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  • balanced scorecard

    1. 1. The Balanced Scorecard Planning for long-runorganizational success
    2. 2. The Balanced Scorecard:A Good Idea in 1992 Balanced Scorecard in 1992 “The Balanced Scorecard – Measures that Drive Performance” Harvard Business Review, 1992
    3. 3. The Balanced Scorecard:A Great Idea by 2002Balanced Scorecard by 2002 21 translations 17 translations 50% usage in Fortune 500 Harvard Business Review “Hall of Fame” 50,000+ BSC on-line members
    4. 4. Balanced Scorecard Hall of Fame Implemented Strategies and Achieved Breakthrough Results… Fast Mobil Saatchi & Saatchi • Last to first ATT Canada 3 years • Cash flow +$1.2b 3 years • ROI 6% --> 16% + $2b + $7b 2-5 years Cigna Brown & Root 2-5 years 3 years • #1 in growth & + $3b profitability City of Charlotte Duke Children’s3 years • Customer Satisfaction = 70% 3 years • Customer Satisfaction #1 • Public Official Award • Cost/Case 33% Wells Fargo Southern Garden 3-5 years • # Customers 450% 3 years • Least Cost Producer • Best Online Bank 2 years Chemical Bank UPS 3 years Hilton Hotels • Revenues 2 years • 99% Merged Target 9% • Customer Satisfaction • Net Income 33% Asset Retention • Market Revenue Index
    5. 5. Question: Question: How can complex organizations Answer: Answer: How can complex organizations achieve results like this in such achieve results like this in such short periods of time? short periods of time? Alignment! Alignment!The Balanced Scorecard process allows an organizationto align and focus all its resources on its strategy BUSINESS UNITS EXECUTIVE TEAM STRATEGY HUMAN RESOURCES INFORMATION TECHNOLOGY BUDGETS AND CAPITAL INVESTMENTS © 1998 Renaissance Worldwide, Inc. and Robert S. Kaplan, All rights reserved.
    6. 6. The Balanced Scorecard Links Vision and Strategy to Employees’ Everyday Actions MISSION Why we exist VALUES What’s important to us VISION What we want to be STRATEGY Our game plan BALANCED SCORECARD Translate, Focus and Align STRATEGIC INITIATIVES What are the priorities TOTAL QUALITY MANAGEMENT What we must improve EMPOWERMENT / PERSONAL OBJECTIVES What I need to do STRATEGIC OUTCOMES Satisfied Delighted Efficient and Effective Motivated & Prepared SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
    7. 7. Balanced Scorecard Balance between  Financial measures of performance  Long-range competitive abilities
    8. 8. Balanced Scorecard Four aspects of firm performance  Financial  Customer  Internal business  Innovation and learning
    9. 9. Financial Perspective How do we look to stockholders?  Survive  Succeed  Prosper
    10. 10. Customer Perspective How do our customers see us?  New products  Responsiveness  Quality
    11. 11. Internal Business Perspective At what must we excel currently?  Manufacturing/service excellence  New product/service introduction
    12. 12. Innovation and LearningPerspective Canwe continue to improve and create value?  Technological leadership  Time to market  Employee training and satisfaction
    13. 13. Perspectives are Interrelated Innovation pleases customers which are necessary for good financial results Goodfinancial results make financing improvements possible
    14. 14. The Complete Balanced Scorecard Strategy Map Improve Shareholder Value Financial Productivity Strategy Shareholder Value Revenue Growth Strategy ROCE Perspective: the drivers of Improve Cost Create Value from Increase Asset Enhance Customer shareholder Structure Utilization Value New Products & Services value  Customer  Cost per Unit  Asset Turnover  New Revenue Profitability Sources  Market and Account Share  Customer Acquisition  Customer Retention  Customer Satisfaction Customer Product Leader Perspective: Customer Solutions the Customer Value Proposition Low Total Cost differentiating Product/Service Attributes Relationship Image value proposition Price Quality Time Function Service Relations Brand Internal Operations Theme Customer Innovation Theme Regulatory and Perspective: Management Society Theme how value is Theme (Processes (Processes that Create created and (Processes that (Processes that New Products that Improve Produce and Deliver Enhance Customer the sustained Products & Value) and Services) Environment Services) and Communities)Learning & Growth Human, Information, and Organizational CapitalPerspective: role forintangible assets – Strategic Strategic Climate for people, systems, Competencies Technologies Actionclimate and culture
    15. 15. Overall Concepts Not just a set of measures  Measures must relate to strategy  Critical success factors  Measures are interrelated  Must understand how the perspectives influence each other
    16. 16. Overall Concepts Not a quick process  Implementation requires  Thought  Analysis  Data-gathering  Time
    17. 17. Overall Concepts Thought  What is our strategy?  What is critical to implementing the strategy?  How can we measure our progress?
