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May 15-17, 2007 Las Vegas, NVBalanced Scorecard Collaborative/Palladium • 55 Old Bedford Road • Lincoln, MA 01773 • Tel: 781.259.3737 • Fax: 781.259.3389 • bscol.com
Aligning Business and Support Units to Enterprise Strategy
Dr. Robert S. KaplanBaker Foundation ProfessorHarvard Business School
Chairman, Professional Practice CommitteeThe Palladium Group/Balanced Scorecard Collaborative
2©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
The Balanced Scorecard Model of Value Creation
Private Sector Organizations
"If we succeed, how will we look to our shareholders?”
"To achieve our vision, how must we look to our
customers?”
"To satisfy our customers and shareholders, at which processes must we excel?”
“How do we align our intangible assets to improve critical processes?”
“How do we have a social impact with our citizens/constituents?”
Mission (Customer) Perspective
“To have a social impact and to attract resources and support, at which processes must we excel?”
“How do we align our intangible assets to improve critical
processes?”
“How should we manage and allocate our resources for maximum social impact?”
Financial Perspective
Customer Perspective
Process Perspective
Learning & Growth
Process (Operational Capacity)
Learning & Growth
Financial
“How do we attract resources and authorization
for our mission?”
Support Perspective
Non Profit and Public Sector Organizations
3©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Most organisations do not know how to execute strategy.
Between 1988 and 1998, only 13% of companies were able to deliver 5.5% annual real earnings growth and deliver returns that covered their cost of capital.
Only 15% of the 794 programs reviewed in Fiscal
2005 were rated effective.
- Fortune Magazine - Barron’s
- Chris Zook, Profit From the Core
Companies on average realize only 60% of the financial performance their strategies promise... more than one-third of executives surveyed placed the figure at less than 50%.
- Harvard Business Review
Less than 10% of strategies effectively formulated are
effectively executed.
4©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
According to a recently completed Monitor study, strategy execution is the single most important issue to the executive suite.
"Using a 1-5 scale, please rate the level of interest / concernyou have in the following business issues at present.”
2.953.07
3.263.35
3.463.513.533.703.703.723.73
3.983.78
1
2
3
4
5
All Positions n = 354
Executing the strategy
Markettrends
Regulatory, compliance, and risk management
Growing the top line
Customer service
Forecasting & reporting effectiveness
Product / service fulfillment
HR
Product innovation / time to
market
IT capabilities ITO / BPO Investor relations
SCM
Source: Monitor Analysis. Survey of 354 executives; 49% of respondents are C-level and 56% are from companies with revenue greater than $1 billion
5©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Do you have a formal strategy execution process in place?
Describe your organization’s current performance.
Yes No
(54%) (46%)
….We have breakthrough results…we are performing better than our peer group Sub-Total
12%58%70%
7%20%27%
…performing at the same level as our peer group.…performing at a lower level than our peer group…not performing at a sustainable level Sub-Total
18%9%3%30%
30%27%16%73%
Winners
Losers
Source: BSCol Research (Survey of 143 performance management professionals, drawn from BSCol On-Line Community, March 2006)
Organizations with a formal strategy execution process in place are dramatically outperforming organizations without formal processes.
6©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Balanced Scorecard Hall of Fame for Executing Strategy By Industry 2000 – 2006
7©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
The typical benefits from successfully executing strategy are dramatic.
