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Balanced Scorecard Case Study Tesco

Great lesson of how Balance Scorecard works can be learned from global retailer Tesco. This company is known for its state of art Business Intelligence (BI) system. Balanced Scorecard is published yearly on woaknb.wz.sk as a part of Tesco&#;s BI system and is a must-see business performance tool. It even has its own name, &#;steering wheel.&#;

Source: woaknb.wz.sk

In this article, I&#;d like to review the Tesco&#;s BSC for the year and suggest some insights that any business professional might adopt in his business.

It is not classical BSC

If you ever start discussions about BSC or what BSC is, you&#;ll end up with some expert saying that BSC is not what you have in your company, because you don&#;t have some important component. As was discussed before, there is no fixed recipe for the BSC.

Companies use this framework and modify it according to their needs. What is more important is that company sees the improvement in business performance.

Tesco did the same trick. Taking classical Balanced Scorecard as a framework method and adopting it to needs of the company.

Source: woaknb.wz.sk

Let&#;s have a quick look on what was modified and what is missing:

  • In the very beginning, it is stated that there are five perspectives: community, operations, people, finance, customer. Remember that classical Balanced Scorecard suggests four perspectives that are a little bit different.
  • Another difference from the classical BSC is that strategy map is not included. If checking  the BSC on Tesco&#;s website, it is not possible to learn what strategic objectives company has and how it going to achieve them. Obviously, that strategy map just was not published here and one can find so called &#;7 part&#; strategy of Tesco with strategic objectives and target measures.
  • Finally, as we know in classical BSC, any business objective should be aligned to KPI and action plan. It is easy to see that publically available BSC of Tesco does not contain all the details, such as action plan, but comments tell us what is general vector of the company and for sure make more sense for employee.

Let&#;s continue the review and find best practices that one can adopt in his own business.

From my viewpoint, one of the most important innovation is that the Balanced Scorecard (well, at least some significant part of it) is publically available. It makes sense for company employees, it makes sense for partners and clients. I believe publishing BSC online in public access is the best way to declare that BSC is important for your company, and you are using it for performance management.

Achievement marks

Now let&#;s pay attention to marks used in the BSC. Achieved or unachieved targets are marked with tick or cross that gives a quick picture of what is doing well and what need to be improved.

Source: woaknb.wz.sk

Also, minor feature, but I think it is really nice &#; when the first value is introduced for year it is not marked with tick or cross, it is just said that it is &#;new&#;.

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  • It is not % classical BSC
  • Strategy map with objectives is available apart from BSC
  • It is published online
  • Simple marks are used to display current state and progress

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Tesco has been using a Balanced Scorecard for almost 20 years.  For those not familiar with the concept of Balanced Scorecards it was developed in the ’s by professors at Harvard Business School.   It is a tool for management to track progress of a business through a range of measures which collectively encapsulate business strategy more comprehensively than a P&L, balance sheet or set of management accounts.  Key to this is the concept that the things that matter to long term business performance can be measured like financial business measures but are not necessarily financial items that appear routinely and may not be financial at all.

According to The Grocer, Tesco boss Dave Lewis has found the old Balanced Scorecard, internally branded as The Steering Wheel, too complex for staff to handle, with more than 40 different metrics and is instead launching “The Big Six”, a new set of principles he believes are more focused for staff.

In ditching the Steering Wheel, is Tesco giving up on strategic clarity?

In our view the answer is no.  Tesco is refining its strategy to focus priorities and enhancing its measurement approach through simplification – not so much Balanced Scorecard but Simplified and Focused Scorecard.

In our experience at Food Strategy Associates, strategy matters.  And Tesco over most of the past 20 plus years has been a testament to good strategy.  Arguably it needed to revisit its strategy a number of years ago, focus on the changing competitive dynamic in its core markets.  However, for various reasons things have gone awry in recent years and there is now a very clear need for revisiting strategy and business priorities.

At Food Strategy Associates, we have identified 4 Tenets of Good Strategy.  Our first tenet is that strategy must be kept simple.  It sounds like Dave Lewis is in agreement on that point.

And what of the Balanced Scorecard?  In our view it reinforces at least 2 of our 4 tenets of good business strategy:

  • Strategy is only good if it leads to a plan – to implement a Balanced Scorecard it is necessary to have agreed the key action plans that underpin strategy
  • Strategy must be understood and believed in across the organisation – the Balanced Scorecard, or in the case of Tesco, The Steering Wheel, is more often than not used as a tool for communicating strategy, business priorities and departments’ if not individuals’ role in delivering strategy.

The fact that Tesco has used a Balanced Scorecard for almost 20 years is a testament to its power as a business tool.  Leahy wrote:  “From the very first moment I could see the power of this simple device which helped us clarify our vision and strategy …and improve feedback and learning from the shop floor”.

I led the implementation of balanced scorecards across a number of food companies over the past two decades and am a fan of how the tool can help management align on business priorities and then communicate those priorities deep into an organisation.   However, whilst the concept of a balanced scorecard is simple, the challenge with scorecards is that it is easy to be drawn into developing ever more complex measures.

So I am not surprised that Dave Lewis is of the view that the Steering Wheel had become too complex. Keeping the right balance between perfect measures and clarity of purpose is at the heart of the challenge of implementing a good Balanced Scorecard.  Clearly after close to 20 years the Tesco experience was that measures needed to be pared down to a smaller and simpler group.   Arguably the same is true of Tesco’s business portfolio.

For all its current challenges, Tesco remains a very strong business.  As the business sells off some non-core assets, simplifying the messages that leadership is communicating to management and workers will reinforce the focus on what really matters.

So whether it is a Balanced Scorecard true to what those Harvard Academics conceived of over 20 years ago or something a bit simpler and accessible it does the same job:  Communicates the essence of business strategy to the broader workforce and measures the key elements of strategy implementation to ensure strategy is delivered.

Tags: Balanced Scorecard, strategy, Tesco

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