A case study about the Value Based Management process at Hydro Oil & Energy: - Practical issues when using the Balanced Scorecard

Abstract: The strong competition for new assets prevailing in the oil and gas industry, have put pressure on companies within the industry to become lean and value creating. In Hydro Oil & Energy, the concept of Value Based Management was introduced in order to ensure value creation by operationalizing the company’s overall strategy. The tool used in Hydro O&E is the Balanced Scorecard. In this thesis we have concluded that the company’s purpose of using the Balanced Scorecard as a mean of maximizing shareholder value, entitle it to be a Value Based Management tool. Comparing theory and our empirical findings we have enlighten some problematic areas when using a Balanced Scorecard for this intended purpose. We have, through the case study conducted, been able to conclude that insufficient dialogue, communication and involvement are the main reasons why the intended outcome of the Balance Scorecard is undermined. We have also seen that there is a need for a facilitator function that can support sectors within Hydro Oil & Energy but that this function must involve the line managers and rely on a common professional language adapted to Value Based Management. We have further shown the contradictory effect that the company’s bonus system can have on the commitment towards the use of the Balanced Scorecard.