    18. 18. Overall Concepts Analysis  What are the linkages between functions?  What drives the achievement of goals?  What measures correlate with the drivers?
    19. 19. Overall Concepts Data-gathering  What data is available? What isn’t?  How should it be gathered? Reported?
    20. 20. Overall Concepts Time  Cannot be done in an afternoon  Successful implementation may take several months  Never-ending process
    21. 21. Implementation Steps Initiative must start at the top  Only senior management has grasp of overall strategy  And the authority to make strategic decisions  Doomed without commitment from the top
    22. 22. Implementation Steps Requires teamwork, collaboration  Different perspectives, expertise required  Not a one-person job  Won’t produce buy-in
    23. 23. Implementation Steps Interview senior managers  Input on strategic objectives  Input on critical success factors  Input on possible measures
    24. 24. Implementation Steps Gain consensus  Senior managers develop tentative scorecard as a group Individual reactions  Suggested refinements
    25. 25. Implementation Steps Expand consensus  Larger group refines tentative scorecard Finishing touches  Consensus on vision, objectives, measures, targets, implementation program, etc.
    26. 26. Implementation Steps Selection of metrics  Must relate to strategic goals  Both leading and lagging  May not be “exact”  May come from external sources  Not too many  Not too few
    27. 27. Implementation Steps Roll-out  Link to data bases and information system  Communicate to employees  Develop scorecards for lower levels
    28. 28. Implementation Steps Periodic reviews  Has strategy changed?  Are the objectives valid?  Are the activities valid?  Are the measures valid? The scorecard evolves with the organization
    29. 29. The Road to Disaster Senior management not committed  No one else will be either Lack of consensus  Lack of commitment
    30. 30. The Road to Disaster Consultants  Good  Provide needed expertise  Bad  Take over the project  Consensus, commitment of employees is lost
    31. 31. The Road to Disaster Failure to communicate  Employees don’t understand:  Strategy  Their roles  Importance of the scorecard measures
    32. 32. The Road to Disaster Lack of “push-down”  Lower levels operating as before  Operations are not tied to corporate scorecard  Scorecard is ignored at lower levels
    33. 33. The Road to Disaster Carve it in stone  It won’t be perfect, ever  Must evolve  Delay implementation until perfect  See above
    34. 34. The Road to Disaster The compensation issue  Powerful motivator of performance Poorlydesigned scorecard will not show strategic improvements even if individual measures show progress
    35. 35. The Scorecard as a ChangeAgent Four steps  Translating the vision into action  Communicating and linking  Business planning  Feedback and learning
    36. 36. Translating the Vision Strategymust be reduced to a set of objectives and measures which can be operationalized  “We want to be the best” won’t do
    37. 37. Communicating and Linking Corporate strategy must be communicated to all levels  Lower levels must have objectives linked to corporate objectives
    38. 38. Business Planning Integrate the financial plan with the business plan  Use the scorecard to allocate resources to critical activities  Avoids the short-term spending mentality
    39. 39. Feedback and Learning Monitorshort-term results to determine if progress is being made toward long-term objectives  May need to refine measures, activities, objectives, even strategy
    40. 40. Building Strategy Focused Organizations with the Balanced ScorecardDr. Robert S. KaplanMarvin Bower Professor of Leadership DevelopmentHARVARD BUSINESS SCHOOLandChairmanBALANCED SCORECARD COLLABORATIVE
    41. 41. The Principles of a Strategy-Focused Organization TRANSLATE EXECUTIVE STRATEGY LEADERSHIP • Mission / Vision • CEO Sponsorship • Strategy Maps • Executive Team Engaged • Balanced • “New Way of Managing” Scorecard • Accountable for Strategy • Targets BALANCED SCORECARD • A Performance Culture • Initiatives ORGANIZATION CONTINUAL ALIGNMENT PROCESS • Corporate Role • Linked to Budgeting • Corporate - SBU • Linked to Ops. Mgmt. • SBU - Shared Services • Management Meetings • External Partners EVERYONE’S • Feedback System JOB • Learning Process • Strategic Awareness • Goal Alignment • Linked Incentives
    42. 42. Organization:#1 TRANSLATE THE STRATEGY TO OPERATIONAL TERMS The Strategy Financial Perspective Measurement is the "If we succeed, how will we look to our language that gives clarity shareholders?” to vague concepts. Customer Perspective "To achieve my vision, Measurement is used to how must I look to my customers?” communicate, not to control. Internal Perspective "To satisfy my customer, at which processes must I excel?” Building the scorecard develops consensus and Organization Learning teamwork throughout the "To achieve my vision, how must my organization learn organization and improve?”