SM
MATURITY
Hall of Fame Company Descriptions
• Stakeholder satisfaction rose 9% to 16%• Saved $20 million in one year on protective policing• Viewed as model organization by funding
organizations (4 years)
Royal Canadian Mounted Police
• Successful merger of 2 mega-banks• Net business profit increased 117%• Moody’s / S&P credit rating from A2 /BBB to A1/A
(2 years)
• Revenues from $1.8B to $9.8B• Number one in market share (22%)• Customer satisfaction awards (4years)
(4 years)
• Wireless data revenue up 74%• Fortune – Most admired innovator• Forbes – One of 26 best managed
(3 years)
• Industry leading margins• Customer loyalty up• Cost per room down• Industry leading stock growth
• Inventory turnover from 1.4 to 3.7• Operating profit grew 70%• Output per employee grew 65%
(3 years)
• Exports doubled in value• Debt down 36%• Growers’ price yield increases from 84% to 93%
(3 years)
China Resources Microelectronics Coffee Growers of Columbia
• Turned $100M loss to $100M profit• 55% target market share• 40% revenue growth
(2 years)
Commercial Vehicle Business Unit
• Return on assets from 16% to 137%• Market share = 2X nearest competitor• World class call centers
(3 years)
CGISS
8©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Strategy-Focused (Hall of Fame) Organizations Use Five Strategy Execution Principles
IV. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB
I. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP
III. ALIGN THE ORGANIZATION TO THE STRATEGY
V. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS
II. TRANSLATE STRATEGY TO OPERATIONAL TERMS
9©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Strategy Maps and Balanced Scorecards Translate Strategy into Action
IV. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB
I. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP
III. ALIGN THE ORGANIZATION TO THE STRATEGY
V. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS
II. TRANSLATE STRATEGY TO OPERATIONAL TERMS
2.1 Strategy translated in strategy map 2.2 Strategy described in Balanced Scorecard
2.3 Targets identified for all measures
2.4 Strategic initiatives rationalized
2.5 Executives accountable for initiatives
10©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
SupplyProduceDistributeManage Risk
OperationsManagement Processes
Process Perspective
EnvironmentSafety & HealthEmploymentCommunity
Regulatory & Social Processes
Select CustomersAcquire New CustomersRetain Existing CustomersGrow Business with
Customers
Customer ManagementProcesses
Information Capital
Organization Capital
Culture Leadership TeamworkAlignment
Identify New OpportunitiesSelect the R&D PortfolioDesign and DevelopLaunch
InnovationProcesses
Learning & Growth Perspective
Human Capital
Relationship Image
Customer Perspective
Customer Value Proposition
Price Quality Availability Selection Functionality Service Partnership Brand
Product / Service Attributes
Financial Perspective
Long-Term Shareholder Value
Productivity Strategy Growth Strategy
Enhance Customer Value
Improve Cost Structure
Increase Asset Utilization
Expand Revenue Opportunities
The strategy map aligns processes and intangible assets to deliver value to customers and shareholders.
11©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
University of Leeds Strategy Map:
15070426_Strategy-Execution_IrishMgt_Inst_Norton_PRINT
12©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Strategy-Focused Organization Use a Best Practices Framework
IV. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB
I. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP
III. ALIGN THE ORGANIZATION TO THE STRATEGY
3.1 Corporate contribution to strategy
defined
3.2 Enterprise scorecard guides business
units 3.3 Enterprise
scorecard guides support units 3.4 Scorecards align suppliers and/or
customers3.5 Scorecard reports to board and/or shareholders
V. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS
II. TRANSLATE STRATEGY TO OPERATIONAL TERMS
13©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
3. Alignment: Cascade & Integrate Objectives Throughout the Organization
Corporate Scorecard
Business Units
Scorecard Cascade
Departments
Shared Services
Teams & Individuals
Corporate Scorecard
Business Units
Scorecard Cascade
Departments
Shared Services
Teams & Individuals
14©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
University of Leeds Cascades its University Strategy Map Out to Each Academic Unit
Defined set of University Measures
Develop key University Targets
Develop Faculty Measures
Develop key Faculty Targets
15©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Senior executives, business unit managers, and the CIO struggle with managing the IT resource.
The three essential questions:
The CIO asks:
How can IT meet the growing needs of its customers (the business units) given the constraints placed on its resources?
The CEO and CFO ask:What is the return from
our investment in Information
Technology?
Business managers ask:Why can’t you run IT more like a business
(and focus on me, your customer)?
