balanced scorecard

The Balanced
Scorecard
Planning for long-run
organizational success

The Balanced Scorecard:
A Good Idea in 1992
Balanced Scorecard in 1992

“The Balanced Scorecard –
Measures that Drive
Performance”
Harvard Business Review,
1992

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

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’s
3 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

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 organization
to 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.

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

Balanced Scorecard
 Balance between

 Financial measures of performance

 Long-range competitive abilities

Balanced Scorecard
 Four aspects of firm performance

 Financial
 Customer
 Internal business
 Innovation and learning

Financial Perspective
 How do we look to stockholders?

 Survive

 Succeed

 Prosper

Customer Perspective
 How do our customers see us?

 New products

 Responsiveness

 Quality

Internal Business Perspective
 At what must we excel currently?

 Manufacturing/service excellence

 New product/service introduction

Innovation and Learning
Perspective
 Canwe continue to improve and create
value?

 Technological leadership
 Time to market
 Employee training and satisfaction

Perspectives are Interrelated
 Innovation
pleases customers which are
necessary for good financial results

 Goodfinancial results make financing
improvements possible

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 Capital
Perspective: role for
intangible assets – Strategic Strategic Climate for
people, systems, Competencies Technologies Action
climate and culture

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

Overall Concepts
 Not a quick process

 Implementation requires

 Thought
 Analysis
 Data-gathering
 Time

Overall Concepts
 Thought

 What is our strategy?

 What is critical to implementing the strategy?

 How can we measure our progress?

Overall Concepts
 Analysis

 What are the linkages between functions?

 What drives the achievement of goals?

 What measures correlate with the drivers?

Overall Concepts
 Data-gathering

 What data is available? What isn’t?

 How should it be gathered? Reported?

Overall Concepts
 Time

 Cannot be done in an afternoon

 Successful implementation may take several months

 Never-ending process

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

 Requires teamwork, collaboration

 Different perspectives, expertise required

 Not a one-person job

 Won’t produce buy-in

 Interview senior managers

 Input on strategic objectives

 Input on critical success factors

 Input on possible measures

 Gain consensus

 Senior managers develop tentative scorecard as a group

 Individual reactions

 Suggested refinements

 Expand consensus

 Larger group refines tentative scorecard

 Finishing touches

 Consensus on vision, objectives, measures, targets,
implementation program, etc.

 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

 Roll-out

 Link to data bases and information system

 Communicate to employees

 Develop scorecards for lower levels

 Periodic reviews

 Has strategy changed?
 Are the objectives valid?
 Are the activities valid?
 Are the measures valid?

 The scorecard evolves with the organization

The Road to Disaster
 Senior management not committed

 No one else will be either

 Lack of consensus

 Lack of commitment

 Consultants

 Good
 Provide needed expertise

 Bad
 Take over the project
 Consensus, commitment of employees is lost

 Failure to communicate

 Employees don’t understand:

 Strategy
 Their roles
 Importance of the scorecard measures

 Lack of “push-down”

 Lower levels operating as before

 Operations are not tied to corporate scorecard

 Scorecard is ignored at lower levels

 Carve it in stone

 It won’t be perfect, ever

 Must evolve

 Delay implementation until perfect

 See above

 The compensation issue

 Powerful motivator of performance

 Poorlydesigned scorecard will not show
strategic improvements even if individual
measures show progress

The Scorecard as a Change
Agent
 Four steps

 Translating the vision into action
 Communicating and linking
 Business planning
 Feedback and learning

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

Communicating and Linking
 Corporate strategy must be communicated to
all levels

 Lower levels must have objectives linked to
corporate objectives

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

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

Building Strategy Focused Organizations
with the Balanced Scorecard

Dr. Robert S. Kaplan
Marvin Bower Professor of Leadership Development
HARVARD BUSINESS SCHOOL

and

Chairman
BALANCED SCORECARD COLLABORATIVE

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

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?”

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 Flow
Customer Revenue & Margin Premium Ratio vs. Industry
Perspectiv “Delight the Consumer” “Win-Win Dealer
e 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 Levels
Perspective 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 Technology
Learning & • Aligned • Functional Excellence • Process Improvement
Growth • Personal Growth • Leadership Skills
• Integrated View
Perspective
Personal BSC Strategic Skill Systems Milestones
Employee Feedback Coverage Ratio

The Balanced Scorecard Framework Is Readily
Adapted to Non-Profit and Government
Organizations
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

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 on
CU 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 Develop
PROCESSE 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 Infrastructure

LEARNING
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 Planning

FINANCIAL Create
Systematize Build Develop Institutionalize
Increase Long-Term
Financial Multi-Year Realistic Multi-Year
Revenue Investment
Processes Support Pro Formas Budgeting
Strategy

A KPI Scorecard: The Four
“P’s”
• Profits

• Portfolio (loan volume)

• Process (ISO certification)

• People (diversity)

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?

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)

TRANSLATE EXECUTIVE
STRATEGY LEADERSHIP

• Balanced Scorecard • “New Way of Managing”
• Targets • Accountable for Strategy
• Initiatives
BALANCED
SCORECARD

ALIGNMENT PROCESS
• Corporate - SBU • Linked to Ops. Mgmt.
• SBU - Shared Services • Management Meetings
• External Partners EVERYONE’S • Feedback System
JOB • Learning Process

• Goal Alignment

Principles of the Strategy-Focused Organization:
LINK AND ALIGN THE ORGANIZATION AROUND ITS
STRATEGY
#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.

