Michael Hegarty at Chemical Bank implemented a Balanced Scorecard (BSC) to facilitate the organizational transformation needed to support the bank's new vision as a customer-focused provider of superior financial services. The BSC helped align the bank's strategy, create specific objectives, and establish performance measures across financial, customer, internal process, and learning/growth perspectives. This allowed the bank to clarify its strategy, improve understanding of key drivers, shift its business model to more profitable customer segments, and establish a performance-focused culture. While successful, challenges remained in fully communicating the BSC throughout the organization and linking compensation to strategic objectives.

1. Executive Summary
The retail bank division of Chemical Bank was performing a radical organizational
transformation into a market-focused and customer-focused organization after the
1991 merger with the Manufacturers Hanover Corporation. The new vision of the
bank was to shift its image from a narrow provider of traditional financial services
to a broader and innovative provider of superior financial service and advice for
targeted customer groups. The objective was to position the bank in order to
remain competitive in a very challenging and changing business environment
characterized by intense price competition, outflow of deposits to mutual funds,
rapid technological change and more sophisticated and demanding clients.
Micheal Hagerty, head of this division, envisioned Balanced Scorecard (BSC) as a
powerful tool to achieve the organizational and cultural transformation required by
the Retail Bank in order to articulate and implement this new vision, mission and
strategy across all levels of the organization. A main objective was to create a
performance focused organization.
The process of implementation of the BSC systems proved very successful for the
Retail Bank because it allowed managers and overall organization to stay focused
on key consumer segments and profitability targets. In addition, the process helped
the Retail Bank to clarify its main strategy statements, develop clear and wellarticulated business objectives for each business dimension and implement a
performance measure system to monitor progress. The final outcome was learning
and more unified organization and a deeper understanding of key business value
drivers and activities.
The process of implementation posed many challenges that the Retail Bank needs
to overcome such as in communication, compensation linkages, information
infrastructure, and data reliability to measure performance among others.
Case Background
The case presents an industry facing an intense change during the last two decades.
Rapid evolving technologies, shrinking spreads, and alternative Channels were
some of the characteristics of the new environment. As a result, the industry passes
from 14,000 banks during the 80´s to 10,000 banks in the 90´s.

2. In 1991 Chemical bank and The Manufacturers Hanover Corporation merged and
form The Chemical Bank. It was in order to improve its performance in the new
highly competitive market. This new bank turned from an excellent collecting and
processing deposits bank to an efficient market oriented organization provider of
financial products to a target group. It means that, the new bank must have the
capability to segment the market and focus on the most attractive customer groups.
The new company found the Balance Score Card as a useful system to achieve the
objective mention before. The BSC was implemented in order to provide the
necessaries links between objectives and measures. The implementation of the
BSC was based on 3 key pillars to drive returns:
o Shift Customer/ Profit Mix.
o Improve Productivity.
o Create an Enabled Organization.
The 03 key pillars respectively correspond to the BSCs Customer, Internal
Business and Learning and Growth perspectives.
Finally, the case presented a BSC system in process. We found that it is very
important a high level of commitment of the senior management in order to follow
an a hundred percent system implementation.
Summary/Conclusions
Micheal Hagerty's team in Chemical Bank implemented BSC as a tool to maintain
strategic direction aligned with relevant strategic target is successful. Chemical
Bank aimed at a breakthrough strategy that redefined the banks business through
focusing on consumer banking.
BSC provided specific, measurable, actionable and timely objectives of superior
service for specific consumer targets. It also managed to pull together two
companies with different management styles ( i.e., a centralized Manufacturers
Hanover with a decentralized Chemical Bank) to one common objective.
Regardless of BSC success in Chemical Bank, there are specific opportunities that
need to be reinforced during BSC implementation. For example, BSC is usually a
senior and middle management tool. An adequate use of BSC demands the
involvement of employees and contributors and all levels (specifically at the lower
end). Also, avoid implementation complexity by defining fewer targets and

3. measure accomplishment with simple indicators. Proven success is found where
BSC objectives are linked to compensational motivators. Finally, since training is
the basis of BSC, employees demanded to learn and develop new skills need to be
appropriately evaluated. This will allow an efficient deployment of the BSC plan
as its execution progresses to its final target.
The Chemical Bank team persevered and fulfilled its new business strategy. BSC
helped in maintaining focus on common objectives through all areas of the
organization. Its mentors and collaborators were determined, smart, and flexible
when obstacles were met while its business grew and its organization changed for
the better.
CHEMICAL BANK CASE
QUESTIONS:
1. What is Hegarty attempting to accomplish with the Balance Scorecard?
Michael Hegarty, head of the Retail Bank Division of Chemical Banking
Corporation was trying to accomplish a major cultural, organizational and strategic
change in the Retail bank in order to transform the bank into a "customer focused
organization" whose mission was to provide superior financial advisor and services
to a targeted customer group. This dramatic and extensive strategic change was
indispensable to place the bank in a better position to compete in a market
characterized by intense price competition, continuous change, rapidly
technological change and increased customer demand for value.
Hegarty envisioned that the implementation of the BSC would facilitate this
transformation by:
· Improving Strategy formulation, understanding & Communication through all
levels of the organization
The implementation of BSC in Chemical bank helped to simplify and better
organize the bank's strategy themes, focus thinking in these core strategic themes
and communicate these themes effectively through all the organization. The main
objective of BSC was to translate the corporate vision and mission of the Retail
Bank into actionable, understandable and measurable objectives. In this way, any
individual in the organization should understand how it fits in the overall company