16©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
HR
IT
FIN
Strategic Support Service Portfolio
Enterprise Strategy
(Strategy Map)
1 2
Strategic Support Services Form the Bridge Between Enterprise and Functional Strategy
• Technology Infrastructure• Transaction Processing
Applications • Analytic and Decision
Support Applications
Strategic Information Capital Portfolio
• Strategic Competency Development
• Organization and Leadership development
• Performance Management Process
Strategic HR Service Portfolio
• Transactions, Controls & Processing
• External Compliance & Communication
• Planning and Decision Support Services
Strategic Financial Service Portfolio
17©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Serve the National Interest and Increase Shareholder Value
Business and Technology Leaders say:“Guarantee secure,
reliable, high-quality
solutions” – C1
“Deliver on commitments to
enable my Mission Success” – C3
“Showme the value” –
C2
“Understand my unique business and
customer” – C4
“Innovate withme to win
business andkeep it sold” –
C5
Run the Business Earn Trusted Partnerships Advance the Business
Achieve Operational Excellence Through Disciplined Performanceexecutes
Magnify the Power of
Aerospace Inc.
Through IT
to
that
Our Diverse, Empowered Workforce
Realize theReal-Time Net-Centric
Strategy
Focused Actions
Anticipate, influence, and deliver on expectations –
P11
Strengthen communication, interactions, and relationships –
P10
Understand and manage unit costs – P5
Drive standardization
and consolidation –
P1
Optimize portfolios of assets,
initiatives, and service offerings –
P4
Effectively select and leverage suppliers – P2
Excel at program management and system
engineering – P3
Aggressively pursue knowledge of business strategies – P9
Live our values and demonstrate SPIRIT –
W2
Attract, develop, and retain a talented, energized, strategy-focused workforce
– W1
Promote creative thinking and innovative solutions – W3
Transform AI through effective collaboration,net-centric capabilities,
and innovative solutions – P13
Aerospace Inc. Enterprise Information Systems Strategy
Build the next generation
infrastructureand business systems – P6
Drive process improvement
through innovative
information access – P7
Continuously improve solutions, performance, and responsiveness –
P8
Accelerate horizontalintegration – P12
Improve margins – V1 Leverage investments – V2 Grow revenue – V3
18©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Strategy-Focused Organizations Use a Best Practices Framework
4.1 Strategic awareness created4.2 Personal goals aligned4.3 Personal incentives aligned4.4 Competency development aligned
IV. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB
I. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP
III. ALIGN THE ORGANIZATION TO THE STRATEGY
V. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS
II. TRANSLATE STRATEGY TO OPERATIONAL TERMS
19©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Motivate to Make Strategy Everyone’s Job
Create Strategic awareness : “Communicate seven times seven different ways”— Personal relevance (WIIFM) brings the strategy to life— Sustained communication uses different channels to get the message across
• Leadership meetings• CEO random visits to employees• Dear Colleague Quarterly Letter in Mellon News• Learning lunches & informal discussions• Intranet• Working groups facilitated by HR• Staff briefings
Source: Presented by Jack Klinck, Vice Chairman, Mellon Europe at BSCol European Summit, June 2005
20©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
You can’t tell them just once. “Communicate Seven Times, Seven Ways”
Posters Portal&
Website
Publications
Rolling Status
2
Translate our strategic priorities into operational
termsCompany & Functional
Strategy Maps authored
Training:Acting on a QSR Report,
Competency and Contribution (StratConn 2)
Consistent review of each objective, focus
Engage QSR focus and
measurement tool
Review organizational
structure
Training: Our Strategy (Strategy Connections Mod. 1)
Awareness
Early QSRs
2 1
SFO
Translate Strategy
Executive Leadership
Organization Alignment
Continual Process
Everyone's Job
4
53
Developchange mgmt,
mobilization, and communication
plans
Operationalize our Strategic Priorities
•Foci•Measures•Initiatives
EIS Balanced Scorecard created
Synchronize strategy content with changed customer business
and technology environments
Align Focus / Strategic Priority throughout the
organization
Horizontally flow objectives across organizations using
new Horizontal Team capability
Strategy mgmt processes and
tools standardized,
simplified
Learnings from the QSRs reflected in
Strategy
Business Area Strategy MapsIS&S, Aero, I&TS, Space
Bus. Unit Strat.
