Strategy Execution ChampionsThe Palladium Balanced Scorecard

Hall of Fame Report 2011

Abu Dhabi Government/General

Secretariat of the Executive Council

AKSA Acrylic Chemical

Barcelona City Council

Boys & Girls Clubs of Puerto Rico

Christchurch City Council (New Zealand)

Cisco Systems/Customer Value Chain

Management

Culligan Argentina

Dimension Data Asia Pacific

(formerly Datacraft Asia)

Federal Bureau of Investigation

First Philec Solar Corporation

Folkhlsan

Health Insurance Review & Assessment

Service (South Korea)

Hindustan Petroleum Corporation Ltd.

The Hospital for Sick Children

(Toronto)

MAPFRE Brazil

Merck & Co.

Minor Food Group

City of San Fernando

(Pampanga, Philippines)

Sociedad Hipotecaria Federal

TNT Express Services UK & Ireland

The Palladium Balanced Scorecard Hall of Fame for Executing Strategy

Class of 2010

Product #12693

Balanced Scorecard Hall of Fame Reports

Each year, we publish a Hall of Fame Report profiling the

organizations named to the Palladium BSC Hall of Fame for

Executing Strategy in the previous calendar year. The first

such annual Hall of Fame Report was published in 2004.

The eight Reports published thus far highlight 129 of the

153 organizations inducted into the Palladium BSC Hall of

Fame since its inception.

Balanced Scorecard Report: The Strategy Execution Source

The bimonthly Balanced Scorecard Report: The Strategy

Execution Source (BSR) is the definitive source of articles

on strategy execution and linking strategy to operations.

Published jointly by Harvard Business Publishing and

Palladium Group, Inc., BSR features the latest thinking by

Balanced Scorecard creators Robert S. Kaplan and David P.

Norton, along with articles highlighting BSC best practices,

challenges, and champions. It also features the latest

thinking of strategy experts from within and outside the

Balanced Scorecard community. The comprehensive BSR

Index 19992010, organized by SFO Principle, case studies,

topics, Hall of Fame organizations, and other useful head-

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The BSR Reader Series

Each BSR Reader offers a collection of important BSR

articles on a relevant topic. BSR Readers are an invaluable

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Available titles include:

BSC Basics: Getting It Right

Mapping Strategy

Human Capital

The Strategy-Focused Government Organization

Best Practices of Strategy-Focused Organizations

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Strategy Reporting and Review

Leadership and Change

Planning for Results: Linking Planning and Budgeting

The Strategy-Focused IT Organization

Managing Innovation

Setting Measures and Targets That Drive Performance

Healthcare: Prescription for Performance

Kaplan and Norton on Strategy Management

Managing Strategic Initiatives

Executing Strategy and Driving Change in the

Pharmaceutical and Life Sciences Industries

BSC Hall of Fame Profiles

BSC Hall of Fame Profiles provide an in-depth look at the

practices, processes, and decision making of 15 select BSC

Hall of Fame winners. Each profile includes a 3,000- to

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Strategy-Focused Organization Execution Toolkits

Developed by Balanced Scorecard creators Drs. Robert

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tion Execution Toolkit contains a rich set of multimedia

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How to Order

To subscribe to BSR, or to order back issues or reprints, a

BSR Reader, BSC Hall of Fame Profiles, or earlier editions

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visit www.strategyexecutions.com or call 800.668.6705

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We invite you to explore our family of Balanced Scorecard publications and tools.Strategy Execution Champions: The Palladium Balanced Scorecard Hall of Fame Report 2011

Editorial Advisers

Robert S. Kaplan, Baker Foundation Professor, Harvard Business School

David P. Norton, Director and Founder, Palladium Group, Inc.

Publishers

Robert L. Howie Jr., Managing Director, Palladium Group, Inc.

Joshua Macht, Group Publisher, Harvard Business Review Group

Executive Editor

Randall H. Russell, Vice President/Research Director, Palladium Group, Inc.

Editor

Janice Koch, Palladium Group, Inc.

Senior Contributing Writer

Lauren Keller Johnson

Contributing Writers

Linda Chow

James Creelman

Anne Field

Wendy Garling

Betsy Hardinger

Palladium Group, Inc. is the global leader in helping organizations solve their most

pressing strategy execution challenges. We provide our clients with an integrated

set of servicesstrategy and technology consulting, education, training, and

certificationthat deliver tangible results and enduring internal capabilities.

The benefits of our approach are demonstrated through the members of the

Palladium Balanced Scorecard Hall of Fame for Executing Strategy, which rec-

ognizes organizations that have achieved premium returns through outstanding

execution. For more information, visit www.thepalladiumgroup.com.

Harvard Business Publishing is a not-for-profit, wholly owned subsidiary of

Harvard University. The mission of Harvard Business Publishing is to improve

the practice of management and its impact on a changing world. We collaborate

to create products and services in the media that best serve our customers

individuals and organizations that believe in the power of ideas.

To learn more about the Palladium Balanced Scorecard Hall of Fame for

Executing Strategy program, including how to apply, visit:

www.thepalladiumgroup.com/halloffame.

Copyright 2011 by Harvard Business School Publishing Corporation and Palladium

Group, Inc. Quotation is not permitted. Material may not be reproduced in whole or in

part in any form whatsoever without permission from the publisher.

Palladium Balanced Scorecard Hall of Fame for Executing Strategy is a registered

trademark of Palladium Group, Inc. The trademarks referenced in this publication are

the property of their respective owners.

Cover photo by Westward Eye, LLC.

P a l l a d i u m B a l a n c e d S c o r e c a r d H a l l o f F a m e R e p o r t 2 0 1 1

Strategy Execution Champions The Palladium Balanced Scorecard Hall of Fame Report 2011In this eighth annual Balanced Scorecard Hall of Fame Report,

we pay tribute to the 20 organizations that were inducted into

the Palladium Balanced Scorecard Hall of Fame for Executing

Strategy in 2010. This diverse group represents a broad spectrum

of industries from the public and private sectors throughout

the world. All are exemplars of strategy management discipline,

through their application of the Kaplan-Norton approach to

strategy execution as embodied in the Palladium Execution

Premium Process (XPP). The remarkable execution premiums

these winners have achieved attest to the power of disciplined

strategy management when it is successfully linked to operations.

