This document discusses the Balanced Scorecard (BSC) framework for strategy implementation and management. It provides an agenda for a workshop on developing and implementing a BSC. It discusses why a BSC makes sense for companies and the requirements for starting the BSC process. Key steps in the process include identifying objectives, developing a strategic framework, defining actions and projects, implementing reporting, and integrating it into management processes with a focus on continuous learning.

1. © Friedag 2011 How to improve Future with the BSC Strategy development and implementation with the Balanced Scorecard [BSC]

2. © Friedag 2011 They must often change who would be constant in happiness or wisdom. ___________________ Confucius

3. independent consultant specialising in: Implementation of the Balanced Scorecard in companies Practice-orientated Balanced Scorecard workshops Member of the public relations board of the ICV Lecturer at the Humboldt University Berlin Hobbies: moving in nature, volleyball, sailing Dr. Herwig R. Friedag © Friedag 2011 Dr. Herwig R. Friedag Friedag Consult Beskidenstr. 33, D 14129 Berlin Fon +49 30 80 40 40 00 Fax +49 30 80 40 40 01 [email_address] www.friedag.com Born in 1950, graduate economist

4. Publications © Friedag 2011 Total number of copies > 75.000 in CZ, D, FIN, PL, RUS 2000, 2002, 2004 1999, 2000, 2002 2001 2003 2005 2004 2002, 2003, 2005, 2011 2009

5. Strategy development and implementation with the Balanced Scorecard © Friedag / Lewandowska 2008 01 Introduction 02 The bases of securing the company’s future 03 What is a BSC ? 04 Approach for an objective system 05 OAI– strategic actions 06 Organising the work 07 Conclusions Agenda © Friedag 2011

6. Strategy development and implementation with the Balanced Scorecard © Friedag / Lewandowska 2008 01 Introduction 02 The bases of securing the company’s future 03 What is a BSC ? 04 Approach for an objective system 05 OAI– strategic actions 06 Organising the work 07 Conclusions Agenda © Friedag 2011

7. We want, we have to prepare for our future, even though it is not a 100% controllable ! © Friedag 2011 „ Whatever will be, will be“; nonetheless, we can, we have to do something today for the future. Therefore, we should at least meet the requirements of the future or better: set standards or even: try to influence the changes in society

8. Why could a BSC make sense for your company? We achieve joint objectives We translate strategies into action By communication we achieve thinking, responsibility, objective-orientated action of our employees and partners We assure sustainability of our company © Friedag 2011

9. 52% of the Germans have secluded with their employer. Responding to the question in a representative study, whether they would presumably be working at their current company next year, they answered: „ No way - as soon as I find a job in a different company, I will be leaving the firm!" Source: Financial Times Germany, June 02 2004, page 2 Is the BSC sensible for our company ? © Friedag 2011

10. Requirements to start the process of strategy implementation Willingness for change Reduce Blame-Culture – learning to learn from mistakes: “no mistake is the biggest mistake” Willingness of management to work out and discuss strategic objectives A strategy ! © Friedag 2011

11. © Friedag 2011 The future has many names. For the weak, it is the unreachable. For the fearsome, it is the unknown. For the brave, it is the chance. ___________________ Victor Hugo

12. Strategy development and implementation with the Balanced Scorecard © Friedag / Lewandowska 2008 01 Introduction 02 The bases of securing the company’s future 03 What is a BSC ? 04 Approach for an objective system 05 OAI– strategic actions 06 Organising the work 07 Conclusions Agenda © Friedag 2011

13. Strategy © Friedag / Lewandowska 2008 What is the strategic objective of a company/an organisation? The basic strategic objective is that of securing the sustainability of a company/organisation. Sustainability can be achieved only on the condition that all relevant stakeholders can benefit from it. This includes antithetic interests and conflicts which contribute to the dynamic development of an organisation. Consequently the objective of a strategy is that of generating a dynamic equilibrium of the benefits which can accepted by all the relevant stakeholders. © Friedag 2011

14. Strategy as part of a holistic management Strategic potentialities as i nput-parameters for results and finance/liquidity; the Balanced Scorecard as tool to work out and implement the company‘s strategy. Assets . Strategy Result Finance Potential planning with e.g. Balanced Scorecard etc. Controller as a Strategy moderator / consultant Profit planning with e.g. Contribution margin accounting etc. Controller as a mediator between internal and external accounting Finance planning with e.g. Free Cash Flow- accounting etc. Controller as a manager of the stakeholder interests Logic of the decision Logic of the tools liabilities G D P FA WC Equ Dbt