Maps (MS2,
…)
PRS Objectives aligned to Strategy
QSR cross-pollination across orgs
Shared Focus
in QSRs
QSR Measures
span orgs,reflect flow
Accountable org forEIS per-objective performance set
Eliminate roadblocks,
accelerate flow per objective
Quarterly focus, perf. to strategy viewable by all
All-employee actions by objective on
PASSPORT
Aligned PAs meet,
exploit comm. channel
Distinct org contributions, foci declared
Alignment analyzed
Orgs teamed by
objective shared focus
Knowledge Base, Guidance Center
Stage 1: The Launch
(6-12 Months)
Stage 3: The Strategy RefreshThe Heavy Lifting
(24-36 Months)
Stage 2: The Early Execution
(12-24 Months)
Year Over Year Conceptual SummaryYear Over Year Conceptual SummaryOur Strategy ManagementOur Strategy Management
Rebranding
Deep dives align activity to strategy
All-PAs Focus
Alignment speeds cross-org excellence to red objectives
Training
© Lockheed Martin Enterprise Information Services
21©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Alignment: “Put Yourself On The Map”
© Lockheed Martin Enterprise Information Services
22©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Making Strategy a Continual Process: The role for scorecards and dashboards
IV. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB
I. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP
III. ALIGN THE ORGANIZATION TO THE STRATEGY
V. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS
II. TRANSLATE STRATEGY TO OPERATIONAL TERMS
A. RESOURCE MANAGEMENT 5.1 Budget is driven by strategy
5.2 Planning linked to strategy
5.3 Portfolio of strategic initiatives aligned to themes
B. KEY PROCESS MANAGEMENT
5.4 Process improvement aligned to strategy
5.5 Best practice sharing in place
C. LEARNING & CONTROL
5.6 Strategy reviewed and adapted on a
regular basis
5.7 Data and analytics guide strategy
How the Closed-Loop Management System Links Strategy and Operations
b. Hold strategy reviews
a. Define strategic objectives and themes
b. Select measures and targets
c. Select strategic initiatives
d. Align the organization
2. STRATEGY TRANSLATION
1. STRATEGY DEVELOPMENT
a. Hold operations reviews
5. STRATEGY TESTING AND ADAPTING
3. OPERATIONAL PLANNING
a. Improve key processesb. Develop sales forecastc. Plan resource capacityd. Prepare budgets
a. Define mission, vision, and values
b. Conduct strategic analysisc. Formulate strategy
a. Conduct profitability analysisb. Conduct strategy correlation
analysisc. Examine emerging strategies
4. MONITORING AND LEARNING
Process
Initiative
EXECUTION
. .
Strategic Plan
Strategy MapStrategy Map
StratEx
Balanced Scorecard
Operating Plan
P&L’sP&L’s
OpEx/CapExOpEx/CapEx
DashboardsDashboards
ResultsResults
24©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Linking Process Management to BSC Strategic Processes
Atuação diferenciada nos mercados doméstico e internacional
PerspectivaFinanceira
Perspectiva Mercado
Perspectivade ProcessosInternos
Ter custos competitivos
segundo padrões internacionais
Fortalecer imagem da marca Petroflex
Garantir rentabilidade e atratividade do
negócio