Summary: Top-to-Bottom Strategy Alignment
Unleashes 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

#3
Principles of the Strategy Focused Organization:
MAKE STRATEGY EVERYONE’S EVERYDAY JOB

HR 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

Making Strategy Everyone’s
Job
Creating a
Climate to
Support
Strategic 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

USM&R Strategic Themes ... Win/Win Relationship Good Neighbor
Improve Dealer/Wholesale Marketer profitability through Protect the health and safety of our people, the
will guide us to our vision and are defined above customer-driven products and services and by communities in which we work, and the environment we
each 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-sale
that will keep us focused on achieving USM&R’s - reportable spills
marketers and
strategic themes are explained in the graphs Mobil.
- community reported
and the bulleted text accompanying them. incidents.

1993 1994 Target 1993 1994 Target

Financially Strong Safe & Reliable On Spec On Time
Reward our shareholders by providing a superior long- Maintain a leadership position in safety while keeping our Provide quality products supported by quality business
term 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 Target

Delight the Customer Competitive Supplier Motivated & Prepared
Understand 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

Employee Innovations: Mobil
Speedpass™

Job
Creating a
Climate to
Support
Strategic Change

Create Strategic

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

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 impact

Customer 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

Job
Creating a
Climate to
Support
Strategic Change

Create Strategic

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

Mobil USM&R Incentive Plan
Poor Average Best-in
Industry
Base 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)

Linking Compensation to the
Balanced Scorecard
Experience with successful BSC users indicates that
linking the BSC to incentive compensation is
essential to success
Executive Perspectives Supported by Research

“People got that scorecard out and did Mercer survey of compensation
the calculations to see how much practices in 214 companies (1999)
money they were going to get. We
could not have got the same focus on • 88% of responding companies
the scorecard if we didn’t have the link consider the use of balanced
to pay.” scorecard measures linked to
Brian Baker, Mobil reward systems to be effective.

“It would be hard to get people to
accept a totally different way of
measurement - which the BSC is - if
you don’t reinforce that change
through incentive compensation.”
Gerry Isom, CIGNA

TRANSLATE EXECUTIVE
STRATEGY LEADERSHIP

• Initiatives
BALANCED
SCORECARD

ALIGNMENT PROCESS
• Corporate - SBU • Linked to
• SBU - Shared Services Operational
• External Partners Improvements
EVERYONE’S
• Management
JOB
Meetings
• Strategic Awareness • Feedback System
• Goal Alignment • Learning Process

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

Mobil NAM&R: Setting Targets and
Performance 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 -

Achieving Stretch Target Performance May
Require

 Strategic Initiatives
 Capital Investments
 New Products/Services
 New Customers
 New Regions
 New Partners

The Scorecard Process Provides Rigor for
Selecting 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 ts

Screen 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

TRANSLATE EXECUTIVE
STRATEGY LEADERSHIP

• Initiatives
BALANCED
SCORECARD

ALIGNMENT PROCESS
• Corporate - SBU • Linked to
• SBU - Shared Services Operational
• External Partners Improvements
EVERYONE’S
JOB • Management
Meetings
• Strategic Awareness • Feedback System
• Goal Alignment • Learning Process

Using the BSC to Link Strategy to Operational
Management

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

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

TRANSLATE EXECUTIVE
STRATEGY LEADERSHIP

• Initiatives
BALANCED
SCORECARD

ALIGNMENT PROCESS
• Corporate - SBU • Linked to Operational
• SBU - Shared Services Improvements
• External Partners • Management
EVERYONE’S
Meetings
JOB
• Feedback System
• Strategic Awareness • Learning Process
• Goal Alignment

Reporting and Feedback:
Monthly Scorecard Summary
Maximize
Financial

Shareholder Value

Meet or Exceed Manage Investment
Commitments Base e
a tiv
I ll ustr
Customer
Satisfaction
Customer

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 Available
Learning & Growth

Develop, Promote Live Co Regulatory
Acquire and Innovation and Promote Values and
Retain Best Practices Diversity (common Legislative
Needed Skills Sharing version) Compliance

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 Index

corrections 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

TRANSLATE EXECUTIVE
STRATEGY LEADERSHIP

• Strategy Maps • Executive Team
• Engaged
Balanced Scorecard
• “New Way of Managing”
• Targets
BALANCED • Accountable for Strategy
• Initiatives SCORECARD
ALIGNMENT PROCESS
• Corporate - SBU • Linked to Operational
• SBU - Shared Services Improvements
• External Partners • Management Meetings
EVERYONE’S
JOB • Feedback System
• Learning Process
• Goal Alignment

To Succeed, the Executive Leader Must be
Engaged 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.”

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)

Typical Balanced Scorecard
Project Schedule
Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Task 1: Define Strategic 2 Wks
Architecture
Project Kickoff

Task 2: Draft the Balanced 4 Wks
Scorecard
Workshop I

Task 3: Develop Measures, 4 Wks
High Level Targets &
Initiatives
Workshop II

Task 4: Develop
Implementation Plan 2 Wks
Workshop III

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

How are Organizations Doing on the
Journey?
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)

What Separates the Winners
from the Losers?
Breakthrough Results Some Progress No Results
Executive Team has created a
sense of urgency 84% 53% 20%
Strategy translated to a strategy
map and Balanced Scorecard 84% 41% 0%
Corporate/Business Unit
measures are linked & aligned 72% 39% 0%
Employees are aware of the
strategy 56% 32% 0%
Individual and team goals are
aligned with the strategy 42% 26% 0%
The BSC is an integral part of the
strategic planning process 100% 40% 0%
The budget is driven by the
strategy 42% 29% 0%

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 Consulting
Training Networking Publications Certification

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