Business Excellence at Philips
Ir. Leon Tossaint
Former Vice President Quality Management, Philips Consumer Electronics
Honourable Board Member SFPO
Introduction
The Quality Program ‘Philips Business Excellence’ (PBE) had a strong impact on the
effectiveness and competitiveness of Philips’ business performance over the last decades. The
EFQM Business Excellence Model was not only the structure for Strategy Development and
business reporting but also for assessing yearly all organizational units –at all levels- on
leadership effectiveness, process improvements, customer satisfaction, people engagement and
ultimately on improved competitive positioning and achieved business results.
The power of ‘Philips Business Excellence’ lies in the fact that this program encompasses all
aspects of managing and improving a business, and in the complete involvement of all
managers and all employees in this ‘Journey for Excellence’.
1 ‘Philips Business Excellence’ the Quality Program at Philips.
In the late 1980th Philips played a crucial role in establishing the ‘European Foundation for Quality
Management’ (EFQM). In that period the Philips top launched their own ‘Philips Quality’ Program
driven by the concept : ‘process improvement has to result in customer satisfaction’. All
operational units were assessed based on this ‘Philips Quality’ concept and the knowledge from
these assessments became a strong input in the development of the EFQM ‘Business Excellence
Model’ and Assessment Approach.
Therefore the implementation of the EFQM Model was the logic next step for Philips, which was
introduced by the Board of Management in 1999 during a Quality Conference for the ‘Philips Top
400’. All Business and Operational units –including Corporate Philips and the Board of
Management- had to apply the EFQM/Business Excellence Model and Assessments.
In addition ‘Quality Improvement Teams’ and ‘Black Belts’, both based on the Six-Sigma
methodology, became part of this ‘Philips Business Excellence’ (PBE) program. Especially
through the involvement of so many employees within the PBE Program, impressive improvement
results could be realized.
For each of the core processes ‘Process Survey Tools’ (PST’s) have been developed. These process
maturity grids had a strong impact on improving all processes towards World-Class Level and on
standardizing the core processes across all Philips’ Divisions.
2 ‘Philips Business Excellence’ (PBE), Model and Assessment
At the launch of ‘Philips Business Excellence’ (PBE) it has been decided that all organizational
units had to apply the PBE Model and had to implement yearly PBE self- and peer assessments.
This included also all Corporate Staff Departments and the Board of Management Office. This was
a strong message to all managers in Philips : PBE is a ‘must’ and is the Philips ‘Business Model’
and ‘Company Standard’ for assessing approaches, improvements and business results.
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Within the PBE Model there is a clear relationship between Processes/Approach (criterion 1-5) and
Results (criterion 6-9). The link between Processes and Results are Performance Indicators (PI’s).
In Philips we have build a coherent set of PI’s –not only for ‘what get’s measured get’s done’- but
more important to make a transparent link between the Strategic Goals and the Operational Targets
further deployed to the level of each individual employee.
The PBE Model also provided an effective structure for Business Tools used within Philips like :
• The ‘One-Page-Strategy’, a compact ( 1-A4) structure for Strategy reporting, based on the
elements of the PBE Model, and easy to communicate within the organization.
• The ’Balanced Score Card’ is implemented at all levels for the total business reporting, with
the clear PBE Model structure : knowledge ->processes->customers->financial results.
• The yearly ‘Employee Engagement Survey’, is structured according to the PBE Model.
Employee perception is requested on : Leadership, Strategy, People related Processes,
Customer Orientation and Results.
Since 2000, based on the PBE (EFQM) Model, every organizational unit applies yearly PBE
Assessments. Every Management Team executes a PBE self-assessment for their organization and
in addition they invite colleagues from other units for a peer-assessment to verify their selfassessment and to provide ‘external’ input. For this reason all managers in Philips have been trained
as PBE Assessor, according to the EFQM rules, and are EFQM certified.