I N T R O D U C T I O N

Results First: Creating Value along the Performance Continuum . . . . . . 2

P R O F I L E S

Abu Dhabi Government/General Secretariat of the

Executive Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

AKSA Acrylic Chemical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Barcelona City Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Boys & Girls Clubs of Puerto Rico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Christchurch City Council (New Zealand) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Cisco Systems/Customer Value Chain Management . . . . . . . . . . . . . . . . . . 19

Culligan Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Dimension Data Asia Pacific (formerly Datacraft Asia) . . . . . . . . . . . . . . . 23

Federal Bureau of Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

First Philec Solar Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Folkhlsan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Health Insurance Review & Assessment Service (South Korea) . . . . . . . 31

Hindustan Petroleum Corporation Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

The Hospital for Sick Children (Toronto) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

MAPFRE Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Merck & Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Minor Food Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

City of San Fernando (Pampanga, Philippines) . . . . . . . . . . . . . . . . . . . . . . . 43

Sociedad Hipotecaria Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

TNT Express Services UK & Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

S t r a t e g y E x e c u t i o n C h a m p i o n s

Results First: Creating Value along the Performance ContinuumBy Robert L. Howie Jr., Chief

Marketing Officer, Palladium Group,

Inc., and Director, Palladium

Balanced Scorecard Hall of Fame

for Executing Strategy

If you cant measure it, you cant manage it.

Strategy is important, but its the execution that counts.

Whether the two thought leaders can claim full credit for these

axioms, its safe to say that the universal currency of these state-

ments is in large measure a triumph of the revolution Robert

Kaplan and David Norton began nearly 20 years ago with the

Balanced Scorecard. The effectiveness of the Kaplan-Norton

approach to executing strategy has become well known around

the world. The report that you hold in your handsthe eighth

such report since the Balanced Scorecard Hall of Fame program

was launched in 2000provides ample evidence that the

approach can be learned and mastered by any organization

having the desire to do so and the right capabilities in place.

Organizations clarify their strategy using a strategy map;

translate it into action with the Balanced Scorecard; align the

organization through shared objectives and performance

incentives; link strategy to operations through plans, processes,

and resources; monitor and learn through dashboards and key

performance indicators (KPIs); and test and adapt the strategy to

ensure the desired outcomes.

This is the proven six-stage Kaplan-Norton approach that high-

performing organizations, including the 20 newest members of

the Hall of Fame profiled here, embrace to achieve sustainable

breakthrough performance results.

This approach, based on systems dynamics, is also what Michael

Beer, professor emeritus at Harvard Business School, calls the

technical system of strategy managementwhat you and I

might call the left-brained, disciplined, engineering approach to

strategic performance management. Over the past decade,

a vast body of knowledge has developed around the Kaplan-

Norton system, anchored by the strategy map, the Balanced

Scorecard, and other tools, from strategic job families and

the Office of Strategy Management to Strategic Expenditures

(StratEx). Five best-selling business books, 10 Harvard Business

Review articles, more than 350 articles in Balanced Scorecard

Report: The Strategy Execution Source, and scores of cases

presented in countless classes, conferences, and seminars have

documented the practices and experiences of organizations

throughout the globe, along with the performance successes

they have achieved and sustained.

The evidence is overwhelming: the Kaplan-Norton system

delivers on its promise of helping organizations of any type,

in any industrypublic or private, regardless of governance

modelsuccessfully execute their strategies.

Change Everyone Can Believe In

Yet there is another side to this success story that we must

not overlook, and it has to do with the right-brained, individual,

behavioral approach to strategic performance management.

Organizations dont execute strategy; people do. Each individual

must embrace the organizations strategy and effect the changes

in his or her behavior that are required for success. But people

dont embrace change spontaneously. They need to be per-

suaded. Its up to leaders to make the case for change and win

employees hearts and minds.

For many years, speaking at Palladiums public conferences,

Robert Kaplan often observed, Leadership is necessary but

insufficient. He was referring to the need for a system that

helps articulate, communicate, measure, and manage strategy

and its execution.

More recently, Kaplans thinking has evolved to the point

where he now claims, Leadership is necessaryand sufficient.

With the right kind of leadership, the restthe process part

is entirely feasible. We can teach process and system

implementation and executionbut we cant teach leadership.

Leadership is the sine qua non of successful strategy execu-

tion; it creates the conditions by which organizationsand the

people within themwill change and perform according to

the new imperatives.

Strategy is how an organization intends to create value for its

stakeholders consistent with its mission. Strategy execution is

the process of creating that value. Employeesthose who do

the work that leads to value creationneed to know about the

strategy and understand how they contribute to it. But under-

standing it isnt enough; they must also believe in it if they are to

fully engage in executing it.

Creating a high-performance culturethe kind of culture that

inspires individuals to want to perform, that causes them to

believe deeply in the organizations mission and in their contri-

bution to that missionis a fundamental and essential task of

leadership. Individuals personal mastery of the competencies

required to perform is also essential, but leadership comes first.

Leaders make the case. They galvanize; they inspire.

As you review the profiles of the 2010 Hall of Fame winners, you

will find that these organizations leaders made the case for

P a l l a d i u m B a l a n c e d S c o r e c a r d H a l l o f F a m e R e p o r t 2 0 1 1

change in part by expressing dissatisfaction with the status quo,

even in organizations that were performing well. These leaders

made the case for change to inspire individuals to achieve even

higher levels of performance. Regardless of the performance

starting point, in almost every case leaders had to first overcome

organizational and individual inertia, either mere reluctance or

outright resistance, to change behaviors.

John Kotter, one of the worlds foremost experts on leadership

and change (and professor emeritus at Harvard Business School),

identified eight steps for leading change successfully: (1) estab-

lish a sense of urgency; (2) form a powerful guiding coalition;

(3) create a vision for change and the strategy for achieving it;

(4) communicate the vision and strategy; (5) empower others to

act on the vision and strategy; (6) produce early wins; (7) sustain

the change effort; and (8) embed change into the culture.1 For

those in charge of strategy execution, recognizing these steps

is important because managing strategy is, after all, managing

change. Its about moving an organization and its people to a

place they want to go but have never before been. The leaders of

the Hall of Fame winners in this report understand this funda-

mental truth, and engage employees, through both the right and

left sides of the brain, to ensure that their change program has

staying power.