    43. 43. Mobil NAM&R Strategy Map Increase ROCE to 12%Financial Revenue Growth Strategy ROCE Productivity Strategy Net Margin (vs. industry)Perspective Increase Customer New Sources of Non- Become Industry Maximize Use of Profitability Through Gasoline Revenue Cost Leader Existing Assets Premium Brands Non-Gasoline Volume vs. Industry Cash Expense (cpg) Cash FlowCustomer Revenue & Margin Premium Ratio vs. IndustryPerspectiv “Delight the Consumer” “Win-Win Dealere Relations” Basic Differentiators Dealer S hare of P rofit T argeted Clean Help Develop Speedy Friendly Helpful Recognize More Growth S egment Safe Business Purchase Employees Loyalty Consumer Dealer M ystery Quality Product Skills Products S atisfaction S hopper Trusted Brand S core “Build the Franchise” “Increase Customer V alue” “Achieve Operational “Be a Good Neighbor” Excellence” Understand Improve Improve Create Non- Consumer Hardware Inventory Gasoline Segments Performance Management Improve Products & Environmental,Internal Services Yield Gap Inventory Health and Unplanned LevelsPerspective Downtime Run-Out Rate Safety Best-In-Class New Product Franchise On-Spec Industry Cost Acceptance Rate Teams On-Time Leader Environment Incidents Dealer Quality Activity Cost Safety Incidents Rating vs. Competition A Motivated and Prepared Workforce Climate for Action Competencies TechnologyLearning & • Aligned • Functional Excellence • Process ImprovementGrowth • Personal Growth • Leadership Skills • Integrated ViewPerspective Personal BSC Strategic Skill Systems Milestones Employee Feedback Coverage Ratio
    44. 44. The Balanced Scorecard Framework Is ReadilyAdapted to Non-Profit and GovernmentOrganizations The Mission "If we succeed, how will ”To achieve our vision, we look to our how must we look to taxpayers (or donors)?” our customers?” “To satisfy our customers, financial donors and mission, what business processes must we excel at?" “To achieve our vision, how must our people learn, communicate, and work together?” The Mission, rather than the financial / shareholder objectives, drives the organization’s strategy
    45. 45. Boston Lyric Opera Strategy Map Our mission is to ensure the long-term future of opera in Boston and New England by (1) producing the highest quality professional productions of diverse opera repertoire that are artistically excellent as well as musically and theatrically innovative; (2) developing the next generation of opera talent; (3) engaging and educating a diverse community about opera to become enthusiastic audience members, educators, supporters, and volunteers. (HBS Case #9-101-111) Supporters/Subscribers National/International Opera Scene Community Target Focus on Build Artistic Launch Unique Focus onCU STOMER Generous and Loyal Board Reputation Residency Present Promote Build Educ./Comm. Diverse Community Contributors/ Investment and for High Program for Collaborations Programs for Repertory Support Prospects Recruitment Standards Artists Greater Boston Enhance Customer Relationships Insure Operational Excellence Increase Brand Awareness INTERNAL BU SINESS Streamline Develop Develop DevelopPROCESSE S Ticketing/Gift Increase Improve Web-based Contract Innovation Increase Cost Launch New One-on-One Board Support “Best” Efficiency/Quality Comprehensive Acknowledgement Service/ Review Products/ Contact Systems Talent Assurance PR Campaign Processes Products Process Program Develop Strategic Job Competencies Strengthen Strategic Alignment Build Growth-Enabling InfrastructureLEARNING AND Provide Leverage Board Develop Incorporate Invest in Develop GROWTH Staff with Effectiveness with Strategic Create Administrative Milestone Strategic Skill Education and Communications HR Plan Residency Evaluations Technologies Training Fundraising Training Plan Program Fiscal Health Growth PlanningFINANCIAL Create Systematize Build Develop Institutionalize Increase Long-Term Financial Multi-Year Realistic Multi-Year Revenue Investment Processes Support Pro Formas Budgeting Strategy
    46. 46. A KPI Scorecard: The Four “P’s”• Profits• Portfolio (loan volume)• Process (ISO certification)• People (diversity)
    47. 47. What’s missing from the 4P’s KPI scorecard?• Where are the customers?• What is the value proposition?• How does ISO certification lead to increases in loan volume?• How does a more diverse work force lead to ISO certification?• Is there no role for information technology?• Is innovation not important?