15. © Friedag 2011 Expenditures Accrual of money Potentials Possibilities + competencies What is strategic, what is operational ? Accrual of potentials to do ? to do nothing ? long-term ? short-term ? develop exploit Orders / Sales Use capacities Quality assurance Employee engagement Safeguarding liquidity Partner engagement Marketing Develop capacities Quality potential HR competences Investor Relations Partnership strategic operational

16. Aspects of the development of potential © Friedag 2011 orientation by objectives financial resources motivation for implementation x x economic force time resources x

17. © Friedag 2011 Only the one who possesses a strategy, can implement it. Therefore: The one who wants a Balanced Scorecard has to start with the strategy! Kaplan/Norton Balanced Scorecard: translate strategy into action!

18. How do we proceed ? Strategy-development Strategy- Use (Integration in the management cycle) Mission* Tasks - strategic challenge Corporate Policy Orientation Strategy- implemen-tation running business middle term planning / Budget / Profit / Liquidity Balanced Scorecard Vision* Closeness => Bearing business idea * long-time Strategic House Strategic projects Business model Reporting Scorecard

19. Example: Vision & Corporate Policy Orientation Company producing rear-view mirrors for cars the “vision” of this company: the leading car-manufacturers are our clients the “Corporate Policy Orientation”: target-year: 2020 Turnover: from 750 Mio € to 2.500 Mio € profit-margin: 7%

20. Exercise: decisions to be made Please decide which company could be the “target” of our work What could be the (long-time) “vision” of this company? What is the “Corporate Policy Orientation”: target-year Turnover profit-margin You have 30 minutes time !

21. Strategy development and implementation with the Balanced Scorecard © Friedag / Lewandowska 2008 01 Introduction 02 The bases of securing the company’s future 03 What is a BSC ? 04 Approach for an objective system 05 OAI– strategic actions 06 Organising the work 07 Conclusions Agenda © Friedag 2011

22. What is a Balanced Scorecard ? © Friedag 2011 The Balanced Scorecard is a universal tool to align the acting of a group of people toward a joint objective. subjective: What are we ready to do and will we take over the responsibility? objective: What objectives and tasks do we want to commit ourselves to?

23. Steps to a BSC-development and -implementation © Friedag 2011 I. Identification of objectives (Mission, vision, leading indicators) II. Develop strategic action frame III. Complete action frame with actions (collect ideas) IV. Bundle actions into strategic projects V. Reporting with the Balanced Scorecard VI. Arrange the BSC into the process of leading VII. Organize learning process Communication

24. Steps to a BSC- development and -implementation © Friedag 2011 I. Identification of objectives (Mission, vision, leading indicators) II. Develop strategic action frame III. Complete action frame with actions (collect ideas) IV. Bundle actions into strategic projects V. Reporting with the Balanced Scorecard VI. Arrange the BSC into the process of leading VII. Organize learning process Communication

25. © Friedag / Lewandowska 2008 Identification of objectives Strategic starting point: our business model Who is our customer ? Target persons What are the needs of our customer? Core need How can we find a cost-covering solution for that? Core competence How can we be better than the competitors? Uniqueness © Friedag 2011

26. Example: business model & strategic challenge Our business model Target-customer: the three technical-leading car-producer Core need: distinctive rear-view mirrors Core competence: specific mirrors in all quantities/specifications Uniqueness: innovation on highest performance And then: Our strategic challenge: to have the most innovative developments

27. Please name in a few words the four aspects of the business model for our example-company What will be the strategic challenge to be achieved You have 30 minutes time ! Exercise: business model & strategic challenge

28. What we focus on the implementation of the strategy ? What will be our strategic period? Vision* What do we want to achieve in this period ? (a “milestone“ of the vision) Mission Statement Strategic message: How do we want to be seen after this period ? Key indicator How can we recognise that we are successful? * “Vision” from now on will be the main goal for the next two or three years goals we want to realise in the next future

29. Vision © Friedag 2011 What do we want to achieve ? We are becoming technological market leader The vision is destined for our company‘s employees. It matches our values that are exemplified through our own life.

