Balancedscorecard 091028001428 Phpapp01

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 2002

Balanced 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
3 years
Saatchi & Saatchi + $2b
Last to first Cash flow +$1.2b ROI 6% --> 16%

2-5 years
ATT Canada
3 years
+ $7b
Cigna
2-5 years
Brown & Root

3 years #1 in growth & profitability
+ $3b City of Charlotte

3 years Customer Satisfaction = 70% Public Official Award
Duke Childrens
Customer Satisfaction #1 Cost/Case 33% 3 years
Southern Garden
3-5 years Least Cost Producer
Wells Fargo
# Customers 450% Best Online Bank 2 years 3 years
Chemical Bank
3 years 99% Merged Target Asset Retention
UPS Hilton Hotels

Customer Satisfaction Market Revenue Index Revenues Net Income 9% 33% 2 years
Question: How can complex organizations achieve results like this in such short periods of time?
Answer:
Alignment!
The Balanced Scorecard process allows an organization to align and focus all its resources on its strategy
BUSINESS UNITS
STRATEGY
EXECUTIVE TEAM
HUMAN RESOURCES
INFORMATION TECHNOLOGY
BUDGETS AND CAPITAL INVESTMENTS

1998 Renaissance Worldwide, Inc. and Robert S. Kaplan, All rights reserved.
A Gap Exists Between Mission-Vision-Strategy and Employees Everyday Actions

MISSION Why we exist VALUES Whats important to us VISION What we want to be STRATEGY Our game plan
TOTAL QUALITY MANAGEMENT What we must improve EMPOWERMENT / PERSONAL OBJECTIVES What I need to do
The Balanced Scorecard Links Vision and Strategy to Employees Everyday Actions
MISSION Why we exist VALUES Whats 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 SHAREHOLDERS Delighted CUSTOMERS Efficient and Effective PROCESSES Motivated & Prepared WORKFORCE
Balanced Scorecard
Balance betwen
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
Can we 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 Good financial results make financing improvements possible
The Complete Balanced Scorecard Strategy Map

Improve Shareholder Value Financial Perspective: the drivers of shareholder value
Productivity Strategy
Shareholder Value ROCE
Revenue Growth Strategy
Improve Cost Structure Cost per Unit Market and Account Share
Increase Asset Utilization Asset Turnover
Enhance Customer Value Customer Profitability Customer Retention Customer Satisfaction Product Leader Customer Solutions
Create Value from New Products & Services New Revenue Sources
Customer Acquisition
Customer Perspective: the differentiating value proposition
Customer Value Proposition

Product/Service Attributes Price Quality Time Function Relationship Service Relations
Low Total Cost Image Brand
Internal Perspective: how value is created and sustained
Operations Theme
Customer Management Theme (Processes that Enhance Customer Value)
Innovation Theme (Processes that Create New Products and Services)
(Processes that Produce and Deliver Products & Services)
Regulatory and Society Theme (Processes that Improve the Environment and Communities)
Learning & Growth Perspective: role for intangible assets people, systems, climate and culture
Human, Information, and Organizational Capital

Strategic Competencies Strategic Technologies Climate for Action
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 isnt? 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
Wont 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 dont 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 wont be perfect, ever
Must evolve
Delay implementation until perfect
See above
The compensation issue
Powerful motivator of performance
Poorly designed 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
Strategy must be reduced to a set of objectives and measures which can be operationalized
We want to be the best wont 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
Monitor short-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 StrategyFocused Organization

TRANSLATE STRATEGY
Mission / Vision Strategy Maps Balanced Scorecard Targets Initiatives ORGANIZATION ALIGNMENT Corporate Role Corporate - SBU SBU - Shared Services External Partners
EXECUTIVE LEADERSHIP
CEO Sponsorship Executive Team Engaged New Way of Managing Accountable for Strategy A Performance Culture CONTINUAL PROCESS Linked to Budgeting Linked to Ops. Mgmt. Management Meetings Feedback System Learning Process
BALANCED SCORECARD
EVERYONES JOB Strategic Awareness Goal Alignment Linked Incentives
#1
Organization: TRANSLATE THE STRATEGY TO OPERATIONAL TERMS