Through a PBE self-assessment, Management Teams review the progress made on improvements,
on the results achieved against the targets. Based on the assessment outcome the MT initiates new
improvement projects. During a peer-assessment, a team of 6 assessors (respected colleague
managers from different Divisions, Regions or from Corporate) assesses the organization on the
effectiveness of their strategy, on the improvements made, on the increase of the competitive
strength and on their contribution to improve the business performance of total Philips. Peer
assessors bring their own broad business experience into the peer-assessment process and ‘take
home’ many learning experiences (‘best practices’, described and benchmarked). This ‘crossfertilization’ is a strong added value of this PBE assessment process and strengthens the synergy
within a large multi Divisional / multi-national Company. Peer Assessors deliver input on new
improvement initiatives and their ‘PBE score’ is the official result on the PBE progress, reviewed
by the Philips Board of Management.
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3 Process Excellence Approach
To have a benchmark for World-Class Process Performance, process experts from Philips and other
global Companies have developed the so called ‘Process Survey Tools’ (PST’s). PST’s have been
described for all key processes like Marketing & Sales, Product Development, Purchasing,
Manufacturing, Supply Chain Management, Finance- and Human Resource Management. These
PST’s are maturity grids describing sub-processes in a 10 level maturity grid, from ‘basic
approach’(level 1) up to World Class (level 10).
Teams of process experts use these PST’s to assess the actual process maturity within an
organization and advise on what/how to improve to achieve the next level of process maturity.
Besides the intensive exchange of know-how between experts this PST approach has a substantial
contribution to the harmonization and standardization of all key processes across the Divisions and
Region within Philips.
Philips made these PST’s available also for other Companies through the EFQM network.
Within the operational units Quality Improvement Teams (QIT’s) are active to improve the
operational processes. QIT’s are mostly initiated by employees who are operationally working in
processes, who recognize problems and are strongly motivated to solve those process problems.
QIT members are trained on problem analyses/solving (six sigma), and are free to invite any
expertise needed and to involve suppliers or customers. QIT members can contact/visit other
operational units to learn from solutions already applied and to benchmark on approach and targets.
To stimulate the thousands of QIT’s within Philips, yearly Team Competitions are organized where
all Teams can present their approach and results and receive feedback from their colleagues and
Management Team. Yearly the best QIT of each operational unit is invited to join a ‘Team Winners
Conference’. At these global QIT Events the Division Top Management provides feedback to each
QIT on what has been achieved, but most important rewards the improvements made by each team
and the collective impact all QIT’s have on improving the Divisions’ results.
Learning from the experience of other large Companies like General Electric, Philips introduced a
‘Black Belt’ Program early 2000. Through this Program, Black Belts (BB’s) are appointed with a
focus on achieving drastic improvements in complex processes, e.g. across Business Units or across
Regions. To become a BB, young ambitious employees (‘High Potentials’), are selected and invited
by Top Management and are trained as Six Sigma experts. These BB’s are full-time –for a period of
2 years- leading BB-teams in analyzing complex process problems and in implementing successful
solutions. Impressive results have been achieved through BB projects.
One important aspect of a BB-Program is to ensure that BB’s after they have successfully finished
their BB projects can be guaranteed an interesting next step in their carrier path.
4 Results achieved through ‘Philips Business Excellence’
Results achieved through the ‘Philips Business Excellent’ (PBE) Program can be best describe
using the 9 Criterion of the PBE Model. These results are generated by the collective effort of the
entire organization, including PBE Assessments, PST Assessments, QIT’s and BB’s.
I have of course to chose a limited number of examples, and most are from my former Division
Philips Consumer Electronics, where I was Vice President Quality Management in the period 19952006, leading the PBE Program World-Wide. However most processes are generic within Philips
and so the described examples count for most of the Divisions within Philips.
