Alpharma, Portugal

 

The present case study developed by Janota (2008) presents the Balanced Scorecard implementation process at Alpharma, Portugal.

 

General setting

Alpharma is a global leading pharmaceutical company specialized in products for both humans and animals. Founded in 1903 in Norway, the company has a rich history of over 100 years and global presence in Europe, Asia, Latin America, United States and Canada.

 

As part of its expansion process, in order to better manage its business around the world, the corporate executives decided in 1997 the implementation of the Balanced Scorecard as a strategic management system for the business. The implementation of the Balanced Scorecard started in 1998 with a pilot project in the U.S. subsidiary. By that same date, the Alpharma Internal Scorecard Development Handbook was released in all subsidiaries in order to accommodate employees with the new concept, as well as to serve as an official internal guide in matter involving the BSC adoption.

 

While at the beginning of the Balanced Scorecard implementation process in the US Alpharma subsidiary, the introduction of the BSC in the company’s subsidiaries was not mandatory, the BSC adoption became a binding reality for all corporate entities starting with January 2001.

 

BSC implementation at Alpharma, Portugal

The subsidiary of Alpharma in Portugal was one of the first within the pharmaceutical group to adopt the Balanced Scorecard.

 

The Balanced Scorecard initiative was coordinated by the country manager, finance and marketing managers helped by a team of external consultants and consisted of three major steps:

  • The formulation of the subsidiary strategy for the country, which in turn became the basis of the BSC implementation in Portugal
  • The training of the local staff in the Balanced Scorecard methodology
  • Development of a linkage model for the company critical strategic objectives and the determination of the appropriate Key Performance Indicators (KPIs) and targets.

 

The Balanced Scorecard Design

The BSC at Alpharma Portugal is divided into four perspectives, for which key strategic goals and performance measures are identified.

 

Balanced Scorecard – Alpharma 2000

Vision: “ through great people, superior processes and innovative solutions we will be a leading company in making accessible medicine” 

Perspectives

Strategic objectives

Key Performance Indicators

Financial

  • Revenues
  • Costs
  • Gross Margin
  • $ Revenues
  • $ Costs
  • $ Gross margin

Market

  • Launch generic products
  • Increase the participation in the hospital tender business
  • Manage the transition from existing branded products to generic products
  • Lobby for default substitution
  • Focus promotion in Doctors for the prescription of generic products
  • Form and maintain partnerships with pharmacies
  • Build bridges between Doctors and pharmacies for the implementation of generics
  • Implement an Alpharma brand
  • Assure product quality
  • Produce and market a wide range of generic products
  • # Ranking against competitors by volume and value
  • % Share of customer’s  sales by category

 

Internal Processes

  • Identify target and lobby partners
  • Target Doctors prescription
  • Leverage local knowledge in the generics market
  • Operate as a distributor for other international generics companies
  • Enable fast regulatory approval processes
  • In-source services from with the Alpharma international structure
  • Position the company within the Portuguese generic market
  • Create an internal task force to support the hospital business
  • Assure a better sales force territorial management
  • Create and update a product wish list
  • Search for local acquisition opportunities
  • # Partners’ service contracts
  • # Frequency of meetings with key partner personnel
  • # External audit of the performance against partner service contracts
  • % Proportion of partner base profiled and stratified
  • % Sales accounted by partners
  • % Penetration of each partner’s outlets
  • % Performance against department cost budget
  • $ Value of penalties incurred
  • $ Value of sales lost to competitors due to portfolio gaps
  • # Wish list updated at agreed intervals
  • $ Maximize gross margin on existing portfolio
  • # Partner’s rating on product mix
  • % Range taken by each partner

Know-how and culture

  • Development of commercial skills
  • Integration of the Alpharma skills
  • Increase of generics mindset
  • Improvement of IT skills
  • Improvement of product sourcing skills
  • Establishment of new brand values within the organization
  • % Staff attending production training
  • % Staff attending account management training

Source: adapted from Janota, 2008

 

Usage of the Balanced Scorecard

The Balanced Scorecard implementation process started at Alpharma Portugal at the beginning of 1999, and was completed by the end of the same year. Overall the entire design and implementation process lasted for 7-8 months. After the implementation was completed, the BSC entered in the maintenance phase. According with the author of the case study, by 2001, “the Balanced Scorecard had become a natural instrument in management and not only a new way of organizing managerial work”.

 

To make the Balanced Scorecard accessible for all the employees in the company, it was automated with the help of the Lotus notes software. This development made the BSC not only more accessible for all employees allowing them to access information on their KPIs and report their achievements, but it could be monitored by the company headquarters.

 

As Janota (2008) research study suggest, the Balanced Scorecard was well diffused and disseminated throughout the organization during 2001-2002.

  • It was used for reporting results up wards in the organization to the management teams
  • It was actively used in the annual planning activities
  • It was used as a bases of discussion within the departments
  • It improved the organizational strategic direction
  • It improved a better understanding of the work at the departmental level

 

Abandon of the Balanced Scorecard

In 2003, due to the introduction of a legislated internal a controller policy for all listed companies, the Sarbanes- Oxley legislation, the Balanced Scorecard in the Portugal division, lost from its meaning and managerial support and was finally abandoned.

 

This came as a result not for an implementation failure, but due to the new legislation which imposed a new internal control process. The mandatory implementation of the Sarbanes- Oxley wave in 2003, meant that every single activity of the company had to be described and documented. For a small subsidiary, with limited financial and human resources, this meant  that all forces had to be redirected towards accomplishing the new imposed regulations, which literary was synonymous with the  signing of the death sentence for the Balanced Scorecard use.

 

Alpharma - BSC difussion - BSC20.comSource, Jonata, 2008

 

For more details on the Balanced Scorecard implementation, usage and abandon at Alpharma Portugal access the case study at the link listed below.

 

References

BSC in practice : Case studies

 

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