30. Mission statement © Friedag 2011 Why shall people be our customers ? We are worldwide leading innovative supplier of rear-view mirrors. The mission statement aims at the memory of our potential customers / partner. With the mission statement we raise expectations that we have to meet.

31. Leading indicator © Friedag 2011 One key figure for the company What shall be the most important criteria that subordinates all strategic decisions? How do we want to measure that ? Leading indicator: number of jointly (with customers) developed innovations With the leading indicator, we concretize our joint orientation

32. Agreement on objectives © Friedag 2011 worldwide leading innovative supplier of rear-view mirrors We are becoming technological market leader number of jointly (with customers) developed innovations vision mission statement leading indicator

33. Exercise: goals for the next future What could be for our company the strategic period mission, vision and the leading indicator You have 30 minutes time !

34. © Friedag 2011 When there is no agreement in principle, then it is senseless to scheme. ___________________ Confucius

35. Strategy development and implementation with the Balanced Scorecard © Friedag / Lewandowska 2008 01 Introduction 02 The bases of securing the company’s future 03 What is a BSC ? 04 Approach for an objective system 05 OAI– strategic actions 06 Organising the work 07 Conclusions Agenda © Friedag 2011

36. Steps to a BSC- development and -implementation © Friedag 2011 I. Identification of objectives (Mission, vision, leading indicators) II. Develop strategic action frame III. Complete action frame with actions (collect ideas) IV. Bundle actions into strategic projects V. Reporting with the Balanced Scorecard VI. Arrange the BSC into the process of leading VII. Organize learning process Communication

37. II. Developing the strategic action frame © Friedag / Lewandowska 2008 Which tasks do we have to fulfil , in order to achieve our vision?  strategic topics Which p otentials do we have to develop in order to achieve our vision?  development areas (perspectives) Which potentials do we have to jointly develop so we are able to face the imponderables of the future better than the competitors can do it? © Friedag 2011 Mission statement : Worldwide leading innovative supplier of rear-view mirror Vision: We will become technological market leader Leading indicator: Number of jointly (with customers) developed innovations

38. Strategic topics © Friedag 2011 Perspectives what shall we do now? extension of local presence entry into chinese market trade volume image jointly developed innovations # of projects higher revenue extension of sales dept. sale potential objective strategic topic Indicator Perspectives worldwide leading innovative supplier we are becoming technological market leader number of jointly developed innovations customer retention Customers new contracts dedication employees CIP-Groups reliability processes error ratio (ppm) reliability partners audits cost consciousness fin. & controlling Cash Flow

39. Perspectives for the stakeholder © Friedag 2011 Perspectives With whom and for whom do we intend to do it ? extension of local presence entry into chinese market trade volume image jointly dev. innov. # of projects higher revenue extension of sales dept. sale potential objective strategic topic Indicator CIP = continuous improvement process worldwide leading innovative supplier we are becoming technological market leader number of jointly developed innovations Perspectives Cost consciousness fin. & controlling Cash Flow reliability Partners Audits dedication employees CIP-Groups Customer retention Customers New contracts

40. Our strategic frame © Friedag 2011 Perspectives extension of local presence entry into chinese market trade volume higher revenue extension of sales dept. sale potential objective Strategic topic Indicator image jointly developed innovations # of projects worldwide leading innovative supplier we are becoming technological market leader number of jointly developed innovations Perspectives Cost consciousness fin. & controlling Cash Flow Reliability Partners Audits dedication employees CIP-Groups Customer retention Customers New contracts

41. Exercise group 1: Strategic topics What are the two main tasks (services, products, changes) that we have to devote ourselves to in order to achieve the vision in the near future ? For each topic, define an objective and an indicator with which we can measure the achievement Less is more ! Recommendation: less than 5 strategies You have 30 minutes time !

42. Exercise group 2: Perspectives of the stakeholder Who are the relevant stakeholders ? How can we motivate our stakeholders to aim at our strategic topics? Define for each perspective an objective and an indicator, which measures the degree of achievement Less is more ! Recommendation: maximum of 6 perspectives You have 30 minutes time !

