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8 a bsc 8 a bsc Document Transcript

  • 1 Dr.L.Prakash Sai #1 REASON WHY LEADERS FAIL? 70% of strategic failures are due to poor execution of leadership..... It’s rarely for lack of smarts or vision. Source: Charan, R. and Colvin, G. “Why CEOs Fail”, Fortune, June 21, 1999.
  • 2 “Today the difference between a company and its competitor is the ability to execute. If your competitors are executing better than you are, they’re beating you in the here and now, and the financial markets won’t wait to see if your elaborate strategy plays out. So leaders who can’t execute don’t get free runs…. Execution is the great unaddressed issue in the business world today.” Execution Drives Results Know your people and your business Insist on realism Set clear goals and priorities Follow through Reward the doers Expand people’s capabilities Know yourself The Leader’s Seven Essential Behaviors “Leaders get the behaviors they exhibit and tolerate.” - Larry Bossidy and Ram Charan - Execution
  • 3 There are generally accepted tools to manage finances, customers, processes, and people. But what about strategy? The Balanced Scorecard is the vehicle that fills the Strategy Management Gap Financial Management Tools EVA Balance Sheets Income Statements Shareholder Value Analysis Customer Management Tools Customer Satisfaction Measurement Customer Relationship Management Segmentation Analysis One-to-One Marketing Process Management Tools Six Sigma Supply Chain Integration Cycle Time Reduction TQM People Management Tools Core Competencies Knowledge Management Pay for Performance HRIS Strategy Management Tools ? Strategy Execution Challenge
  • 4 Why Do Organizations Struggle So Hard With Strategy? 1 in 10 organizations execute their strategies successfully 72% of CEOs believe that executing their chosen strategy is more difficult than developing a good strategy Fortune Magazine, 1998 Malcolm Baldrige CEO Survey, 2002 Strategy Development or Strategy Execution? Organizations Need Both Strategic Success At Risk Doomed From The Start Missed Opportunity StrategyFormulation Flawed Sound FlawedSound Strategic success requires going beyond successful strategy formulation to successful strategy execution Strategy Execution
  • 5 MISSION Why We Exist VALUES What’s Important To Us VISION What We Want To Be STRATEGY MAP Translate The Strategy BALANCED SCORECARD Measure and Focus TARGETS & INITIATIVES What We Need To Do PERSONAL OBJECTIVES What I Need To Do STRATEGIC OUTCOMES Satisfied Shareholders Delighted Customers Efficient & Effective Processes Motivated & Prepared Workforce STRATEGY Our Game Plan THE FRAMEWORK
  • 6 What is the Balanced Scorecard (BSC)?  The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action.  It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.  When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.
  • 7 FINANCIAL PERSPECTIVE "TO SATISFY OUR SHAREHOLDERS, WHAT FINANCIAL OBJECTIVES MUST WE ACCOMPLISH?” "TO SATISFY OUR CUSTOMERS, AND SHAREHOLDERS, IN WHICH INTERNAL BUSINESS PROCESSES MUST WE EXCEL?” INTERNAL PERSPECTIVE "TO ACHIEVE OUR FINANCIAL OBJECTIVES, WHAT CUSTOMER NEEDS MUST WE SERVE?” CUSTOMER PERSPECTIVE Balanced Scorecard – Strategic Alignment Measurement gives clarity to vague concepts Strategy can be described as a series of cause effect linkages LEARNING PERSPECTIVE "TO ACHIEVE OUR GOALS, HOW MUST OUR ORGANIZATION LEARN AND INNOVATE?”