4. strategy. As the case mentioned, the BSC provided senior management with a
permanent forum to discuss present performance and future targets.
· Promoting cultural change & learning
The implementation of BSC facilitated the alignment and convergence of the two
different management teams and cultures that existed in the bank in that moment
due to the merger process with the Manufacturers Hanover Corporation. The BSC
implementation process allowed the surge of a powerful-shared sense in the
management team of the Retail Bank.
In addition the BSC implementation fostered the creation of a continuous learning
culture in the organization thus allowing a better understanding of the key business
value drivers at all levels of the organization.
· Redefining the Core Business of the Retail Bank
The new vision of the bank required a shift in the customer and product mix
toward more profitable segments and fee-based businesses. BSC implementation
facilitated this shift in the core business and also provided focus on implementing a
new customer segmentation strategy based on: (i) deeper understanding of
customer needs, (ii) identifying attractive customer segments and (iii) developing
high value and tailored new products for the identified segments.
· Focusing the organization on performance & establishing a methodology to track
performance of vital processes
BSC implementation allowed the organization to maintain focus on key strategic
objectives and establish linkages among these key strategic objectives and the main
business dimensions: financial, customer, internal and learning: " BSC reinforces
the need for a new focus on the customers, specially the need to get to a more
profitable mix of customers, and to retain and deepen relationships with best
customers". In addition, BSC forced the Bank to stay on track and to follow up the
organization performance on a permanent basis.
· Achieving the main financial, customer, internal and learning strategic objectives
determined during the BSC process
The implementation of the BSC targeted to achieve the main strategic objectives of

5. the Retail bank such as: (i) Improve profitability through better spending
efficiency, revenue growth and expense reduction; (ii) Shift customer & product
profit mix; (iii) Develop internal process that allows a better understanding of
customer needs, development of new products and performing cross selling; and
(iv) build an organization with new skills, access to strategic information and
aligned incentives.
In conclusion, Michael Hegarty considered the balance Scorecard as a main
strategic tool to articulate in an effective way the new vision of the Retail bank
through all levels of the organization and achieved the transformation in the Retail
bank culture and organization needed to support the new vision.
2. Why use a balanced scorecard with all these measures?
A BSC system enables organizations to clarify their vision and strategy, providing
the ability to integrate the strategic objectives of a business in 4 different
dimensions and to establish causal links among these objectives in order to
translate the corporate foundations of a company into actionable activities at all
levels of the organization. In the BSC system, each objective must be aligned with
strategy, mission and Vision
In order to effectively track strategic and operation progress, the BSC develops
performance measures that provides basis for testing the execution of the strategy
and its effectiveness in moving the organization toward its goals. The performance
measurement consists in developing meaningful performance indicators and
establishing desired targets for each indicator.
Thus, in the case of Chemical Bank, the main reasons to use a balanced Scorecard
with all these measures are:
· You can't manage what you can't measure
The only way managers can determine if their organizations are on the right path
toward achieving their objectives is by monitoring performance in a discipline and
constant manner. One of the main strengths of a BSC system is its focus on
developing meaningful and concrete measurements of strategic performance. In the
case of chemical bank this feature allowed the organization to keep focused on
performance, stay on track and follow up the results of the strategy
implementation.

6. Thus, managers must be able to monitor and act upon indicators. Indicators are not
relevant if there is no discipline that urges managers to act upon such indicators.
· Provide a broader set of performance indicators including non-financial indicators
One of the strengths of a BSC system is that it relies on other non-financial
indicators in order to measure performance in a more precise and integrate form. In
this way, a BSC system provides a comprehensive set of measures tied to products,
services, processes and operations that represents a clear basis for aligning all
activities with the company's objectives.
For example, Chemical Bank developed several non-financial measures in order to
monitor customer and internal process strategic objectives. One of these measures
was the "Selling Contacts per salesperson". In addition, the case mentions the
efforts of Chemical Bank to find new measures to evaluate employee training.
· Provide Feedback and performance improvement
BSC measures provide permanent feedback respect both the internal business
processes and external outcomes in order to continuously improve strategic
performance and results. Each Key Performance Indicator is aligned to measure
how well the company is achieving its objectives. For example, in order to achieve
and increase in revenues, Chemical Bank must implement an indicator to measure
Revenue Growth Rate and define a standard for such indicator.
· Improve learning and strategy adjustment
As in the case of Chemical Bank, the process of developing a set of meaningful
performance measures allows a better and deeper understanding of key value
drivers and provides a way to identify high value activities and critical internal
processes that must be performed. As top manager at Chemical Bank clearly
understood, BSC is a process of continuous learning and adjusting.
· Importance of measuring operational variables and identifying those key
indicators that need to be measured
In order to develop meaningful performance measures, the organization has to
understand the desire outcomes and the critical processes that are needed to
produce those outcomes. In the case of Chemical Bank, in order to shift the mix of
product and customer, the bank identified certain critical process such as cross
selling, market segmentation and new product development.
It is important to note that there is no right or wrong amount of measures, but is it
is important to be able to define those vital few ones that enable management to