43. Strategy development and implementation with the Balanced Scorecard © Friedag / Lewandowska 2008 01 Introduction 02 The bases of securing the company’s future 03 What is a BSC ? 04 Approach for an objective system 05 OAI– strategic actions 06 Organising the work 07 Conclusions Agenda © Friedag 2011

44. Steps to a BSC- development and -implementation © Friedag 2011 I. Identification of objectives (Mission, vision, leading indicators) II. Develop strategic action frame III. Complete action frame with actions (collect ideas) IV. Bundle actions into strategic projects V. Reporting with the Balanced Scorecard VI. Arrange the BSC into the process of leading VII. Organize learning process Communication

45. © Friedag / Lewandowska 2008 It is only through the concrete, daily actions of all the employees in a company that potentials can be developed . © Friedag 2011 Kaplan/Norton Translate strategy into action!

46. III. Objective-oriented actions - the OAI -principle © Friedag / Lewandowska 2008 Check if every action matches the strategic topics and the development areas (perspectives)! O bjective A ction I ndicator Strategic topics Development areas (perspectives) © Friedag 2011

47. Define objective-orientated actions © Friedag 2011 Perspectives extension of local presence entry into chinese market trade volume higher revenue extension of sales dept. sale potential objective Strategic topic Indicator image jointly developed innovations # of projects O bjective: create enthusiasm at the customers A ction: customer visits approx. 8 weeks after first delivery: „Any problems ?" I ndicator: number of visited customers worldwide leading innovative supplier we are becoming technological market leader number of jointly developed innovations Perspectives Cost consciousness fin. & controlling Cash Flow reliability Partners Audits dedication employees CIP-Groups Customer retention Customers New contracts

48. Create objective-orientated actions © Friedag 2011 Perspectives extension of local presence entry into chinese market trade volume higher revenue extension of sales dept. sale potential objective Strategic topic Indicator image jointly developed innovations # of projects O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator worldwide leading innovative supplier we are becoming technological market leader number of jointly developed innovations Perspectives Cost consciousness fin. & controlling Cash Flow Reliability Partners Audits dedication employees CIP-Groups Customer retention Customers New contracts

49. So many OAI´s © Friedag / Lewandowska 2008 © Friedag 2011

50. For each development field of the company there have to be developed actions supporting the achievement of the goals. © Friedag / Lewandowska 2008 Example: customers O bjective: awake enthusiasm among customers A ction: customer visits approx. 8 weeks after first delivery: „Any problems ?" I ndicator: number of visited customers S 1 Work group: OAI © Friedag 2011

51. © Friedag / Lewandowska 2008 Exercise: Objective-Action-Indicator What exactly do we have now to do to achieve our our strategical goals in 2010: Objective Action Indicator All three points please on one moderation-card – readable written You have 30 minutes time ! © Friedag 2011

52. Strategy development and implementation with the Balanced Scorecard © Friedag / Lewandowska 2008 01 Introduction 02 The bases of securing the company’s future 03 What is a BSC ? 04 Approach for an objective system 05 OAI– strategic actions 06 Organising the work 07 Conclusions Agenda © Friedag 2011

53. Steps to a BSC- development and -implementation © Friedag 2011 I. Identification of objectives (Mission, vision, leading indicators) II. Develop strategic action frame III. Complete action frame with actions (collect ideas) IV. Bundle actions into strategic projects V. Reporting with the Balanced Scorecard VI. Arrange the BSC into the process of leading VII. Organize learning process Communication

54. IV Implement strategic projects © Friedag 2011 Perspectives extension of local presence entry into chinese market trade volume higher revenue extension of sales dept. sale potential objective Strategic topic Indicator image jointly developed innovations # of projects O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective A ction I ndicator O bjective P roject I ndicator O bjective P roject I ndicator O bjective P roject I ndicator O bjective P roject I ndicator O bjective P roject I ndicator O bjective P roject I ndicator O bjective P roject I ndicator worldwide leading innovative supplier we are becoming technological market leader number of jointly developed innovations Perspectives Cost consciousness fin. & controlling Cash Flow Reliability Partners Audits dedication employees CIP-Groups Customer retention Customers New contracts

55. Projects supporting the implementation of BSC © Friedag 2011 The most important things: Don‘t look for perfect solutions! Delegate responsibilities and competences, demand and support consequence! Organise the things that can be already done. The sooner the first success appear, the greater the acceptance of Balanced Scorecard will be. Let us start, there‘s a lot of work ahead of us!