    48. 48. A Good Balanced Scorecard Tells the Story of Your Strategy Every measure is part of a chain of cause and effect linkages All measures eventually link to organizational outcomes A balance exists between outcome measures (financial, customer) and performance drivers (value proposition, internal processes, learning & growth)
    49. 49. The Principles of a Strategy-Focused Organization TRANSLATE EXECUTIVE STRATEGY LEADERSHIP • Mission / Vision • CEO Sponsorship • Strategy Maps • Executive Team Engaged • Balanced Scorecard • “New Way of Managing” • Targets • Accountable for Strategy • Initiatives BALANCED SCORECARD • A Performance Culture ORGANIZATION CONTINUAL ALIGNMENT PROCESS • Corporate Role • Linked to Budgeting • Corporate - SBU • Linked to Ops. Mgmt. • SBU - Shared Services • Management Meetings • External Partners EVERYONE’S • Feedback System JOB • Learning Process • Strategic Awareness • Goal Alignment • Linked Incentives
    50. 50. Principles of the Strategy-Focused Organization:LINK AND ALIGN THE ORGANIZATION AROUND ITSSTRATEGY #3. #1. Each Support Unit develops a A Corporate Scorecard defines plan and BSC for “best overall strategic priorities. practice” sharing to create synergies across SBUs. CORPORATE CO RPORATE SCORECARD LINE BUSINESSES SUPPORT EXTERNAL PARTNERS (Shared Strategic Agenda) UNITS SBU SBU SBU SBU Theme s Me asure s A B C D 1. Financial Growth xxx • Finance 2. Delight the Consumer xxx • Marketing • Customer Scorecards 3. Win-Win Relationships xxx • Distribution • Distributor Scorecard 4. Safe & Reliable xxx • Procurement • Joint Venture Scorecard 5. Competitive Supplier xxx • Purchasing • Vendor Scorecard 6. Good Neighbor xxx • Safety • New Venture Scorecard 7. Motivated & Prepared xxx xx xx xx xx • Human Resources • Outsourcer Scorecard 8. Quality xxx • Information Technology #2. #4. Each SBU develops a Plans and BSC’s define long-range plan and BSC relationships with external consistent with corporate partners consistent with strategic agenda. SBU strategy. Strategies Are Executed Through Business Units. The Strategies of the Business Units Must Be Integrated If Organization Purpose and Synergies Are to Be Achieved.