The starting point for change is culturethe way we do things

around here. When Richard Clark became CEO of Merck & Co.

(a 2010 Hall of Fame winner) he famously said, We first must fix

the culture. If we dont, culture will eat strategy for lunch every

time. He was referring to the not invented here mind-set then

prevalent at Merck. It was a mind-set that Clark was determined

to change. (On pages 3940, you can read about how his effort

turned out.)

Building organizational capability and the competencies to sup-

port change are, of course, critical to sustainable execution. These

actions include establishing an Office of Strategy Management

to coordinate the cross-functional business processes required

to execute strategy, and ensuring that decision makers, whatever

their organizational level, have access to enterprise performance

management systems that contain the data they need, when they

need it, to make better, more informed decisions.

Show Me the Money

In the introduction to the 2010 Hall of Fame Report, I cited docu-

mented evidence that the Kaplan-Norton approach to executing

strategy works, evidence so compelling that it bears repeating

here. A 2008 study by independent academics Aaron Crabtree

(of the University of NebraskaLincoln) and Gerald DeBusk

1 Kotter is author of the best-selling book Leading Change (Harvard Business Press, 1995) and a popular version of the book, Our Iceberg Is Melting (St. Martins Press, 2006). Robert Kaplan mapped Kotters eight principles to the six stages of the Kaplan-Norton system in Leading Change with the Strategy Execution System, Balanced Scorecard Report: The Strategy Execution Source, NovemberDecember 2010 (Reprint #B1011A).

The Palladium Execution

Premium Process (XPP), based

on the Kaplan-Norton approach

to executing strategy, is

composed of six stages. In stages

5 and 6, organizations analyze

results, test strategic assump-

tions, and adapt accordingly. By

using the XPP approach, Hall of

Fame winners have successfully

executed their strategies.

S t r a t e g y E x e c u t i o n C h a m p i o n s

(University of TennesseeChattanooga) analyzed the share-price

performance of more than 160 public companies (BSC users and

nonusers)matched by industry, organization size, and other

criteriaover the BSC users three-year post-BSC adoption period.

BSC users outperformed nonusers across three measures of

performancemarket value of equity, book-to-market ratio, and

net assetsby an average of 28%. In their article in Advances in

Accounting, Crabtree and DeBusk concluded:

Many firms have adopted the Balanced Scorecard (BSC) as a

way to execute strategy and measure performance. ...[F]irms

that adopt the BSC significantly outperform those that do

not adopt the BSC over a three-year period beginning with

the year of adoption. ...These results provide strong evidence

that the BSC is an effective strategic management tool that

leads to improved shareholder returns.2

The Crabtree and DeBusk findings show that companies using

the Kaplan-Norton approach to executing strategy achieve

growth in shareholder value that is three times as great as those

companies that do not. This differential constitutes what we

call an execution premium, creating extraordinary value for

stakeholders.

A 2009 survey of members of the Palladium Execution Premium

Community (XPC), an online community of strategy management

professionals, provided powerful evidence of the added impact

of the BSC when used in combination with enterprise perfor-

mance management technologies such as business intelligence

and decision analytics. Survey participants were asked about

their use (and length of use) of the BSC, as well as their use of

such technologies. It turns out that the use of decision analytics

alone (without the BSC) does little to improve an organizations

chances of strategic success; fewer than 20% reported achieving

breakthrough results.

A separate study by Palladium, published in Business Network

Transformation: Strategies to Reconfigure Your Business

Relationships for Competitive Advantage, demonstrates how

powerful the outcome is when analytics are combined with the

BSC.3 The odds of success rise dramatically: to a 57% chance of

breakthrough results (when BSC usage is less than three years)

and to 77% when the BSC has been in use for more than three

years. Moreover, the percentage of organizations using the BSC

and analytics together for three or more years and achieving

breakthrough results was four times the percentage of organiza-

tions achieving breakthrough results and using only one of the

two tools. Its no surprise that most of the Hall of Fame organi-

zations in this report fall into the former group; theyve linked

strategy management and business intelligence to scale and

sustain their successful execution.

The Results Continuum

Its not uncommon for Hall of Fame companies to achieve

revenue growth of, say, 225%, or profitability growth of 150%, or

increases in shareholder value (measured by whatever yardstick

you choose) on the order of 200%. They do so by doing many of

the right things right, typically for two or more years. It takes

time and resources to close the gap between an organizations

current performance and its desired future performance. Creat-

ing extraordinary value for stakeholders with results that can be

measured in the hundreds of millionsif not billionsof dollars

takes time, resources, and effort.

Breakthrough performance: the term can convey instantaneity,

something accomplished in a single blow, the overnight

sensation. That is rarely the case. Moreover, the performance

results achieved by the Hall of Fame winners described in this

report takes place along a continuumthe Kaplan-Norton

strategy execution continuumand not just at the end of two

or three years.

In our experience in working with organizations over many

years, different types of results are realized in different time

periods, some in the earliest stages of a strategy transformation.

In fact, through extensive research, we have identified three

categories of benefits and approximate time frames in which

these benefits begin to accrue. The most basic benefits, such

as getting aligned, are organizational. Next come operational

benefits. Finally, organizations achieve strategic benefitsthe

breakthrough, pan-BSC-perspective, across-the-board results

that are the accumulation and the culmination of the aggregate

performance improvements and results.

The key organizational result derived from the Kaplan-Norton

approach to strategy execution is alignment. Much has been

written about the essential need for and power of alignment,

2 A. Crabtree and G. DeBusk, The Effects of Adopting the Balanced Scorecard on Shareholder Returns, Advances in Accounting, incorporating Advances in International Accounting 24 (2008): 815. See also BSC Adoption Boosts Shareholder Returns: Findings from a Recent Study by DeBusk and Crabtree, in Balanced Scorecard Report, MayJune 2010 (Reprint #B1005C).

3 J. Word, ed., Business Network Transformation: Strategies to Reconfigure Your Business Relationships for Competitive Advantage (Wiley & Sons, 2009).

According to Arun Balakrishnan, former chairman and managing director of Hindustan Petroleum, a 2010

Hall of Fame winner, The Kaplan-Norton approach helped us early on to clarify our strategic objectives,

align ourselves with them, and communicate and implement change.