The Strategy
Measurement is the language that gives clarity to vague concepts. Measurement is used to communicate, not to control. Building the scorecard develops consensus and teamwork throughout the organization
"If we succeed, how will we look to our shareholders? Customer Perspective "To achieve my vision, how must I look to my customers? Internal Perspective "To satisfy my customer, at which processes must I excel? Organization Learning "To achieve my vision, how must my organization learn and improve?
Mobil NAM&R Strategy Map

Increase ROCE to 12%
Revenue Growth Strategy

New Sources of NonGasoline Revenue
ROCE Net Margin (vs. industry)
Productivity Strategy
Become Industry Cost Leader Cash Expense (cpg) vs. Industry Maximize Use of Existing Assets Cash Flow
Increase Customer Profitability Through Premium Brands Volume vs. Industry Premium Ratio
Customer Perspective
Share of Targeted Segment Mystery Shopper Score
Non-Gasoline Revenue & Margin
Delight the Consumer Basic

Clean Safe Quality Product Trusted Brand Speedy Purchase
Win-Win Dealer Relations Differentiators

Friendly Helpful Employees Recognize Loyalty More Consumer Products Help Develop Business Skills Dealer Profit Growth Dealer Satisfaction
Build the Franchise Create NonGasoline Products & Services

New Product Acceptance Rate
Increase Customer Value Understand Consumer Segments
Achieve Operational Excellence

Improve Hardware Performance Yield Gap Unplanned Downtime On-Spec On-Time Improve Inventory Management Inventory Levels Run-Out Rate Industry Cost Leader Activity Cost vs. Competition
Be a Good Neighbor
Internal Perspective
Improve Environmental, Health and Safety

Environment Incidents Safety Incidents
Best-In-Class Franchise Teams

Dealer Quality Rating
A Motivated and Prepared Workforce

Climate for Action Competencies Functional Excellence Leadership Skills Integrated View
Strategic Skill Coverage Ratio
Technology Process Improvement
Learning & Growth Perspective
Aligned Personal Growth

Personal BSC Employee Feedback
Systems Milestones
The Balanced Scorecard Framework Is Readily Adapted to Non-Profit and Government Organizations
The Mission
"If we succeed, how will we look to our taxpayers (or donors)?
To achieve our vision, how must we look to 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 organizations 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
CUSTOMER
Target Generous and Loyal Contributors/ Prospects
Focus on Board Investment and Recruitment
Build Artistic Reputation for High Standards
Launch Unique Residency Program for Artists
Present Diverse Repertory
Promote Collaborations
Build Community Support
Focus on Educ./Comm. Programs for Greater Boston
Enhance Customer Relationships INTERNAL BUSINESS PROCESSES
Insure Operational Excellence
Increase Brand Awareness
Streamline Ticketing/Gift Acknowledgement Processes
Increase One-on-One Contact
Improve Board Support Systems
Develop Web-based Service/ Products
Contract Best Talent
Develop Innovation Review Process
Increase Cost Efficiency/Quality Assurance
Launch Comprehensive PR Campaign
Develop New Products/ Program
Develop Strategic Job Competencies
Strengthen Strategic Alignment
Build Growth-Enabling Infrastructure
LEARNING AND GROWTH
Provide Staff with Skill Training
Leverage Board Effectiveness with Education and Fundraising Training
Develop Strategic Communications Plan
Incorporate Milestone Evaluations
Create HR Plan
Invest in Strategic Technologies
Develop Administrative Residency Program
Fiscal Health
Growth Planning
FINANCIAL
Increase Revenue
Systematize Financial Processes
Build Multi-Year Support
Create Long-Term Investment Strategy
Develop Realistic Pro Formas
Institutionalize Multi-Year Budgeting
A KPI Scorecard: The Four Ps

Profits Portfolio (loan volume) Process (ISO certification) People (diversity)
Whats missing from the 4Ps 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 STRATEGY
BALANCED SCORECARD
Principles of the Strategy-Focused Organization: LINK AND ALIGN THE ORGANIZATION AROUND ITS STRATEGY
#3. #1. A Corporate Scorecard defines overall strategic priorities. Each Support Unit develops a plan and BSC for best practice sharing to create synergies across SBUs.
CORPORATE
CORPORATE SCORECARD (Shared Strategic Agenda)