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4.1 Leadership
The Management Review System is strongly structured around the Strategic Goals and Operational
Targets, which are deployed from the Division’s top level to each of the operational levels, even to
the individual employee level. Therefore Leaders communicate intensively the Strategy, Goals and
Targets with all employees during the so called ‘Town Meetings’. Twice a year Leaders report in
these meeting events on the progress achieved and individual employees can discuss directly with
their Division’s Leaders on how to further improve the business, how to strengthen the Divisions’
competitive position and what has been learned from mistakes. This approach has strongly
motivated employees which is evidenced by the high scores on questions from the yearly
‘Employee Engagement Survey’ (EES) like :
• ‘Philips Leaders communicate a Vision of the future that motivates me’.
• ‘Leaders show a clear role model behavior in line with the Philips Values’
• ‘The Philips Management Style brings the best out of me’
Business Leaders are the powerful engine to drive the Business Excellence Process, they participate
in PBE Assessments, drive improvement initiatives, coach the Black Belts and stimulate QIT’s.
4.2 Strategy
The Strategy process, originally a ‘once a year’ quite complex –‘limited to the top’- process, has
been developed into a transparent continuous process, involving many layers of the organization.
A simplified reporting structure, the so called ‘One-Page-Strategy’, with a clear Vision/Ambition
and concrete Strategic and Operational targets was easy to communicate to all employees. This
approach is quite effective which became clear from the high scores on the EES survey on
questions like : ‘The Strategy is clear, motivating and a driver for a successful future’.
The development of new Business Models for the Customer/Trade relationship was a very
successful strategy to strengthen the competitive position with the larger Trade Channels. These
Business Models have been embraced by the Leading Trade Channels and later also adopted by the
main competitors.
4.3 People
A People Performance Management System has been established to guide employees in their
personal development and to create early signals on their talents and leadership capabilities. Within
this system also the Division Targets are yearly deployed to the individual level of each employee.
Within Philips there is a strong emphasis on creating a ‘Caring’ and ‘Learning’ organization.
All young ‘high potentials’ have a ‘top manager’ as coach (similar as Black Belts), to guide those
employees in their personal carrier development and to intensify their learning to improve their
leadership capabilities.
All QIT members receive specific trainings on six-sigma, teamwork, problem solving. QIT’s are
supported by process experts on problem analyses and implementing solutions. QIT’s get feedback
from (top) management on the effectiveness of their proposed solutions and are challenged on their
learning experiences. QIT members are able to expose their ‘extra capabilities’ (beyond their
normal job), which often results in new and unexpected carrier opportunities.
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4.4 Partnerships & Resources
Strengthening the relationship with key Suppliers and Business Partners is of strategic importance
for Philips to grow the business, to broaden the technology base, to share the risks and to improve
the competitive position. In this context a ‘Lean and Mean’ approach has been implemented
allowing Philips to focus on their Core Competences / Core Businesses and still offering a broad
product range and service package to the customers.
The strong global position of Philips enables a strong global partnership network especially in the
upcoming markets like China, India and Brazil. This has resulted in an advanced competitive
position for Philips in these Regions.
Suppliers are strongly involved in the PBE Program, they participate in PBE assessments and in
QIT Teams. All Suppliers and Business Partners are encouraged to implement the PBE/EFQM
Model in their own organization.
4.5 Processes, Products and Services.
Process Management has been key since the 90th and in that period all operational units have been
ISO 9000 certified. Through the PBE Program, process improvements are strongly linked to
business improvements and focused on achieving the business targets. Effective instruments for
process improvement are the PBE Assessments, the Process Survey Tools, and the QIT’s.
The BB approach is very effective in drastic process re-engineering.
An example of adapting processes to business goals is the change of the ‘Product Creation Process’
into a ‘Business Creation Process’, driven by the needs to launch new products on time in the
market, products which are innovative, users friendly, of high quality and profitable. Reducing the
process of ‘Time to Market’ substantially has improved the competitive position for many Philips’
products and services.