P a l l a d i u m B a l a n c e d S c o r e c a r d H a l l o f F a m e R e p o r t 2 0 1 1

Palladium Balanced Scorecard Hall of Fame for Executing Strategy 20002010

S t r a t e g y E x e c u t i o n C h a m p i o n s

whose benefits include enhanced teamwork and sharper focus.

Getting your top 10 leaders on the same page is a precondition

for getting the next 500 or the next 10,000 on the same page.

This is usually accomplished in a matter of weeks, not months; if

the experience of Hall of Fame organizations is a guide, getting

the top 10 aligned can be accomplished in as little as 30 days.

According to Arun Balakrishnan, former chairman and managing

director of Hindustan Petroleum, a 2010 Hall of Fame winner,

The Kaplan-Norton approach helped us early on to clarify our

strategic objectives, align ourselves with them, and communi-

cate and implement change.

Long before Duluth, Minnesotabased Essentia Health achieved

a compound annual growth rate of 127% while improving

operating margins by a factor of 3, Essentia saw results. In fact,

Essentiaa $1.6 billion healthcare system (formerly SMDC

Health System, a 2002 Hall of Fame winner)realized results

almost immediately after adopting the Kaplan-Norton approach

more than a decade ago. Getting ourselves aligned first was a

turning point for the executive team, says CEO Peter Person,

M.D. The agenda of our monthly leadership meeting shifted

from day-to-day operations to strategic-issue decision making.

And at the Toronto-based Hospital for Sick Children (another

2010 winner), the common cause of alignment, as clarified in

the hospitals BSC and in from-to diagrams illustrating current

status to desired state, created a near-immediate culture shift

from silos to solidarity. Within two quarters, MRI wait times fell,

and medication reconciliation (analyzing the interactions of

all of a patients medications) went from being performed on

33% of patients admitted to nearly 70% of them.

Although its not easy to measure the quantitative value of

organizational results, many Hall of Fame organizations have

managed to do so. The ability of Nemours, the Wilmington,

Delawarebased pediatric healthcare institution and 2007 Hall

of Fame winner, to communicate its strategy to a bond rating

agency convinced the agency to award the hospital a AAA rating.

This organizational competency saved Nemours what might

have amounted to millions of dollars in borrowing costs (a finan-

cial result) as the organization prepared to undertake a major

capital expansion.

Even before achieving dramatic breakthroughs in revenue and

profits, strategy-focused organizations achieve operational

results. For example, their leading KPIs show improvements in

such areas as cycle time reduction, employee retention, and

safety. These improvements are measurable results that have

direct and indirect benefits. Reducing product cycle times, for

example, saves money and resourcesa direct result. It also

yields indirect (and perhaps more important) results, such as

accelerated sales and receivables collection.

Consider this small sampling of operational results achieved by

2010 Hall of Fame winners. AKSA Acrylic Chemical cut raw materi-

als wastage from 103 tons to 72 tons (indirect result: reducing its

environmental footprint). Ciscos Customer Value Chain Manage-

ment division helped raise the percentage of products achiev-

ing Six Sigma quality by almost 23% (indirect result: greater

reliability and an enhanced reputation in the marketplace). The

percentage of employees at Culligan Argentina with access to

online strategic reporting rose from 0% to 23% (indirect result:

faster, better decision making by more people, including custom-

er-facing personnel). The City of San Fernando in the Philippines

slashed the time needed to process a new business permit from

two weeks to 25 minutes (indirect result: fostering business and

economic development).

Timing Is Everything

Nor are results limited to the organizational and the operational.

Several years ago, in assessing the strategic initiatives portfolio

of a bank client, we were able to document in less than a month

that 30% of its initiatives had little or no measurable strategic

impact. At the same time, key elements of the banks strategy

lacked initiatives that could close the performance gap. By pull-

ing the plug on the 30% of initiatives lacking strategic impact,

the bank saved millions. Launching new initiatives that did in

fact support the banks strategic objectives added some cost,

but the bank still realized a net savings of many millions of

dollarsmoney it was then able to reinvest elsewhere. Equally

important, management was assured that every strategic

objective was now supported by one or more corresponding

initiatives. This causal link, fundamental to the Kaplan-Norton

approach, translates into significant tangible benefits.

The causal links between strategy map perspectivesalso

fundamental to the Kaplan-Norton approachprovide us with

an even clearer way to understand the sequence and timing of

results. In the foundational learning and growth perspective

(known at the FBI, another 2010 Hall of Fame winner, as the

three Ts: talent, teamwork, and technology), many Hall of Fame

members measure employees awareness and understanding

of the strategy and employee engagement. Generally speaking,

Strategy execution is a team sport. The roles of the chief operating officer, chief financial officer, chief

strategy officer, chief information officer, and chief human resources officeralong with the other

C-suite and business-unit chiefs that make up the senior leadership teamare critical to effective

strategy execution.

P a l l a d i u m B a l a n c e d S c o r e c a r d H a l l o f F a m e R e p o r t 2 0 1 1

employee understanding and awareness of the strategy

prerequisites to successful executioncan be achieved in 60

to 90 days, depending on the organizations size, complexity, and

other factors. (Effective communicationcarried out seven

times in seven waysnever ends.)

In the internal process perspectivethe heart of all operations,

where the work gets doneresults can be achieved in three to

six months, again depending on factors unique to the organiza-

tion. In the customer perspective, whose outcomes are causally

based on the objectives of the underlying learning and growth

and internal process perspectives, results at Hall of Fame orga-

nizations were typically achieved in four to nine months. In the

financial perspective (locus of the ultimate results for corpora-

tions) or the mission perspective (locus of the ultimate results

for mission-based organizations), breakthrough performance

results will take longer to manifest themselves. For many Hall

of Fame organizations, it takes anywhere from 18 to 30 months

to achieve such breakthrough results as doubling shareholder

value (or, for nonprofits, doubling donor contributions).

Martin Madeus, chairman and CEO of 2009 Hall of Fame winner

Millipore Corporation, said, Our strategy maps and BSCs ensure

that our people understand our strategy and their individual

and team contributions to it. As a result, were on track to double

shareholder value within five years. It took only four years for

Millipore to increase revenues 82% and see its stock price rise

41%. Billions of dollars in value were created.