Themes Measures SBU A
LINE BUSINESSES
SBU B SBU C SBU D
SUPPORT UNITS
EXTERNAL PARTNERS
1. Financial Growth 2. Delight the Consumer 3. Win-Win Relationships 4. Safe & Reliable 5. Competitive Supplier 6. Good Neighbor 7. Motivated & Prepared 8. Quality
xxx xxx xxx xxx xxx xxx xxx xxx xx xx xx xx
Finance Marketing Distribution Procurement Purchasing Safety Human Resources Information Technology
Customer Scorecards Distributor Scorecard Joint Venture Scorecard Vendor Scorecard New Venture Scorecard Outsourcer Scorecard
#2. Each SBU develops a long-range plan and BSC consistent with corporate strategic agenda.
#4. Plans and BSCs define relationships with external partners consistent with 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

TRANSLATE STRATEGY
BALANCED SCORECARD
#3
Principles of the Strategy Focused Organization: MAKE STRATEGY EVERYONES EVERYDAY JOB
HR Processes Are Essential for Moving Strategy From the Top to the Bottom
CORP SBU
Top-Down Bridging Process To Share the Strategy & Align the Workforce
EDUCATION PERSONAL GOAL ALIGNMENT BALANCED PAYCHECKS

The Strategy Focused Workforce
Bottom-Up Process to Internalize & Execute the Strategy
Making Strategy Everyones Job

Creating a Climate to Support Strategic Change 1
Create Strategic Awareness
Insure that each individual has sufficient understanding of the strategy (You cant execute what you dont understand) Insure that each individual knows where they fit into the overall game plan
2
Align Personal Objectives
3
Align Incentive Compensation
Reinforce desired behavior and increase intensity of awareness
USM&R Strategic Themes ...

will guide us to our vision and are defined above each graph.
Win/Win Relationship
Improve Dealer/Wholesale Marketer profitability through customer-driven products and services and by developing their business competencies.
Good Neighbor
Protect the health and safety of our people, the communities in which we work, and the environment we all share.
Dealer/Mobil Gross Profit
Environmental Index Composite of: - reportable releases to air and water - reportable spills - community reported incidents.
USM&R Strategic Measures ...

that will keep us focused on achieving USM&Rs strategic themes are explained in the graphs and the bulleted text accompanying them.
Total profit earned at Mobil outlets and split between our dealers/whole-sale marketers and Mobil.
1993
1994
Target
1993
1994
Target
Financially Strong
Reward our shareholders by providing a superior longterm return which exceeds that of our peers.
ROCE Income divided by capital employed including all allocations. 12% 8% 7%
Safe & Reliable

Maintain a leadership position in safety while keeping our refineries fully utilized.
USM&R Days Away From Work Manufacturing Reliability Index
On Spec On Time
Provide quality products supported by quality business processes that are on time and done right the first time.
Quality Index Composite of incidents of: - product off spec - 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

Understand our consumers needs better than anyone and offer them products and services which exceed their expectations.
Competitive Supplier
Provide product to our terminals at a cost equal to or better than the competitive market maker.
Motivated & Prepared

Develop and value teamwork and the ability to think Mobil, act locally.
Mystery Shopper The Mystery Shopper program rates how well each of our stations is delivering the best buying experience. Our cost to deliver product to the terminal vs. lowest cost provider.
Laid-down Cost Survey of employees to measure how people perceive the Mobil workplace environment.
Climate Survey
1993
1994
Target
1993
1994
Target
1993
1994
Target
Employee Innovations: Mobil Speedpass

Insure that each individual has sufficient understanding of the strategy (You cant execute what you dont understand) Insure that each individual knows where he or she fits into the overall game plan
2 Align Personal Objectives 3

Ultimately, Team and Individual Goals and Objectives Are Aligned to the Strategy
A performance model provides the framework for cascading and aligning personal goals
Customer Example Corporate Parent Customer Satisfaction Customer retention On time delivery First Pass Yield Schedule Adherence Line Availability Schedule adherence Division Financial Example
Corporate Measures Balanced Scorecard Financial
250 225 70 Earnings Net Cash Flow Overhead & Operating Expense
A personal scorecard focuses individuals on the part of the performance model they can impact
Business Unit Measures

1993 1994 1995 1996 Targets 1997 1.
Individual Goals
And Near Term Action Steps
Operating Margin
1993
1994
1995
1996 Targets
1997
100
120 450 85
160 200 80
180 210 75 Targets
Operating Margin
Variable Costs Period Expenses Variable Costs Mfg Overhead Scrap rate Labor/ Unit