PerspectivaAprendizado eCrescimento
Desenvolver competências estratégicas
Desenvolver Logística
integrada com níveis
adequados de capital de giro
Aumentar participação de
produtos de maior valor agregado
Prover tecnologia de informação que
sustente os requisitos do
negócio
Conscientizar pessoas para atuar
de forma responsável
SER RENTÁVEL EM 23% DO CAPITAL INVESTIDO E AUMENTAR O VALOR DA EMPRESA PARA US$ 300 MILHÕES EM 5 ANOS
Garantir plena utilização das
plantas
Fortalecer presença no
mercado externo
Reenergizarpessoas
fortalecendo a gestão por resultados
Estreitar relacionamento com centros de
decisão dos clientes chave
Ser ágil e efetivo no desenvolvimento de soluções orientadas
aos clientes
Excelência Operacional Gestão de Clientes
Aumentar o valor da empresa
Otimizar custos fixos
Responsabilidade Social e Corporativa
Desenvolvimento Aplicado
Sustentar níveis de excelência em segurança, saúde e meio
ambiente
Garantir flexibilidade Operacional
Explorar novos negócios de forma
seletiva
Aumentar participação de
outros clientes de pneus
Sustentarcrescimento na Indústria Geral
Perseguir boas práticas de GovernançaCorporativa
Buscar diferenciais competitivos percebidos e
valorizados pelos mercados
Utilizar recursos com eficiência
Manter níveis adequados de endividamento
Strategy Map
To achieve this strategic process objective, how must we improve?T
axe
s
Dis
trib
uti
on M
arg
in
Inve
stm
ent
in P
hys
ical S
pace
/In
vento
ry
Sm
all
Quanti
ties
Mate
rial S
elec
tion (
Rubber
, O
ther
Chem
icals
)
Form
ula
tion s
upport
Oper
ati
ng p
roce
dure
s
Qualit
y C
ontr
ol and T
esti
ng P
roce
dure
s
Yie
ld /
Scr
ap B
ench
mark
s
Exp
ort
Support
Gen
eral M
gm
t Tra
inin
g
“Rubber
Univ
ersi
ty”
Equip
men
t S
elec
tion S
upport
Equip
men
t M
ain
tenance
Support
Sec
ond H
and E
quip
men
t Tra
din
g
Capaci
ty T
radin
g
KEY-ATTRIBUTES
RELA
TIV
E O
FFER
ING
LEV
EL
AS-I S VALUE PROPOSI TI ON
TO-BE VALUE PROPOSI TION
A completely new set of value attributes
Important value attributes fixes
23. DEVELOP STRATEGY
COMPETENCI ES
21. SUPPLY INFORMATI ON
TECHNOLOGY THAT SUPPORTS BUSINESS
REQUI REMENTS
24. AWARE PEOPLE TO ACT IN A RESPONSI BLE
MANNER
16. HAVE A STRONG
PRESENCE AT EXTERNAL MARKET
22. EMPOWER PEOPLE AND
FORTIFY VALUE-ORIENTED MGMT
CUSTOMER MGMT
17. SEARCH LONG TERM
RELATI ONSHI PS ALONG WITH
TARGET CUSTOMERS
18. BE AGI LE AND EFFECTI VE ON THE DEVELOPMENT OF
CUSTOMER-ORI ENTED
SOLUTI ONS
APPLIED DEVELOPMENT
BE CONTI NUOUSLY I NNOVATI VE ON OUR PRODUCT
LINES
HAVE AN IN-DEPTH UNDERSTANDING
ABOUT OUR MARKETS AND THEI R TARGET-
SEGMENTS
HAVE A CONTINUOUS MONI TORING
PROCESS RELATED TO OUR
PRODUCTS PERFORMANCE
CRI TI CAL SUCCESS FACTORS
25©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
18. BE AGILE AND EFFECTIVE ON THE DEVELOPMENT OF
CUSTOMER-ORIENTED SOLUTIONS
% Performance-Controlled Products
# of Co-created Proposals
# of Protected Ideas
RDEI - R&D Effectiveness Index Time-to-Market
Strategic Objective and Metrics
Critical Success Factors
Business Processes Metrics
Linking a Balanced Scorecard R&D strategic objective to critical success factors and metrics.