Its worth noting that although weve been citing CEOs through-

out these examples, strategy execution is a team sport. The roles

of the chief operating officer, chief financial officer, chief strategy

officer, chief information officer, and chief human resources

officeralong with the other C-suite and business-unit chiefs

that make up the senior leadership teamare critical to effective

strategy execution. Each of these individuals brings a unique

perspective, insight, experience, and influence to bear in execut-

ing the strategy. Each ones personal engagement, commitment

to change, and effectiveness in aligning his or her own unit or

area to the strategy are essential ingredients to success.

So lets recap this results timetable. Although best case, these

scenarios are typical of Hall of Fame winners, as the profiles in

this report show.

Eliminating or reducing spending on nonstrategic initiatives:

30 to 60 days. Potential savings: millions of dollars

Educating and engaging employees in the strategy:

60 to 90 days

Initial process improvements and new projects to fill perfor-

mance gaps yielding measurable results: three to six months

Results achieved in customer objectives, based on learning

and growth and internal process actions: four to nine months

Breakthrough results, such as doubling shareholder value:

18 to 30 months

If an organization is not getting organizational, operational,

or other measurable results earlyin weeks or months, not

quartersits unlikely it will ever achieve breakthrough strate-

gic performance. Early resultsthose that are organizational

and operationalare gateway results. They lay the foundation

for breakthrough results, and are, in effect, bellwethers of

eventual breakthrough performance.

Profiling the Class of 2010

The 20 organizations profiled in this years Hall of Fame Report

were named to the Hall of Fame in 2010 based on the strength

of their strategy management systemsall of which are based

on the Kaplan-Norton approachand their performance results

through 2009.

Eight winners hail from the Americas (Argentina, Brazil, Canada,

Mexico, and the United States); five from Europe and the Middle

East (Finland, Spain, Turkey, the United Arab Emirates, and the

UK/Ireland); and seven from the Asia-Pacific region (India, New

Zealand, the Philippines, Singapore, South Korea, and Thailand).

They represent a similarly diverse range of industries and sec-

tors, and run the gamut in size, from organizations with fewer

than 200 employees to those with workforces in the tens of thou-

sands. And their challenges were, in the least, many; at most,

downright daunting.

Seven winners are government organizationsthe Abu Dhabi

Government/General Secretariat of the Executive Council,

the city councils of Barcelona and Christchurch (New Zealand);

the City of San Fernando (Pampanga, the Philippines); the U.S.

Federal Bureau of Investigation; South Koreas Health Insurance

Review & Assessment Service; and Mexicos Sociedad Hipote-

caria Federal. As public sector entities, they must demonstrate,

whether to a legislature, a ministry, or the general public, that

they provide value for taxpayers and citizens and serve the

common good. Typically, they serve multiple types of customers,

which adds complexity to their strategy maps and strategy

management process; at times, this means reconciling constitu-

ents conflicting needs (e.g., building new infrastructure while

reining in taxes). Many faced the classic government challenge

of doing more with less, a challenge heightened by the reces-

sionary environment and economic uncertainties of the past

few years. All have had to cut through siloed structures and

the bureaucratic mind-set to instill teamwork and foster cross-

functional behavior and actions, while sharpening competencies

to private-sector levels.

Manufacturers such as AKSA Acrylic Chemical, Cisco Systems/

Customer Value Chain Management, and First Philec Solar Cor-

poration must constantly balance two imperatives: innovation

and operational efficiency. And they must do so in a business

S t r a t e g y E x e c u t i o n C h a m p i o n s

environment in which competitors can come seemingly out of

nowhere to overtake even the most established market leader

with breathtaking speed.

Social services organizations Folkhlsan (the Finnish health

and wellness group) and the Boys & Girls Clubs of Puerto Rico

grappled with growth and the need for clear, well-communicated

strategies and new systems and processes to support them

all while maintaining the financial discipline that is often over-

looked, though no less important, in nonprofits.

On top of a national economic crisis and a flood of new competi-

tors, Culligan Argentina faced an overwhelming lack of manage-

ment systems and customer service standards that threatened

its fiscal survival. Dimension Data Asia Pacific, already familiar

with the ruthlessness of IT markets, needed a mechanism for

evolving from a product to a solutions focusand one that

would help it transcend the cultural and process differences

among its 13 geographies. Hindustan Petroleum Corporation

faced market liberalization with a workforce unprepared for

the rigors of private competition. The Hospital for Sick Children

needed an organizing framework to prioritize, communicate,

and pursue its ambitious goals in care, research, and education.

In addition to unifying two separate entities, MAPFRE Brazil had

to find a way to build growth in a new marketthe substantial

lower-income segment of the Brazilian population that had

never before bought insurance. Shifting costs, expiring patents,

and skyrocketing innovation costs prompted Merck & Co. to

create a rigorous strategy management infrastructure. A raft of

strategic risks convinced executives at Minor Food Group that

a strategy makeoveralong with a disciplined management

systemwas imperative. And intensifying competition, flat cus-

tomer satisfaction, and a looming recession convinced leaders

at TNT Express Services UK & Ireland that they needed a clearly

articulated strategy, strategy management structures (such as

an Office of Strategy Management), and prioritized initiatives to

remain viable.

Through the profiles of these 20 organizations, youll learn more

about the challenges they faced, their decisions and actions, and

the execution premiums they realized. Their successes are all the

more impressive considering they were achieved during a time

of recession and economic uncertainty.

A System That Works

If the profiles in this report affirm anything, it is that successful

strategy execution is possible for any organization. Its no acci-

dent, however, that 70% to 90% of organizations fail at executing

strategy.4 Certain key ingredients must be in place: leadership,

a commitment to change, a clear and universally understood

strategy, and a disciplined management process to execute the

strategy. What successful execution does not require is waiting

years for results to show. Results should begin to appear

early on, and their arrival fuels the desire for morein turn,

accelerating further results that stoke pride of achievement

and an ever-increasing commitment by all.

Business in the twenty-first century moves fast. And the

accelerated pace raises performance expectations. If your

organizations performance is measured quarterly, can you even

afford to wait two years to see results? Certainly, achieving the

ultimate resultbreakthrough strategic performancetakes a

commitment in people, resources, and time. Strategy execution

is indeed a journey. But that doesnt mean organizations cannot

experience results along the way. Organizations neednt delay

gratification; in fact, by pursuing and expecting preliminary

results, they lay the groundwork for an execution premium down

the road. Strategy execution is a continuum; results are cumula-

tive and reinforce each other.