    51. 51. Summary: Top-to-Bottom Strategy AlignmentUnleashes Full Organization Potential • The Corporate Strategy is communicated to business units and agencies through key themes, opportunities for integration and synergies, and shared measures • Cooperation and greater synergy between business units, staff and shared service functions, and across diverse organizational units becomes formalized through the Scorecard
    52. 52. The Principles of a Strategy-Focused Organization TRANSLATE EXECUTIVE STRATEGY LEADERSHIP • Mission / Vision • CEO Sponsorship • Strategy Maps • Executive Team Engaged • Balanced Scorecard • “New Way of Managing” • Targets • Accountable for Strategy • Initiatives BALANCED SCORECARD • A Performance Culture ORGANIZATION CONTINUAL ALIGNMENT PROCESS • Corporate Role • Linked to Budgeting • Corporate - SBU • Linked to Ops. Mgmt. • SBU - Shared Services • Management Meetings • External Partners EVERYONE’S • Feedback System JOB • Learning Process • Strategic Awareness • Goal Alignment • Linked Incentives
    53. 53. #3 Principles of the Strategy Focused Organization: MAKE STRATEGY EVERYONE’S EVERYDAY JOBHR Processes Are Essential for Moving Strategy From the Top to the Bottom CORP SBU Top-Down “Bridging • EDUCATION Bottom-Up Process Process” To Share to Internalize & the Strategy & Align Execute the Strategy the Workforce • PERSONAL GOAL ALIGNMENT • BALANCED PAYCHECKS The Strategy Focused Workforce
    54. 54. Making Strategy Everyone’sJob Creating a Climate to SupportStrategic Change 1 • Insure that each individual has sufficient Create Strategic Awareness understanding of the strategy (You can’t execute what you don’t understand) 2 Align Personal • Insure that each individual knows where they fit Objectives into the overall game plan 3 Align Incentive • Reinforce desired behavior and increase Compensation intensity of awareness
    55. 55. USM&R Strategic Themes ... Win/Win Relationship Good Neighbor Improve Dealer/Wholesale Marketer profitability through Protect the health and safety of our people, thewill guide us to our vision and are defined above customer-driven products and services and by communities in which we work, and the environment weeach graph. developing their business competencies. all share. Dealer/Mobil Gross Profit Environmental Index • Total profit earned at • Composite of:USM&R Strategic Measures ... Mobil outlets and - reportable releases split between our to air and water dealers/whole-salethat will keep us focused on achieving USM&R’s - reportable spills marketers andstrategic themes are explained in the graphs Mobil. - community reportedand the bulleted text accompanying them. incidents. 1993 1994 Target 1993 1994 TargetFinancially Strong Safe & Reliable On Spec On TimeReward our shareholders by providing a superior long- Maintain a leadership position in safety while keeping our Provide quality products supported by quality businessterm return which exceeds that of our peers. refineries fully utilized. processes that are on time and done right the first time. USM&R Days Away Manufacturing ROCE Quality Index From Work Reliability Index • Income divided by • Composite of incidents 12% of: capital employed including all 8% - product off spec allocations. 7% - order shipped late - business process errors - customer complaints - cost of rework. 1993 1994 Target 1993 1994 Target 1993 1994 Target 1993 1994 TargetDelight the Customer Competitive Supplier Motivated & PreparedUnderstand our consumers’ needs better than anyone Provide product to our terminals at a cost equal to or better Develop and value teamwork and the ability to think Mobil,and offer them products and services which exceed their than the competitive market maker. act locally.expectations. Mystery Shopper Laid-down Cost Climate Survey• The Mystery Shopper • Our cost to deliver • Survey of employees to program rates how well product to the terminal measure how people each of our stations is vs. lowest cost perceive the Mobil delivering the “best provider. workplace buying experience.” environment. 1993 1994 Target 1993 1994 Target 1993 1994 Target
    56. 56. Employee Innovations: MobilSpeedpass™
    57. 57. Making Strategy Everyone’sJob Creating a Climate to SupportStrategic Change 1 • Insure that each individual has sufficient Create Strategic Awareness understanding of the strategy (You can’t execute what you don’t understand) 2 Align Personal • Insure that each individual knows where Objectives he or she fits into the overall game plan 3 Align Incentive • Reinforce desired behavior and increase Compensation intensity of awareness