7. assess the 4 dimensions (financial, customer, internal, learning & growth) in order
to achieve the strategy set forth by senior managers.
The main goal of making measurements is to permit managers to see their
company more clearly from many perspectives and hence to make wiser long-term
decisions.
3. How can you assess the quality of a business unit's BSC?
The quality of a business unit's BSC depends among other factors of:
· Quality of each of its components
The main elements of a BSC system are: (i) Business foundations, (ii) Plans (iii)
Business strategic map, (iv) Business objectives, (v) Performance measures, (vi)
Performance targets, (vii) business initiatives.
To assess the quality of a Business Unit's BSC, a first step is to assess the quality
of each of these elements:
(i) Business foundations: A well-defined and clear vision and mission statements
are the cornerstones of a high quality BSC. This is the case of Chemical Bank
whose well-defined mission was to provide superior financial services to targeted
customers.
(ii) Plans: The quality of a business unit's BSC is also directly related with the
quality of the implementation plans. For example, a good communication plan is
indispensable to achieve a high quality BSC.
(iii) Business strategic maps: A key factor to assess the quality of a BSC system is
the level of integration and alignment of its components with the foundations and
overall strategic objective of the company. The BSC strategic maps describe the
cause-effect relationships across the different strategic objectives and define the
objectives for each of the four business dimensions. The Chemical Bank is a good
example of a well-integrated and aligned strategic map.
(iv) Business objectives: High quality objectives are those who are specific, welldefined, tangibles and well aligned with overall corporate strategy and foundations.

8. (v) Performance measures: Meaningful measures are critical for a good BSC
system. Performance measures must be SMART (Specific, Measurable,
Actionable, Relevant, Time Bound). In the case of Chemical bank, the
implementation team was still in process of identifying certain performance
measures for certain objectives that are more difficult to measure due to lack of
reliable information systems or difficulty to identify a critical measure of
performance.
(vi) Performance targets: Must be realistic and consistent with company main
goals.
(vii) business initiatives: Must be specific, achievable, consistent and wellarticulated with business objectives.
· The level of alignment and integration of mission, vision, strategy, business
objectives and performance measures
As previously mentioned, a high quality BSC must establish accurate causal
linkages across the different strategic objectives of each of the four business
dimensions and effectively translate these relations into actions and activities at all
levels of the organization.
· How well communicated and understood are BSC objectives at different levels of
the organization
The level of communication, understanding and commitment at different levels of
the organization with the BSC system and objectives, provides an excellent way to
assess the quality of a BSC system. In the case of Chemical Bank, there still a
pending task to communicate the BSC to lower levels of the organization and
involved more actively these lower levels.
· Linkage of BSC objectives to compensation
A high quality BSC system must link effectively employee compensation to the
strategic business objectives in order to motivate all the organization toward
superior performance in achieving the main goals established. This is the only way
to assure that efforts at all levels of organization are aligned with overall
foundations and strategy of the company. In the case of Chemical Bank, this task
was still in process of completion.
· Balance of a BSC system
A high quality BSC must balance short term vs. long-term goals, financial vs. non-

9. financial objectives and measures, internal vs. external perspectives of the
company.
· Quality of infrastructure and data reliability
A high quality BSC requires high quality infrastructure and systems in place to
measure on a reliable basis the different strategic objectives. In the case of
Chemical Bank, they still needed to build certain databases in order to measure
some of its strategic objectives (For example, customer satisfaction and Employee
training).
· Actionable discipline in monitoring and evaluating results
A high quality BSC must provide permanent feedback respect performance across
all levels of organization.
· Impact in the company organization and performance
The quality of a BSC system can be assessing by the impact in the organization. A
high quality BSC system must cause a major transformation of the organization
culture toward permanent learning, performance focus, feedback, innovation in
products and processes, and finally superior results.
A good BSC system will cause people to think and act differently (more strategic)
respect their organization and their work. It involves a change in minds and
attitudes into an organization.
It also has to generate an impact of Enablers: New Skills, Access to strategic
information, and aligned incentives.