  • 8 LAG MEASURES (Outcome) Purpose Focus on the performance results at the end of a time period or activity Examples “year-end-budget expense” “client satisfaction” “cases per caseworker” Strengths Usually objective and easily captured Issues Outcome measures reflect success of past, not current, activities and decisions LEAD MEASURES (Driver) Purpose Measure intermediate processes and activities Examples “hours spent with clients” “$ spent on automation”. Strengths More predictive in nature Allows organisations to adjust behaviors for performance Issues Based on hypotheses of strategic “cause and effect” Often difficult to collect supporting data Strategic Measures Balanced Scorecard – The Idea Financial Perspective GOALS MEASURES Customer Perspective GOALS MEASURES Learning & Growth Perspective GOALS MEASURES Internal Process Perspective GOALS MEASURES The Balanced Scorecard Links Performance Measures How Do We Look to Shareholders? How Do Customers See Us? Can We Continue to Improve and Create Value? What Must We Excel At? Harvard Business Review January-February 1992 Accounts Receivable Operating Expense Return on Capital Employed Customer Satisfaction Rework Employees’ Suggestions Employees’ Morale (+) (+) Financial Customer Internal Business Process Learning and Growth Harvard Business Review January-February 1996 How One Company Linked Measures from the Four Perspectives (-) (-) (+) (+) (-)
  • 9 Learning & Growth Business Processes Customer Financial “Strategy is a set of hypotheses” Cause & Effect Relationships ROCE Customer Loyalty On Time Delivery Process Quality Process Cycle Time Employee Skills Strategic Theme: Operating Efficiency Profitability Financial Learning More customers Ground crew alignment Lowest prices Fewer planes Flight Is on time Customer Internal Fast ground turnaround What will drive operating efficiency?” • More customers on fewer planes How will we do that? • Attract targeted customer segments who value price and on time arrivals What must the internal focus be? • Fast turnaround Will our people do that? • Educate and compensate ground crew regarding how they contribute to the firm’s success • Employee stockholder program The BSC Should Tell the Story of the Strategy
  • 10 Objectives • Fast ground turnaround Statement of what strategy must achieve and what’s critical to its success Target • 30 Minutes • 90% The level of performance or rate of improvement needed Strategic Theme: Operating Efficiency Profitability Financial Learning More customers Ground crew alignment Lowest prices Fewer planes Customer Internal Fast ground turnaround Diagram of the cause and effect relationships between strategic objectives (Strategy Map) Flight Is on time • Cycle time optimization Key action programs required to achieve objectives InitiativeMeasurement • On Ground Time • On-Time Departure How success in achieving the strategy will be measured and tracked Some Common Vocabulary Human capital  Identify the strategic job families  Develop the competency profile  Assess the human capital readiness  Formulate a plan for improving the human capital Information capital  Transaction processing applications: This involves the day to day, repetitive tasks.  Analytic applications: This involves statistical analysis used to understand and improve  Transformation applications: This involves change in the nature of business Organization capital  Culture: This describes the perception across the company of its goals, mission, and policies.  Leadership and accountability  Alignment: Linking rewards to performance  Teamwork: A system of global knowledge management Learning&Growth Perspective
  • 11 Strategy Map (TATA Steel) CoC: Code of Conduct (TATA) CVM: Customer Value Mgmt. RVM: Revenue Value Mgmt.
  • 12 Top-Down “Bridging Process” To Share the Strategy & Align the Workforce Bottom-Up Process to Internalize & Execute the Strategy CORP SBU The Strategy Focused Workforce Strategic Education & Communication Personal Scorecards Personal Development Incentives & Rewards Principles of the Strategy Focused Organization: MAKE STRATEGY EVERYONE’S JOB The Challenge: Moving Strategy from the Top to the Bottom
  • 13 BSC-Based Performance Management Top Ten Balanced Scorecard Implementation Issues  Premature links to management processes  Lack of cascading  Terminology  No new measures  Consistent management practices  Timing  No objectives for the Balanced Scorecard program  No Strategy  Lack of Balanced Scorecard education and training  No executive sponsorship
  • 14 STRATEGY Formulate NavigateCommunicate Execute Summary: The Balanced Scorecard Provides a Framework to Manage Organizations That Execute Their Strategies Rapidly and Reliably Reengineer Processes Comprehensive Communication to Create Awareness Rationalize & Align the Organization Translate the Strategy Align Goals & Incentives Align Resources & Initiatives Create Knowledge Networks Strategic Feedback Encourages Learning Executive Teams Manage Strategic Themes Testing Hypotheses, Adapting & Learning “The Strategy Focused Organization” Principles of a Strategy Focused Organization 1. Translate the Strategy to Operational Terms 2. Link & Align the Organization Around It’s Strategy 3. Make Strategy Everyone’s Job 4. Make Strategy a Continuous Process 5. Executive Team Leadership to Mobilize Strategic Change ‘90 ‘92 ‘94 ‘96 ‘98 ‘00 ‘02 ‘04 ‘06 The Balanced Scorecard has gone through three distinct cycles of evolution. HBS Books HBR Articles A Measurement System (The Balanced Scorecard) A Performance Management System (Strategy-Focused Organizations) A Core Competency (Strategy Execution)