    58. 58. Ultimately, Team and Individual Goals and Objectives Are Aligned to the Strategy A performance model provides A personal scorecard focuses individuals the framework for cascading and on the part of the performance model they aligning personal goals can impactCustomer Example Financial Example Corporate Measures Balanced Scorecard Business Unit Measures Individual Goals Corporate Parent • Operating Margin 1993 1994 1995 1996 1997 1993 1994 1995 1996 1997 And Near Term Action Steps Targets Financial Targets 1. 100 120 160 180 250 • Earnings • Customer Division • Operating Margin 100 450 200 210 225 • Net Cash Flow 100 85 80 75 70 • Overhead & Operating Expense Satisfaction Targets Operating Targets 2. • Variable Costs 100 75 73 70 64 • Overhead & Operating Costs • Customer V P of Opns • Period Expenses 100 97 93 90 82 • Finding & Development Costs 100 105 108 109 110 • Total Annual Production retention (Indexed: 1993=100) 3. Plant Manager Corporate Objectives Individual Measures • Variable Costs • Double our value in 10 years. 1. • Increase our earnings by an average of 20% a • On time • Mfg Overhead • year 2. Achieve an internal rate of return 2% above the 3. cost of capital. 4. delivery • Reduce our overhead & operating costs by a further 30% by 1997. 4. 5. Shift Supervisor • Scrap • Reduce our 5-year average finding & development costs by 20%. • Reach the top quartile of industry profitability • First Pass Yield rate • by 1997. Increase production by 10% by 1997. Name: If we can achieve all these 5. • Schedule • Labor/ business objectives, we will be a Location: top quartile competitor Adherence Unit • Line Availability • Schedule adherence
    59. 59. Making Strategy Everyone’sJob Creating a Climate to SupportStrategic Change 1 • Insure that each individual has sufficient Create Strategic Awareness understanding of the strategy (You can’t execute what you don’t understand) 2 Align Personal • Insure that each individual knows where he or Objectives she fits into the overall game plan 3 Align Incentive • Reinforce desired behavior and Compensation increase intensity of awareness
    60. 60. Mobil USM&R Incentive Plan Poor Average Best-in IndustryBase Pay 90% 90% 90%Corporate Award 0-1 3-6 10(Return-on-Capital,Earnings Growth)USM&R/SBU M&R (30%) 0 5-8 20 SBU (70%)Total Pay 91% 98-104% 120%(% of Market)
    61. 61. Linking Compensation to the Balanced ScorecardExperience with successful BSC users indicates thatlinking the BSC to incentive compensation isessential to success Executive Perspectives Supported by Research“People got that scorecard out and did Mercer survey of compensationthe calculations to see how much practices in 214 companies (1999)money they were going to get. Wecould not have got the same focus on • 88% of responding companiesthe scorecard if we didn’t have the link consider the use of balancedto pay.” scorecard measures linked to Brian Baker, Mobil reward systems to be effective.“It would be hard to get people toaccept a totally different way ofmeasurement - which the BSC is - ifyou don’t reinforce that changethrough incentive compensation.” Gerry Isom, CIGNA
    62. 62. The Principles of a Strategy-Focused Organization TRANSLATE EXECUTIVE STRATEGY LEADERSHIP • Mission / Vision • CEO Sponsorship • Strategy Maps • Executive Team Engaged • Balanced Scorecard • “New Way of Managing” • Targets • Accountable for Strategy • Initiatives BALANCED SCORECARD • A Performance Culture ORGANIZATION CONTINUAL ALIGNMENT PROCESS • Corporate Role • Linked to Budgeting • Corporate - SBU • Linked to • SBU - Shared Services Operational • External Partners Improvements EVERYONE’S • Management JOB Meetings • Strategic Awareness • Feedback System • Goal Alignment • Learning Process • Linked Incentives
    63. 63. Making Strategy a Continual Process Imbed the Strategy in Ongoing Management Processes 1 Integrate Strategy • Establish stretch targets; Select initiatives, Align with Planning and operational improvement programs (TQM, Six Budgeting Sigma, Activity Based Management); Allocate resources to projects 2 Introduce the New • Develop systems for data collection, analysis, Reporting System and reporting 3 Conduct the New Management • Open discussion of performance shortfalls; Meeting team problem-solving; adapting and learning