100 100
Operating
64 82 110 Overhead & Operating Costs Finding & Development Costs Total Annual Production
(Indexed: 1993=100)
Targets
2.
100 100 100
75 97 105
73 93 108
70 90 109
VP of Opns
3.
Plant Manager
Corporate Objectives
Double our value in 10 years. Increase our earnings by an average of 20% a year Achieve an internal rate of return 2% above the cost of capital. Reduce our overhead & operating costs by a further 30% by 1997. Reduce our 5-year average finding & development costs by 20%. Reach the top quartile of industry profitability by 1997. Increase production by 10% by 1997.
Individual Measures
1. 2. 3. 4. 5. 4.
Shift Supervisor
If we can achieve all these business objectives, we will be a top quartile competitor
Name: Location:
5.

Insure that each individual has sufficient understanding of the strategy (You cant execute what you dont understand) Insure that each individual knows where he or she fits into the overall game plan
2
Align Personal Objectives
Mobil USM&R Incentive Plan

Poor Average Best-in Industry
Base Pay
Corporate Award (Return-on-Capital, Earnings Growth)
90%
0-1
90%
3-6
90%
10
USM&R/SBU
M&R (30%) SBU (70%) Total Pay (% of Market) 91% 98-104% 120% 0 5-8 20
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 the calculations to see how much money they were going to get. We could not have got the same focus on the scorecard if we didnt have the link to pay. Brian Baker, Mobil It would be hard to get people to accept a totally different way of measurement - which the BSC is - if you dont reinforce that change through incentive compensation. Gerry Isom, CIGNA Mercer survey of compensation practices in 214 companies (1999) 88% of responding companies consider the use of balanced scorecard measures linked to reward systems to be effective.

TRANSLATE STRATEGY
CEO Sponsorship Executive Team Engaged New Way of Managing Accountable for Strategy A Performance Culture CONTINUAL PROCESS Linked to Budgeting Linked to Operational Improvements Management Meetings Feedback System Learning Process
BALANCED SCORECARD
Making Strategy a Continual Process

Imbed the Strategy in Ongoing Management Processes 1 Integrate Strategy
with Planning and Budgeting
Establish stretch targets; Select initiatives, Align operational improvement programs (TQM, Six Sigma, Activity Based Management); Allocate resources to projects Develop systems for data collection, analysis, and reporting
2
Introduce the New Reporting System
3 Conduct the New

Management Meeting
Open discussion of performance shortfalls; team problem-solving; adapting and learning
Mobil NAM&R: Setting Targets and Performance Factors

Business Group Variable Pay Opportunity . . . . . .
Variable Pay Percent 20
Performance Factor 1.25 1.20 1.15 1.12 1.09 1.06 1.03
Qualitative BEST IN CLASS Well Above Average

How to think about performance factors: Objective:
Above Average Average
External Benchmark 1.00 means target equals the average of competition 1.25 means target equals the top of the competitive group Subjective: Internal Benchmark 1.00 means the difficulty of the dive is average
1.00 0.90 0.80
0.75
Below 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 Strategic Initiative Consideration
OFS Projects, Activities, etc. Marketing Projects, Activities, etc. Development Projects, Activities, etc. Other Projects, Activities, etc.
Criteria
Initiative:
Strategic Thrust(s): Primary Strategic Objective:
2 Screen Candidates to Identify Those That Qualify as Strategic
E-Bill Presentment
Area Strategic Importance Cost Benefit Required for Other Initiatives/Dependencies Time to Implement Overall Score Score
AC/IR/RC
Continue Leadership in Superior Products
Points 8 -2 4 1 -2 9
Comments
The killer application X $ $ X # months X
Ranking
Initiiative
Strategic Thrust(s) and Objectives(s) AC/IR/RC Cont. Leadership in Superior Products
Strategic Importance
Cost
Benefit
Required for Other Initiatives/ Time to Implement Dependencies
Overall Score
Overall Points
3 Select Strategic Initiatives
E-Bill Presentment
Prioritized List of Strategic Initiatives

TRANSLATE STRATEGY
BALANCED SCORECARD
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 STRATEGY
BALANCED SCORECARD
Reporting and Feedback: Monthly Scorecard Summary