Based on the strategy to develop new Business Models for the Customer/Trade relation, the
‘International Key Account Management’ process has been introduced and has proven to be very
effective for aligning with the strategies of the key Trade Partners. This approach of extending the
Philips’ Marketing & Sales process via the Trade Partners up to the final Consumer has
impressively increased Customer Satisfaction.
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4.6 Customer Results
Trade Satisfaction has been measured yearly by independent agencies for Philips Consumer
Electronics (PCE) as well as for all their major Competitors. This is a key measure to improve
competitive market performance. An example of such a measure is shown for PCE Europe :
Next to Trade Satisfaction, also Customer (Consumer) Satisfaction is measured for each of the
‘Customer Touch Points’ :
At every occasion where a consumer of a Philips product or service is ‘in touch with Philips’, the
consumer perception has to be measured and understood. Most of these measures at each ‘Customer
Touch Point’ show comparisons with the Competition. For each measure targets are defined and
improvement projects installed to increase continuously customer satisfaction at each ‘touch point’.
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4.7 People Results
People Satisfaction has yearly been measured for all Philips’ employees on many aspects,
structured by the PBE/EFQM Model through the so called ‘Employee Engagement Survey’(EES).
By using an external/independent research institute for this survey, data could be compared with
results from other companies. The ‘top 20 companies’ within this global database offer the ‘High
Performance Norm’ which serves as the benchmark for every subject.
An example for PCE over the period 2004-2005 shows
As a result of the many improvement projects and initiatives within the ‘Philips Business
Excellence’ Program, the ‘High Performance Norm’ could be reached for e.g. Leadership, Internal
Communication, People Development and Team Work.
4.8 Society Results
Philips’ international reputation for being a Company with Social Responsibility and a high priority
for Sustainability, has been recognized by the ranking of the Dow Jones Sustainability Index.
In 2010 (and many years before) Philips has been recognized by Dow Jones as the Global Leader in
Sustainability within the Cyclic Goods Market.
Philips’ global leading position as ‘Green Company’ (recognized by Green Peace, 2010) is strong
compared with all their main Competitors. This is a clear result of the ‘Green Product Development
Drive’ Philips started in the early 2000th . In fact through the implementation of the PBE/EFQM
Model in 1999 the Social Responsibility and Sustainability Program got a high level of
management attention and top level priority.
To show their Social Responsibility, each Philips location (globally many hundreds) has yearly a
couple of improvement projects involving/supporting the social environment of that location.
Through measuring ‘Society Satisfaction’ the effectiveness of these initiatives have been proven.
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4.9 Key Results
Through the implementation of the ‘Balanced Score Card’ a transparent structure was provided for
all key Business Targets, derived from the Strategic Division Targets and deployed to all Business
and Operational Units up to the individual level. In this way all PBE improvement projects and all
QIT projects had clear targets to support the strategy and to achieve the Key Business Results.
The Division’s PBE score, measured through peer assessments at all business units and at HQ’s, is
a generic Performance Indicator reflecting the overall improvement of approaches and results of the
Division. The PBE score has monthly been reported to the Board of Management as a Key Result.
To monitor progress on process improvements, each process has a set of Performance Indicators.
In addition the Process Survey Tool score (achieved through peer assessments) provided an overall
measure on the maturity level of these processes and on their speed of moving towards WorldClass.
The ‘Lean and Mean’ approach had a great impact on cost reductions at operational level as well as
at Corporate/Regional level. Continuous drastic cost reduction has always been a major drive within
Philips. Reducing the risk profile through partnerships resulted in a ‘Asset Light’ organization.
All these initiatives have enabled Philips to anticipate effectively on changes in the Market and on
changes in the global economy (financial crisis).
From the Quarterly Financial Publications, over the last years, it became evident that Philips could
consistently show positive financial results, better than expected by the (external) financial experts,
adding value to Shareholders Satisfaction.
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