Early results are themselves leading indicators of the execution

premiumthat extraordinary, organization-wide value that the

Hall of Fame winners profiled in these pages have achieved. This

newest class of Hall of Fame winners demonstrates that theyve

achieved benefits all along the continuum, from first results

those immediate or near-term operational and organizational

gainsto the aggregate breakthroughs. We encourage you to

study the remarkable journeys of these 20 organizations and the

results they achieved along each milestone of the strategy

continuumresults that propelled them forward in their pursuit

of breakthrough performance. These lessons are as rich and

varied as they are adaptable to any organization with the will to

inspire and lead transformational change.

4 An early 1980s survey of management consultants noted that fewer than 10% of well-formulated strategies were successfully implemented (reported in Corpo-rate Strategists Under Fire, by Walter Kiechel, Fortune, December 27, 1982). By 1999, the statistics had hardly improved; in Why CEOs Fail (Fortune, June 21, 1999), Ram Charan and Geoffrey Colvin observed that 70% of companies failed at strategy execution.

Strategy execution is indeed a journey. But that doesnt mean organizations cannot experience results

along the way. Organizations neednt delay gratification; in fact, by pursuing and expecting preliminary

results, they lay the groundwork for an execution premium down the road. Strategy execution is a

continuum; results are cumulative and reinforce each other.

P a l l a d i u m B a l a n c e d S c o r e c a r d H a l l o f F a m e R e p o r t 2 0 1 1

Abu Dhabi Government/General Secretariat of the Executive Council

In 2006, the booming, cosmo-

politan capital of the United Arab

Emirates forged an ambitious new

strategyonly to struggle with

operationalizing it. Two years

later, Abu Dhabis Executive Council embarked on

a comprehensive and disciplined path to strategy

execution. At its heart: the councils Performance

Management Framework, which fosters alignment

vertically, horizontally, and thematically.

In recent decades, Abu Dhabi has transformed itself from a

small, localized economy into a booming, $187 billion economy

fueled by oil and global finance. The largest of the seven United

Arab Emirates and the federations capital, it now accounts for

more than 50% of the UAEs total GDP. A constitutional monar-

chy with a population of about 1 million, Abu Dhabi is run by an

18-member executive council headed by Crown Prince Sheikh

Mohammed bin Zayed Al Nahyan.

In 2006, the Executive Council set its sights on becoming a

world-class government. It introduced a comprehensive strategy

encompassing and coordinating the activities of its 34 govern-

ment organizations, or entities, from healthcare and utilities to

environmental management. But the obstacles to implementing

the strategy were formidable. Each agency employed hundreds

of people and had its own budget, constituents, and systems.

Employees were wary of what they saw as yet another attempt

at strategic planning. And managers lacked the expertise

to align people throughout the sprawling organization and

translate strategy into action. Without a comprehensive policy

agenda, the new strategy floundered.

A Vision, a Plan, a Performance Management Framework

Then, in 2008, the Executive Council took a new tack, articulat-

ing a vision focused on creating a more globally competitive

economy and becoming a leading government. It also crafted a

17-point policy agenda with such goals as A caring society that

provides equal opportunities, Readily accessible world-class

information and communication technologies (ICT) infra-

structure, and World-class government administration and

services. This long-term planit has a two-decade horizon

involved devising a program of short- and medium-term actions

and initiatives. The Executive Council turned to the Balanced

Scorecard to make it all happen.

The Abu Dhabi General Secretariat of the Executive Council

(ADGSEC), an administrative body reporting to the Executive

Council, was tasked with creating an operational framework for

the governments long-term vision. Using the BSC methodology,

the ADGSEC took a disciplined, rigorous approach to translating

the strategy into strategy maps and scorecards and cascading

them to each entity. For example, it created what it called a

whole of government (WoG) strategic five-year plan and strat-

egy map, which encompassed the policy agendas 17 goals. After

several revisions, the ADGSEC produced individual entity (i.e.,

agency or departmental) maps to link and align objectives

and initiatives to the WoG plan. Perhaps more important, it

created its Performance Management Framework encompassing

the vision and policy agenda, with goals, outcomes, priorities,

and initiatives, along with corporate- and entity-level strategy

maps, and a five-year strategic plan for each entity.

These champions identify specific whole-of-

government outcomes for which they are

responsible and also develop outcome definition

cardsmini-scorecards with key measures

that help the ADGSEC quickly see whether out-

comes are being achieved.

To reinforce alignment between departments and functions,

the ADGSEC organized strategy maps drawing on four strategic

themes: Social Sustainability, Environmental Sustainability,

Knowledge-based Economy, and Human Capital, along with

two enablersInfrastructure and Government Excellence. To

further strengthen this alignment, the ADGSEC created strategy

maps for each strategic theme. It also appointed champion en-

tities in agencies or departments, such as utilities and finance,

that provide services to external or internal customers. These

champions identify specific WoG outcomes for which they

are responsible and also develop outcome definition cards

mini-scorecards with key measures that help the ADGSEC

quickly see whether outcomes are being achieved.

The OSM and Initiative Management

The Government Performance Management Division (GPMD),

which reports to the ADGSEC, serves as the ADGSECs Office of

Strategy Management (OSM), with a mission of enabling and

driving the delivery of policy, strategy, and initiatives execution

to create public value. Twelve staff members drive or coordi-

nate most elements of key strategy management processes,

from strategy development to strategy review.

Perhaps the OSMs most impressive role is managing initia-

tivesa formidable task, given the number of entities and

initiatives (some 1,700 thus far). The office ensures that the

initiatives support the strategy and pinpoints areas of overlap

0 S t r a t e g y E x e c u t i o n C h a m p i o n s

and gaps; it then oversees and monitors their progress. The OSM

also prioritizes initiatives by assigning each one a score and

plotting results according to such criteria as strategic relevance

and available resources. Additional analysis examines such

considerations as the relationship between feasibility and ease

of implementation.

