard (Folkman, 2013).
Concerning this, making a survey like Google does, managers would be rated on a five-point
scale, from "needs improvement" to "superb", including what could be done do in a different
way to impact on the company (Lebowitz, 2015). This would increase the managerial
standards and performance, additionally, there will be new ideas for Tesco, as managers
would be forced to innovate, look for solutions and examine the workplace culture and work
environment constantly.
Work-life balance. When a high percentage of workers possess a good work-life balance,
they are more productive (Friedman, 2009: 5).
Undoubtedly, workers that are satisfied in all life spheres are more productive and satisfied at
work (Friedman, 2009: 5) and this would lead to an increase in sales and a better attention to
customers, which, is important considering that Tesco was the worst evaluated company in
cashier courtesy according to Davidson (2015).
Furthermore, it is an easy measurable indicator because it will be obtained just by counting the
hours worked by employees and avoiding overwork to make sure the Tesco staff can have a
balanced life.
3.2.3. OPERATIONS
As the availability of items and reducing costs is a major concern for Tesco, indicators like
Stock replacement time and Expenditure on research and development will increase
customer´s satisfaction and raise sales. Moreover, improving this aspect of the Tesco Steering
Wheel, will unveil important figures related to productivity.
Stock replacement time. Managing stocks and inventories effectively will reduce costs and
increase sales (Victoria State Government, 2015).
Indeed, this indicator will determine how fast is Tesco at replacing the stocks available and it is
quickly measurable by taking into account the time a product is out of stock and the time it is
replaced.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 17

18. Expenditure on research and development. Regarding this aspect, process simplification
was mentioned as a priority in Tesco report (Tesco, 2016b) and investing in research and
development, at least, in a think tank to provide managers with new ideas, will increase
chances of reducing costs, raise revenues, determine competitive advantages, among other
benefits.
3.2.4. FINANCE
Tesco's finances were the bigger concern for changing the manner the performance of Tesco
was measured. In effect, after leaving behind the steering wheel, the Tesco's CEO remarked
the importance of the financial aspect, adding 3 new aspects just to measure financial
performance to facilitate the decision-making process for managers.
In this manner, it is suggested two more indicators used by PriceWaterhouseCooper (2007).
Actual and expected return on stores, because Tesco was having financial problems in
certain regions of the world and it would be advisable to start measuring profits in every store,
being very specific analysing the financial information for each store to identify the best
locations to sell and where to open or close stores.
Additionally, this comparison between the current revenue and the projected revenue of stores
will show the discrepancies between these two numbers and it will help Tesco identify how
stores are performing and how accurate are their projections.
Bestseller stores. Similar to the above-mentioned indicator, determining the bestseller stores
would identify the best-located stores to invest and the less privileged store to strengthen them
or in the worst scenario, close them.
This indicator will help Tesco to save costs and avoid investing in areas, in which, Tesco has
too much competence, while it can focus on areas more likely to make profits.
3.2.5. COMMUNITY
As the role of Tesco in the community is very important for the corporative image of Tesco,
being a socially responsible corporation means a good reputation and trust in the organisation.
Therefore, it is fundamental to show how beneficial Tesco is for the community.
People’s perception and Tesco’s reputation. The company’s reputation matter more now
than it used to be decades ago because it enhances the credibility, influence and the
perception that the company cares about its “social contract with consumers, shareholders,
regulators, and taxpayers” (Bonini et al, 2009).
For this reason, making surveys to customers to measure what they think and how they
evaluate the service and prestige of Tesco would benefit the performance as it can be
constantly.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 18

19. Disabled people working for Tesco. Reputation's factors are changing (Bonini et al, 2009)
and utilising a heterodox indicator like this one would show that Tesco does care about people
and that jobs at Tesco are offered without discrimination.
Finally, showing this indicator to the communities would raise the ethical value of Tesco and
benefit its reputation to attract costumer, candidates and shareholders.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 19

20. The report has discussed what Tesco is and how its balanced scorecard evolved to face the
challenges of the market after a fall in its profits.
Particularly, it was proposed to add to each of the balanced scorecard's categories two
indicators in order to obtain new and important figures that would allow Tesco to have more
resources at facing the current competitive retail context.
In detail, the aforementioned indicators are the following:
1. Customer
Best selling products.
Average resolution time.
2. People
Internal perception of managerial staff.
Work-life balance.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 20
CONCLUSIONS4

21. 3. Operations
Stock replacement time.
Expenditure on research and development.
4. Finance
Actual and expected return on stores.
Bestseller stores.
5. Community
People’s perception and Tesco’s reputation.
Disable people working for Tesco.
With new indicators to measure the performance of the organisation, Tesco concentrated on
the fundamentals to regain a good market portion and some indicators are innovative because
they measure and evaluate how Tesco is perceived internally and externally.
Besides, these indicators update the performance measurements presented in the steering
wheel and provide an opportunity to confront the competition given that they directly take
under consideration specific facts, which, Tesco affirm to have problems.
For instance, Stock replacement time would help at resolving the availability problems in
Tesco and controlling this time would permit managers to increase the costumer’s satisfaction
and finally, make sales growth.
In addition, it is noteworthy that the revision of the Tesco's balanced scorecard is just an
example to apply in other organisations in times of change. So, the report showed a practical
way to analysed performance indicators in general.
As a final reflection, the proposed indicators are just the beginning as there are more possible
indicators and, in fact, the indicators should be regularly revised in order to make sure they
respond to the external and internal business’ conditions.
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 21

22. BBC (2013) Tesco blames drop in half-year profits on Europe. On line at:
http://www.bbc.com/news/business-24361465 [Accessed: 03 June 2016].
Bonini, S. Court, D. & Marchi, A. (2009) Rebuilding corporate reputations.
McKinsey&Company On line at:
http://www.mckinsey.com/global-themes/leadership/rebuilding-corporate-reputations
[Accessed: 10 June 2016].
Davidson, L. (2015) Tesco is Britain's least favourite grocer. The Telegraph. On line at:
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11661958/Tesco-is-
Britains-least-favourite-grocer.html [Accessed: 10 June 2016].
Folkman, J. (2013) Seven Ways To Increase Employee Satisfaction Without Giving A Raise.
Forbes. On line at: http://www.forbes.com/sites/joefolkman/2013/11/27/seven-ways-to-
increase-employee-satisfaction-without-giving-a-raise/#5723eaef52ba [Accessed: 10 June
2016].
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 22
REFERENCES5

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TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 23

24. The Economist (2008) Balanced scorecard. On line at:
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Victoria State Government (2015) Set up a stock control process. Government of Australia. On
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TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 24

25. Appendix 1
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 25
APPENDICES6

26. Appendix 2
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 26

27. Appendix 3
Source: Greenhouse gas emissions (Tesco, 2016b: 23).
TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 27

28. TESCO: HOW TO IMPROVE ITS BALANCED SCORE CARD? 28
Mario Samuel Camacho
Sociologist
MSc. in Business & Management
camacho16@gmail.com