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Oil Production Balanced Scorecard

Jun 2, 2008
The complex business process of oil production gave rise to a newer concept of Balanced Scorecard in this industry. Balanced Scorecard, also known as BSC, is a performance assessment system to manage oil assets.

A balanced scorecard, was developed by Dr. Kaplan and Dr. Norton in 1992, is used to monitor the performance of any industry and to provide a proper communication among the various channels into the production line. A balanced scorecard is simply the next step of Japanese concept Quality circle, which empowers the employee to realize their strengths and to work on their weaknesses to overcome them, by a proper chain of communication in all the levels of organization of the oil producing firm. The balance scorecard provides a link between the strategies and performance, thence a proper alignment of actions to strategy and its proper implementation.

Balance scorecard is highly useful in industries, as they provide better quality, revenue, customer loyalty, and employee knowledge. Balance scorecard differs from MIS (Management Information Systems) in various ways. Executives can make use of ISHIKAWA principle or cause-and-effect relationship to come up with the proper solutions to those wrenching in the oil producing industries.

The Process of a BSC is basically employed in four step process:

1) Developing

2) Mapping

3) Cascading

4) Executing

The process is employed in the plant to achieve excellence, by improving excellence in communication in the layout, finding the proper causes of the problems and then obtaining the optimum solution to that problem. After proper execution of BSC, it will measure the performance of the oil producing industry in financial as well as non financial visions, some of them are as follows: financial Indicators, Customers, Education and Growth and Internal Processes.

The Financial Indicators of BSC improves the shareholder's value as it improves the productivity and revenue growth. The productivity can be improved by improving the cost structure and improving asset utilization. But the revenue growth could be achieved by building more franchise and increasing customer values.

The Customer perspective depends upon price of the products, quality of the products, time taken to deliver the product, and the functions employed for the processes improves the service attributes of the oil producing companies. The service and brand provided by the companies help them in a long run.

The internal perspectives of the oil production should be improved to achieve the excellence in a long run, that it to employ innovative processes, customer management process, operations process and regulatory processes that are building the franchises, increasing customer values, achieving operational excellence and being a good neighbor of the various companies respectively.

The learning process in any industry is the most important parameter, as it creates lots of new ideas and strategies for the production plant. The whole and sole growth of the oil production depends upon the strategic technologies, strategic competitions and climate for action, which helps the growth to be the maximum and to create a motivated and prepared workforce to make the scorecard balanced and to achieve the best from the technique.

There are several evidences of balanced scorecard utilization in oil companies which helped them to get the boom. Like, a US oil producing company, going down in income by 13% in last 5 years, and after the implementation of BSC, they expect to add $ 350 million over the next 10 years. Another example in the same process line was of a Teekay shipping Canada Ltd. Teekay shipping is an essential marine link in the global energy supply chain, serving the world's leading and oil and gas companies. They were very keen to improve the performance of the company from several years and considered balance scorecard as an outstanding tool in assertion to promote the concept as well as providing real time performance data through out global organization.
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