The GPMD also ensures that initiatives are linked to specific

budget categoriesoperating expenditures (OpEx), capital

expenditures (CapEx), and strategic expenditures (StratEx)and

takes steps to detect any misallocation of resources. As part

of the yearly budgeting process, the GPMD and Department of

Finance calculate the total budget allocated to each strategic

goal and identify relevant initiatives, as well as the entities

driving those initiatives.

Initiatives often affect multiple outcomes or themes. Those

aimed at developing human capital through education might

also, for instance, affect social sustainability, because that

theme encompasses education and healthcare quality. To

ensure fund allocations are balanced, each initiative is analyzed

to determine its impact on the WoG outcomes and entity-level

priorities, as well as on service delivery.

Awareness and Accountability

To help overcome the natural tendency toward bigger bureau-

cracy and a siloed culture, the Executive Council has actively

sought to increase transparency and accountability. For example,

initiative owners are identified in strategic plans. Performance

contractsessentially service-level agreementsbetween

the Executive Council and each entity stipulate mutually

agreed-upon key performance indicators and selected key

strategic initiatives. More recently, to further reinforce a

culture of accountability, entities have begun using internal

performance agreements between their top management and

internal departments or sections.

Even before the BSC was cascaded throughout the government,

the GPMD had launched its strategy communication program

by engaging the key management and strategy teams from all

entities. Workshops (for senior management and delivery teams

alike) are also conducted at each stage of strategy management

and execution. More than 15 have been held over the past three

years on topics ranging from vertical and horizontal alignment

to bolster collaboration among entities, to capacity building to

help entities effectively execute their strategies.

After only three years, the Abu Dhabi government has realized

impressive results. From 2007 to 2009, the percent of Emirati

women in the workforce increased from 20% to 27%. Automa-

tion of services grew from less than 30% to 53%. Customer

satisfaction (i.e., citizens, residents, businesses) rose from 52%

to 69%. Also during this period, GDP value increased by 35%,

and import value as a percentage of GDP increased by 84%

results more indirect, but no less relevant, to the governments

broader goals.

Coordination among entities, once nonexistent, is today the

norm. And the internal culture has been transformed into one

focused on strategy and execution. We have been successful

in setting and maintaining a single language and approach to

execution and performance across the entire government,

says His Excellency Mohammad Ahmad Al Bowardi, secretary-

general of the Executive Council. The structured framework of

the Kaplan-Norton approach has established the basis for cross-

government alignment, transparency, and accountability. And

with the steadfast focus on both WoG outcomes and specific

service-delivery targets, Abu Dhabi has maintained an enviable

pace of growth, despite the global downturn.

(All results from 20072009 unless otherwise indicated)

Employment rose from less than 43% to 50.2%, support-

ing the objective on the human capital strategy map to

Strive for full employment.

GDP value increased by 22% in 2008, reflecting achieve-

ment against the objective to build rapid, sustainable

GDP growth.

Percentage of initiatives executed on time increased

from less than 65% to 74%.

The United Arab Emirates ranking on the ICT Networked

Readiness Index rose from 29 (of 130-plus nations) in

20072008 to 23 in 20092010. The index, published by

the World Economic Forum in cooperation with

INSEAD, is the leading global ranking of the impact of

information communication technology on nations

development and competitiveness.

Execution Premium

Further increasing the horizontal alignment among

entities to bolster their collaboration in delivering

results.

Linking individual objectives to overall strategy.

Increasing the use of performance management by top

leadership as a key tool in decision making.

Improving efforts by the GPMD to facilitate the ex-

change of best practices among entities.

Future Focus

P a l l a d i u m B a l a n c e d S c o r e c a r d H a l l o f F a m e R e p o r t 2 0 1 1

AKSA Acrylic ChemicalVolatile oil prices and new competitors

flooding its markets prompted this

Turkish manufacturer to shift strategic

focus from operational excellence to

product innovation. A rigorous management system

that emphasizes leadership and human capital

fueled the new strategyand dramatic growth.

The carpets on your floors, the upholstered sofa in your living

room, your favorite knitwear, those cozy socksthese and other

items you rely on every day may well have had their origin at

AKSA Acrylic Chemical.

Based in Istanbul, the 42-year-old company is the worlds largest

producer of acrylic fiber used in textile manufacturing. AKSA,

one of four firms within parent company AKKKs Chemistry

group, accounts for 45% of AKKK revenues. (AKKKs other

groups include Energy, Textile, and Real Estate.) Its revenues in

2010 were approximately $850 million. Its global market share

stood at 13.2%; its Turkish share, at 70%. AKSA serves customers

in more than 50 countries on five continents. Listed on the

Istanbul Stock Exchange, the company employs 900 people,

most of them factory workers.

From Operational Excellence to Product Innovation

AKSA had long focused its strategic efforts on operational

excellence, steadily applying process improvement techniques

including TQM, Six Sigma, and the European Foundation for

Quality Model (EFQM). But in the 1990s, executives realized that

the companys fortunes were tied too closely to oil prices. The

price of acrylonitrile, the raw material accounting for most of

the costs of AKSAs acrylic fiber product, rises and falls with

oil prices, which are notoriously volatile. That makes AKSA

vulnerable to oil industry trends and acrylonitrile producers

decisions.

But AKSA faced additional challenges. Owing to global warming,

customers in the apparel industry wanted thinner knitwear

made with alternative materials such as cotton. During the

1990s, use of AKSAs acrylic fiber shrank in developed countries

while increasing in emerging markets. Acrylic fiber made by

Chinese competitors had begun flooding AKSAs markets,

following the elimination of quotas in 2005 by the World Trade

Organization.

To reduce AKSAs vulnerability to such forces, executives decided

in 2005 to radically shift the companys strategy to R&D-driven

innovation and product leadership. The goal: accelerate develop-

ment of special products such as carbon fiber and polymers, a

practice that would enable the company to make more efficient

use of its existing infrastructure while also increasing the

percentage of value-added products in its offerings portfolio.

Pulling off the new strategy required major changes. For

instance, AKSA would need to start competing on value, not

cost; sharpen its market and customer focus; step up growth in

global markets; and simplify its organizational structure. The

company adopted the Balanced Scorecard to execute these

changes. In 2006, a team consisting of AKSAs general manager,

eight directors, 14 managers, and members of the strategic

planning office created its first strategy map (whose key

themes center on innovation) and scorecard (characterized by

SMART targetsspecific, measurable, achievable, related, and

time-bound). The following year, the map and scorecard were

cascaded to the business units (Acrylic Fiber, Outdoor & Special

Fiber, Carbon Fiber, and Energy) and support units (including

human resources [HR], Finance, New Business Development,

and Purchasing and Maintenance). Reflecting the new strategy,

the company also created a scorecard specifically for its R&D

and Innovation function.