    64. 64. Mobil NAM&R: Setting Targets andPerformance Factors Business Group Variable Pay Opportunity . . . . . . Variable Pay Performance Percent Factor Qualitative 20 1.25 BEST IN CLASS 1.20 Well Above How to think about 1.15 Average performance factors: 1.12 Objective: 1.09 External Benchmark 1.06 Above Average 1.00 means target equals 1.03 the average of competition 7 1.00 Average 1.25 means target equals the 0.90 top of the competitive group 0.80 Subjective: 1 0.75 Below Average Internal Benchmark 1.00 means the difficulty of the dive is average - 13 -
    65. 65. Achieving Stretch Target Performance MayRequire  Strategic Initiatives  Capital Investments  New Products/Services  New Customers  New Regions  New Partners
    66. 66. The Scorecard Process Provides Rigor forSelecting and Managing Initiatives —1—Identify All Potential Candidates for Development Strategic Initiative OFS Projects, Projects, Consideration Activities, etc. Activities, etc. Marketing Projects, Other Projects, Activities, etc. Activities, etc. Criteri a P ri m a r y S tra te g ic O b je c tiv e : I n itia tiv e : S tra te g ic T h r u s t( s) : C on tinu e L e a d e rsh ip in S u p e rio r E - B ill P re s e n tm e n t AC /IR /R C P ro d u c ts —2— A re a S c o re P o in ts C o m m e n tsScreen Candidates to Strateg ic Im p ortan ce 8 • Th e “killer” app licatio n •X Identify Those That C ost -2 •$Qualify as “Strategic” B enefit 4 •$ R equ ired for O ther Initiatives /D ep end encies 1 •X Tim e to Im p lem e nt -2 • # mo nths O v e ra ll S c o re 9 •X Require d for Othe r Strate gic Thrust( s) Strategic Overall Ranking Initiia tive Cost Bene fit Initiatives/ Time to Implement Overa ll Score and Objectives( s) Importance Dependencie s Points —3— AC/IR/RC E- Bill Cont. Leadership in 1 9 Prese ntment Superior Products Prioritized List of 2 A 9 Select Strategic 3 B 8 4 C 8 Initiatives 5 6 D E 7 7 Strategic Initiatives 7 F 7 N G X
    67. 67. The Principles of a Strategy-Focused Organization TRANSLATE EXECUTIVE STRATEGY LEADERSHIP • Mission / Vision • CEO Sponsorship • Strategy Maps • Executive Team Engaged • Balanced Scorecard • “New Way of Managing” • Targets • Accountable for Strategy • Initiatives BALANCED SCORECARD • A Performance Culture ORGANIZATION CONTINUAL ALIGNMENT PROCESS • Corporate Role • Linked to Budgeting • Corporate - SBU • Linked to • SBU - Shared Services Operational • External Partners Improvements EVERYONE’S JOB • Management Meetings • Strategic Awareness • Feedback System • Goal Alignment • Learning Process • Linked Incentives
    68. 68. Using the BSC to Link Strategy to OperationalManagement Activity-Based Costing • Cost of Internal Processes • Customer Profitability Shareholder Value • Explicit Value Proposition • Path for Revenue Growth Strategy Quality Programs • Link to Customer and Financial Outcomes • Identify New Processes; Set Priorities • Integrated Strategic Management Approach
    69. 69. BSC Adds to Total Quality Programs Explicit Causal Links from Operational Improvements to a Customer-Based Value Proposition Explicit Linkages to Productivity Enhancements and Financial Outcomes Identify Entirely New Processes for Improvement Set Priorities among Processes to Improve
    70. 70. The Principles of a Strategy-Focused Organization TRANSLATE EXECUTIVE STRATEGY LEADERSHIP • Mission / Vision • CEO Sponsorship • Strategy Maps • Executive Team Engaged • Balanced Scorecard • “New Way of Managing” • Targets • Accountable for Strategy • Initiatives BALANCED SCORECARD • A Performance Culture ORGANIZATION CONTINUAL ALIGNMENT PROCESS • Corporate Role • Linked to Budgeting • Corporate - SBU • Linked to Operational • SBU - Shared Services Improvements • External Partners • Management EVERYONE’S Meetings JOB • Feedback System • Strategic Awareness • Learning Process • Goal Alignment • Linked Incentives
    71. 71. Reporting and Feedback: Monthly Scorecard Summary MaximizeFinancial Shareholder Value Meet or Exceed Manage Investment Commitments Base e a tiv I ll ustr Customer SatisfactionCustomer and Loyalty Competitive Service Quality Price Reputation, Safety Brand and Trust Priority On Develop, Acquire Profitably Acquire, Internal Processes Favorably Positioned for Reliability and and Retain Retain and Success in a Competitive Cost Excellence Profitable Supply Environment Manage Positions Customers Legend Above target Priority on Safety On Track (within limits) Effectively and Environmental Significantly below target Manage Risks Excellence Data Not AvailableLearning & Growth Develop, Promote Live Co Regulatory Acquire and Innovation and Promote Values and Retain Best Practices Diversity (common Legislative Needed Skills Sharing version) Compliance