Financial
Maximize Shareholder Value Meet or Exceed Commitments Manage Investment Base Customer Satisfaction and Loyalty Service Quality Priority On Safety Reputation, Brand and Trust Profitably Acquire, Retain and Manage Customers
Above target On Track (within limits) Significantly below target Data Not Available
Customer
Competitive Price
Internal Processes
Reliability and Cost Excellence
Develop, Acquire and Retain Profitable Supply Positions
Favorably Positioned for Success in a Competitive Environment
Legend
Priority on Safety and Environmental Excellence
Effectively Manage Risks
Learning & Growth
Develop, Acquire and Retain Needed Skills
Promote Innovation and Best Practices Sharing
Promote Diversity
Live Co Values (common version)
Regulatory and Legislative Compliance
Effective Strategic Management Is Based Upon a Double Loop Learning Approach

The Strategy
Financial Perspective Customer Perspective
Strategic Feedback That Encourages Learning
Internal Perspective
update the strategy
Learning Perspective
incorporate learning
Test
Strategic Learning Loop

Balanced Scorecard
Financial
Strategic Objectives Financially Strong Delight the Consumer Win-Win Relationship Safe & Reliable
Strategic Measures Return of Capital Employed Mystery Shopper Rating Dealer/Pioneer Gross Profit Split Manufacturing Reliability Index Days Away from Work Rate Laid Down Cost vs. Best Competitive Ratable Supply Strategic Competency Availability
corrections
Competitive Supplier
result
Operational Control Loop

Performance
L&G
Motivated & Prepared
hypotheses about your strategy Assess changes in the environment Identify emerging strategies
Internal
Cust
input
Initiatives & Programs
output

TRANSLATE STRATEGY
BALANCED SCORECARD
To Succeed, the Executive Leader Must be Engaged in the Strategic Change Process
Unfreeze
Achieve commitment and momentum at the top
Change
Align and focus the organization on change
Breakthrough and Sustain

Institutionalize capabilities 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 Ps)
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 Architecture Project Kickoff

Task 2: Draft the Balanced Scorecard Workshop I Task 3: Develop Measures, High Level Targets & Initiatives Workshop II Task 4: Develop Implementation Plan Workshop III
2 Wks
4 Wks
4 Wks
2 Wks
Balanced Scorecard Project Team

BSCol Engagement Officer/ Principal (part-time) Overall project ownership Consultations/pre-presents as needed
Executive Sponsor/ Steering Committee
BSCol Project Leader (full-time)
2 days/week Client Project Leader Executive Leadership Team
BSCol Project Team
Client Core Team Staff knowledgeable of business strategies and organization
1-2 staff 2-3 days/week Briefings with others as needed
3 half- to full-day workshops One 90-minute briefing/ interview Consultations/ pre-presents as needed
1-2 Consultants (full-time)
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 Some progress No or limited results 15% 64% 21% (n = 19) (n = 80) (n = 26)
What Separates the Winners from the Losers?

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

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The Balanced Scorecard

Planning for long-run organizational success

The Balanced Scorecard: A Good Idea in 1992

The Balanced Scorecard: A Great Idea by 2002

Saatchi & Saatchi + $2b

Last to first Cash flow +$1.2b ROI 6% --> 16%

Brown & Root

+ $3b City of Charlotte

UPS Hilton Hotels

BUDGETS AND CAPITAL INVESTMENTS

A Gap Exists Between Mission-Vision-Strategy and Employees Everyday Actions

Financial measures of performance Long-range competitive abilities

Four aspects of firm performance

Financial Customer Internal business Innovation and learning

How do we look to stockholders?

Survive Succeed Prosper

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

Can we continue to improve and create value?

Technological leadership Time to market Employee training and satisfaction

Perspectives are Interrelated

The Complete Balanced Scorecard Strategy Map

Revenue Growth Strategy

Increase Asset Utilization Asset Turnover

Customer Perspective: the differentiating value proposition

Customer Value Proposition

Low Total Cost Image Brand

Internal Perspective: how value is created and sustained

Customer Management Theme (Processes that Enhance Customer Value)

Innovation Theme (Processes that Create New Products and Services)

(Processes that Produce and Deliver Products & Services)

Human, Information, and Organizational Capital

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

Not a quick process

Thought Analysis Data-gathering Time

What is our strategy?

What are the linkages between functions?

What data is available? What isnt? How should it be gathered? Reported?

Cannot be done in an afternoon

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

Wont produce buy-in

Interview senior managers

Senior managers develop tentative scorecard as a group

Larger group refines tentative scorecard

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

Link to data bases and information system

The scorecard evolves with the organization

The Road to Disaster

Senior management not committed