56. © Friedag 2011 having objectives only is not enough – we have to want to do it ! assign clear responsibilities achieve early wins develop adjuvant rituals train consequent leader behaviour pay attention: time is a critical resource - time cannot be stored - each process needs sufficient timing - point in time as important as the period of time … and organize active doing

57. Steps to a BSC- development and -implementation © Friedag 2011 I. Identification of objectives (Mission, vision, leading indicators) II. Develop strategic action frame III. Complete action frame with actions (collect ideas) IV. Bundle actions into strategic projects V. Reporting with the Balanced Scorecard VI. Arrange the BSC into the process of leading VII. Organize learning process Communication

58. V. Reporting components of the BSC © Friedag 2011 Project- indicators Indicators of the BSC-house strategic and operational indicators for internal control strategic and operational indicators for external reporting Leadership-Scorecard Reporting-Scorecard

59. Reporting with the Leadership-Scorecard – what do we do ? © Friedag 2011

60. Reporting - Scorecard © Friedag 2011 Main corporate indicators (Development and exploitation of potentialities) Early indicators Late indicators Development of potentialities Exploitation of potentialities

61. Steps to a BSC- development and -implementation © Friedag 2011 I. Identification of objectives (Mission, vision, leading indicators) II. Develop strategic action frame III. Complete action frame with actions (collect ideas) IV. Bundle actions into strategic projects V. Reporting with the Balanced Scorecard VII. Organize learning process Communication VI. Arrange the BSC into the process of leading

62. VI Arrange the BSC into the process of leading © Friedag 2011 Strategy Leading- Scorecard Team objectives Reporting- Scorecard Operational objectives Sustainable success of the organization Acting Transparency Each area defines for itself how they can support the vision

63. Arrange the BSC into the leading process © Friedag 2011 Live the Balanced Scorecard ! Integrate all employees What divisions are relevant strategically ? Where are different approaches needed in order to achieve the vision ? Set a main focus Develop and integrate a communication concept Use indicators to control Establish the Balanced Scorecard in the reporting What can be dispensed in the reporting ?

64. Diffusion of the BSC into the company © Friedag 2011 strategic operational ealry late contribution strategic operational early late contribution strategic operational early late

65. Steps to a BSC- development and -implementation © Friedag 2011 I. Identification of objectives (Mission, vision, leading indicators) II. Develop strategic action frame III. Complete action frame with actions (collect ideas) IV. Bundle actions into strategic projects V. Reporting with the Balanced Scorecard VII. Organize learning process Communication VI. Arrange the BSC into the process of leading

66. VII Organize learning process © Friedag 2011 assign specific authority and responsibilites to the indicators learn from the cause-effect-chain permit, that strategic objectives may be changed keep on going to discuss the strategic objectives

67. © Friedag 2011 The balanced scorecard puts strategy – not control – at the center ___________________ Kaplan / Norton (1992)

68. Strategy development and implementation with the Balanced Scorecard © Friedag / Lewandowska 2008 01 Introduction 02 The bases of securing the company’s future 03 What is a BSC ? 04 Approach for an objective system 05 OAI– strategic actions 06 Organising the work 07 Conclusions Agenda © Friedag 2011

69. Benefits of safeguarding the company with the help of the Balanced Scorecard © Friedag 2011 Everyone in the company knows his future All stakeholder aim jointly in one direction Limitation on less, on the fundamental things for the future Better rating (Basel II) Better results in the EFQM-Process better operating profits as a base of sustainability

70. Leading with joint and clearly defined operative and strategic objectives By communication we achieve thinking, responsibility, objective-orientated action of all of our employees and partners Better transparency creates confidence at internal and external partners Conclusion © Friedag 2011 more successful because of strategy developemt and implementation with the help of Balanced Scorecard ? Strategy is the first task of leaders !

71. Fazit © Friedag 2011 " Balanced Scorecard is more than a performance measurement system ” Friedag / Schmidt "Balanced scorecard is management, not measurement" Kaplan / Norton balanced scorecard transforms strategy into action

72. © Friedag 2011 Welcome to the Future! Strategydevelopment and -implementation with the Balanced Scorecard [BSC]