BE CONTINUOUSLY INNOVATIVE ON OUR
PRODUCT LINES
HAVE AN IN-DEPTH UNDERSTANDING ABOUT
OUR MARKETS AND THEIR TARGET-SEGMENTS
HAVE A CONTINUOUS MONITORING PROCESS
RELATED TO OURPRODUCTS PERFORMANCE
IDEA TESTING
NEW PRODUCTSPLAN AND STRATEGY
DEVELOPMENT
ESTABLISH PRIORITIES AND PROTECT NEW
PRODUCT IDEAS
PROPOSALS DEVELOPMENT
SCHEDULING, BUDGETING AND
PRIORITIES ESTABLISHING
SALES AND NEW PRODUCTS
DEVELOPMENT EVALUATION
26©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Dashboards articulate the critical link between strategy management and operations management
MAP MODEL MOVE
THEME linked to PROCESS PROCESS linked to
METRICSMETRICS improve PROCESS
PROCESS supports THEME
Identify operational processes key to executing strategy and manage those processes using analytical models rather than instincts
Analytical models identify drivers to the process and display these drivers on a dashboard accessible to managers that can make an impact
Drivers include not only financial (lagging) metrics, but operational, environmental, demographic, and other situational leading indicators
Models will be updated with actual results and the cause-and-effect correlations will be improved
Dashboards tailored based on the user and the ability to “drill-down” from a strategic objective to a low-level operational metric maintained across the enterprise value chain
27©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
With advances in technology, next-generation dashboards can now fulfill the role of full-fledged performance management tools
Advanced visualization methods, with ability to represent large, complex data sets, makes information “actionable”
Alignment to strategy – focused on processes that are key to overall strategy execution
Ability to display data from multiple sources, mix of quantitative and qualitative information
Pre-defined navigation paths to facilitate analysis and improve user experience, improved audit trails and data transparency
How the Closed-Loop Management System Links Strategy and Operations
b. Hold strategy reviews
a. Define strategic objectives and themes
b. Select measures and targets
c. Select strategic initiatives
d. Align the organization
2. STRATEGY TRANSLATION
1. STRATEGY DEVELOPMENT
a. Hold operations reviews
5. STRATEGY TESTING AND ADAPTING
3. OPERATIONAL PLANNING
a. Improve key processesb. Develop sales forecastc. Plan resource capacityd. Prepare budgets
a. Define mission, vision, and values
b. Conduct strategic analysisc. Formulate strategy
a. Conduct profitability analysisb. Conduct strategy correlation
analysisc. Examine emerging strategies
4. MONITORING AND LEARNING
Process
Initiative
EXECUTION
. .
Strategic Plan
Strategy MapStrategy Map
StratEx
BSC
Operating Plan
P&L’sP&L’s
OpEx/CapExOpEx/CapEx
DashboardsDashboards
ResultsResults
29©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Operational Review Meetings: Role for KPI Dashboards— Frequent (daily, twice weekly, weekly)— Departmental and functional personnel— Identify and solve operational problems (late deliveries,
equipment downtime, supplier problems)— Promote continuous improvement (better, faster, cheaper)
Companies use strategy scorecards and operational dashboards to inform their different management meetings.
Strategy Review Meetings: Role for Balanced Scorecard and Time-Driven ABC Reports — Monthly— Management team; cross functional, multiple business units— Discuss and solve problems with strategy implementation— Manage product and customer profitability
30©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Identify Performance Issues: Focus on the performance of objectives NOT measures.
What are the measures telling us? Are the measures driving change and adding focus?
Analyze Objective Performance:
Take Action: Discuss and agree on how to remedy issues. Assign accountability to ensure decisions are
implemented.
What are the root causes of what’s occurring? What are the expectations for the future? And, are current initiatives sufficient to close the performance gap?
What action steps – including additional or different initiatives - are required to improve performance going forward?
Are initiative on track to deliver expected value? If not, why and what can be done to remedy issues?
Use of a BSC Report in Strategy Review Meetings1
3
5
2
4
The leadership team uses the BSC to review performance, test strategic hypotheses and make informed decisions
Objective:
Discussion/Update:
Recommendations/Required Actions:
Person(s) Responsible: Due Date: Priority (A, B, C):
Action Item Detail:1. 2. 3.
6
7
ILLUSTRATIVE
I03 Identify Adverse Trends
Support trends
IO3 Identify Adverse Trends
K01 Develop Quality Tracking Program
K01 Develop Quality Tracking Program
Develop program to track all incident root causes identified during reviews and perform trend analysis
Application needs to be selected within next 60 days to stay on schedule
How the Closed-Loop Management System Links Strategy and Operations
b. Hold strategy reviews
a. Define strategic objectives and themes
b. Select measures and targets
c. Select strategic initiatives
d. Align the organization
2. STRATEGY TRANSLATION
1. STRATEGY DEVELOPMENT
a. Hold operations reviews
5. STRATEGY TESTING AND ADAPTING
3. OPERATIONAL PLANNING
a. Improve key processesb. Develop sales forecastc. Plan resource capacityd. Prepare budgets
a. Define mission, vision, and values
b. Conduct strategic analysisc. Formulate strategy
a. Conduct profitability analysisb. Conduct strategy correlation
analysisc. Examine emerging strategies
4. MONITORING AND LEARNING
Process
Initiative
EXECUTION
. .