    72. 72. Effective Strategic Management Is Based Upon a “Double Loop” Learning Approach The Strategy Financial Perspective Strategic Feedback That Encourages Customer Perspective Internal Perspective Learning update the Learning Perspective incorporate Test hypotheses strategy learning about your Strategic Learning Loop strategy Balanced Scorecard Assess changes Financial Strategic Objectives Strategic Measures Financially Strong Delight the Consumer Return of Capital Employed Mystery Shopper Rating in the Cust environment Win-Win Relationship Dealer/Pioneer Gross Profit Split Safe & Reliable Manufacturing Reliability Indexcorrections result Days Away from Work Rate Internal Identify Competitive Supplier Laid Down Cost vs. Best Competitive Ratable Supply emerging Motivated & Prepared Strategic Competency Availability L&G strategies Operational Control Loop Performance Initiatives & Programs input output
    73. 73. The Principles of a Strategy-Focused Organization TRANSLATE EXECUTIVE STRATEGY LEADERSHIP • Mission / Vision • CEO Sponsorship • Strategy Maps • Executive Team • Engaged Balanced Scorecard • “New Way of Managing” • Targets BALANCED • Accountable for Strategy • Initiatives SCORECARD • A Performance Culture ORGANIZATION CONTINUAL ALIGNMENT PROCESS • Corporate Role • Linked to Budgeting • Corporate - SBU • Linked to Operational • SBU - Shared Services Improvements • External Partners • Management Meetings EVERYONE’S JOB • Feedback System • Learning Process • Strategic Awareness • Goal Alignment • Linked Incentives
    74. 74. To Succeed, the Executive Leader Must beEngaged in the Strategic Change Process… Breakthrough Unfreeze Change and Sustain Achieve commitment and Align and focus the Institutionalize capabilities momentum at the top organization on change and culture required for breakthrough results“The Case for Change” “Early Wins” “Irreversible Momentum” “A successful Balanced Scorecard program is a transformation process not a “metrics” project.”
    75. 75. Pitfalls  Middle Management Team: Lack of Senior Management Commitment (“Bacon and Eggs Breakfast”)  Done Only by One or Two Individuals  Held at the Top: For Senior Management Only  Too Long a Development Process: “Best Becomes the Enemy of the Good” “Just Do It!”  Treating the Balanced Scorecard as a Systems Project  Just a “checklist” for compensation purposes (the 4 P’s)
    76. 76. Typical Balanced Scorecard Project Schedule Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16Task 1: Define Strategic 2 Wks Architecture Project KickoffTask 2: Draft the Balanced 4 Wks Scorecard Workshop ITask 3: Develop Measures, 4 Wks High Level Targets & Initiatives Workshop IITask 4: Develop Implementation Plan 2 Wks Workshop III
    77. 77. Balanced Scorecard Project Team BSCol • Overall project ownership Executive • Consultations/pre-presents Engagement Sponsor/ as needed Officer/ Steering Principal Committee (part-time) • 2 days/week BSCol • 3 half- to full-day Client Executive workshops Project Project Leadership • One 90-minute Leader Leader Team briefing/ (full-time) interview • Consultations/ pre-presents as needed Client • 1-2 staff BSCol Core • 2-3 days/week Project Team • Briefings with others Team as needed Staff 1-2 knowledgeable Consultants of business (full-time) strategies and organization
    78. 78. How are Organizations Doing on theJourney? A survey of online members of the BSCol: 500 responses; 250 reported, “Yes, we have BSC.” 50% of these: too early to tell about impact. Of the 125 who had sufficient experience with the program: Achieved breakthrough results 15% (n = 19) Some progress 64% (n = 80) No or limited results 21% (n = 26)
    79. 79. What Separates the Winnersfrom the Losers? Breakthrough Results Some Progress No ResultsExecutive Team has created asense of urgency 84% 53% 20%Strategy translated to a strategymap and Balanced Scorecard 84% 41% 0%Corporate/Business Unitmeasures are linked & aligned 72% 39% 0%Employees are aware of thestrategy 56% 32% 0%Individual and team goals arealigned with the strategy 42% 26% 0%The BSC is an integral part of thestrategic planning process 100% 40% 0%The budget is driven by thestrategy 42% 29% 0%
    80. 80. For further information, visit www.bscol.com Our Mission: “To facilitate the worldwide awareness, use, enhancement, and integrity of the Balanced Scorecard as a value-added management process”Conferences Membership Research ConsultingTraining Networking Publications Certification

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