Strategic Plan
Strategy MapStrategy Map
StratEx
Balanced Scorecard
Operating Plan
P&L’sP&L’s
OpEx/CapExOpEx/CapEx
DashboardsDashboards
ResultsResults
32©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
A systematic selection approach supports unlocking the full potential of the Balanced Scorecard management system
Software Role in Strategy Management
clearly communicate strategy and measures across the organization
display linkages among objectives, measures, and initiatives
capture and analyzing performance data across the organization
provide relevant information on results in a clear, concise and useful manner
Application software should support the Balanced Scorecard approach to creating a Strategy-Focused Organization:
33©2007 Balanced Scorecard Collaborative and Robert S. KaplanThe Objectives and Measures shown are for illustration purposes only.
Illustrative
34©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
What Are Some of the Benefits from Automated BSC Solutions?
“You don’t have to wait for the next meeting to be informed. Management meetings focus only on the real issues…. We expect to save $5 mm a year from administration costs alone by replacing spreadsheet managed Balanced Scorecards with [an automated application].”
Peter Geelen, CIO Philips Corporate Control
“Instant communication…. Easy to understand view of the data…. Saves 20 – 40 hours of labor per month preparing charts…. Saves management time reviewing results.”
Ben Patterson, Unisys Corporation
“[The integration of an automated BSC application has increased the] visibility that we are experiencing around the intangibles, the knowledge, the idea generation and helping that differentiate what we do.”
Michael Collins, WorldTravel BTIFormally McCord Travel Management
35©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Strategy-Focused Organizations Use a Best Practices Framework
IV. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB
I. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP
III. ALIGN THE ORGANIZATION TO THE STRATEGY
V. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS
II. TRANSLATE STRATEGY TO OPERATIONAL TERMS
1.1 Leaders drive strategy execution 1.2 Executives make case for change1.3 Leaders reinforce strategic priorities
1.4 Well articulated strategy exists
1.5 Office of Strategy Management established
36©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Strategy Management: An Emerging Professional Group
Managing Strategy CSMO
Managing Customers
• Market Research• Brand Management
Managing Technology
• Engineers• Scientists
Managing Quality
• Black Belts• ISO Certified
Managing Money
• Accountants (CPAs)• Controllers
Executive Team
Held together bya shared view of
the strategy
Managing People
• Aligning and Developing Human Capital
CFO
CIO
CHCO
MKTG
OPS
CEO
37©2007 Balanced Scorecard Collaborative and Robert S. Kaplan
Employee Alignment
Q1 Q2 Q3 Q4
Strategy Management
ProcessesAnnual Cycle
Enterprise Strategic Planning
Organization Planning and
Alignment
Financial & Resource Planning
Management Control & Learning
Annual Update of Strategy• Clarify Vision• Adapt Corporate Strategy
Planning / Budgeting• Budgets• Plans • Initiatives
Employee Alignment• Personal goals• Employee incentives• Personal development
Review Strategy and Operations
Share Best Practices
Manage Strategic Initiatives
Communicate Strategy
Modify the Corporate Scorecard / Strategy Map
• Finance• IT• HR
Align the Organization• Corporate and business units
aligned• Business and support units aligned• Board of Directors aligned
Modify Business and Support Unit Scorecards
CoordinatedBy
Accountable Executives
CEO/Executive Team
BSC Project Team (OSM)
LOB Leaders
Support Unit Leaders
BSC Project Team (OSM)
Chief Financial Officer Human Resources Officer Chief Information Officer Chief Operating Officer
Human Resources Officer
CEO/Executive Team/OSM
Program Office (OSM?)
Chief Knowledge Officer
Corporate Communications
OFFICE
OF
STRATEGY
MANAGEMENT
The Office of Strategy Management facilitates nine strategy management processes throughout the year.