Uncommon Discipline and Rigor

AKSA has demonstrated uncommon discipline and rigor in

managing its new strategy. First of all, the company uses well-

established strategy-formulation methods, including Michael

Porters Five Forces model as well as SWOT (strengths, weak-

nesses, opportunities, and threats) and PESTEL (political, eco-

nomic, social, technological, environmental, and legal) analyses.

It also has a five-year rolling strategic plan that incorporates

budget management with strategy management.

In addition, in 2008 the company established a Co-Creation

Center through which it collaborates with customers and sister

companies in AKKK to develop product concepts. The center

raises customer awareness of AKSAs products and ensures

that products meet customers expectations regarding matters

such as quality standards and compliance with environmental

requirements. Through weekly teleconferences with key custom-

ers, product development directors involve clients early in the

R&D process.

Prioritizing Leadership and Human Capital

AKSA views leadership and human capital as critical means for

executing its new strategy. (Indeed, human capital makes up 25%

of AKSAs Intellectual Capital Model, which also includes pro-

cess capital, customer capital, and relationship capital.) The HR

function is considered a true strategic partner and has its own

strategy map. And the company has defined three leadership

levelsstrategic, managerial, and operationaleach of which

has individual performance linked to strategic objectives.

Leaders are assigned to sponsor strategic initiatives, which

have included increasing installed capacity, researching alter-

native energy production methods, reducing environmental

waste, and developing new chemical formulas, to name only

a few examples. Performance is evaluated through the lens

of contribution to the strategy, including tracking return on

S t r a t e g y E x e c u t i o n C h a m p i o n s

investments in initiatives through a web-accessible project

database, as well as distinguishing between breakthrough

and incremental improvements. (AKSA makes this distinction

because of different expectations for results.) Incremental

improvements are typically operational and result from

employee suggestions, whereas breakthrough improvements

involve developing new processes and products and arise from

innovation and formal process improvement methodologies.

Assessments include 360-degree feedback as well as benchmark-

ing against other industries (in such areas as strategy manage-

ment and leadership development).

Leaders also play a key role in motivating and aligning employ-

ees through a multichannel communication effort designed

to regularly convey AKSAs strategic priorities, mission, values,

targets, and strategic performance to teams. Communications

are tailored to different managerial and employee audiences

and include daily internal TV programs and access to scorecards

through information kiosks; monthly department meetings

and celebrations of successes; quarterly performance reports

and strategy reviews; and an annual publication of corporate

objectives.

Communications are tailored to different mana-

gerial and employee audiences and include daily

internal TV programs and access to scorecards

through information kiosks; monthly department

meetings and celebrations of successes; quarterly

performance reports and strategy reviews; and an

annual publication of corporate objectives.

The company backs its leadership approach with identification

of strategic job families, investing most heavily in development

(through training) or acquisition (through recruiting) of com-

petencies directly affecting innovation. These competencies

include gathering information, creativity, conceptual thinking,

self-confidence, and team training. AKSA has also taken steps

to craft a culture of innovation; for instance, it provides awards

as well as individual and team incentives for inventions and

patents.

Says board member and general manager Mustafa Yilmaz,

One of the most important steps in strategic management is

to ensure the deployment of strategy through the organiza-

tion and to secure its spreading and ownership throughout all

management layers. AKSAs results strongly suggest that the

company has mastered this step. In three yearsand amid a

global economic downturn that forced some competitors out of

businessAKSA saw dramatic improvements in sales, profits,

returns on investment and equity, market share, customer satis-

faction, and employee loyalty.

(All results from 20052008)

Sales increased from $531 million to $685 million; net

profit, from $10.2 million to $57 million; and EBITDA,

from $47.5 million to $63.6 million.

Global market share expanded from 8.25% to 12.5%.

The customer loyalty index ranking went from 87.5 to

90.5 (on a scale of 100).

Incentives from R&D projects (offered by the Turkish

government) increased from 1 unit to 4 units.

Raw materials wastage dropped from 103 tons to

72 tons.

Employee turnover decreased 50%, and the number of

training sessions soared from 216 to 770.

Execution Premium

Aligning the BSC with the companys new strategic busi-

ness unit structure to increase management efficiency.

Upgrading reporting through improvements in informa-

tion technology platforms.

Using AKSAs experience to expand the use of the BSC to

its sister companies within AKKK.

Future Focus

P a l l a d i u m B a l a n c e d S c o r e c a r d H a l l o f F a m e R e p o r t 2 0 1 1

Barcelona City CouncilSpains second-largest city

adopted the BSC to translate

its Municipal Action Plan into strategic objectives,

measures, targets, and initiativesas well as craft

a culture of high performance and accountability.

Results? Key performance criteriaincluding

tourism, business activity, and customer service

all improved.

With Barcelonas rich history, architectural beauty, and eco-

nomic might, its no wonder the city has excited imaginations

around the world. Spains second-largest city (after Madrid) and

the capital of Catalonia (one of 17 autonomous communities

in Spain), Barcelona is home to 1.6 million people10.7% of

Spains population.

A hub of economic and cultural activity, the city boasts more

than 7 million visitors and 1,800 conferences and conventions

annually. Some 51 million tons of goods are imported and

exported every year through Barcelonas 2,000-year-old port.

In 1992, Barcelona hosted the Summer Olympics, which were

deemed a smashing success.

Orchestrating this citys many moving parts is no small feat. But

the Barcelona City Council has risen to the challenge. Managing

a workforce of 13,000 and a budget of 2.7 billion, the council

consists of 21 elected members (a mayor, five deputy mayors,

and 15 councilors) plus an administration team headed by the

city manager. The administration teams job is to ensure that

the promises made to Barcelonas citizens by their elected of-

ficials are fulfilled throughout the citys 10 geographic districts

and 10 sectors (including social services, environment, finance,

education and culture, and security).

Barcelona 2.0

The Barcelona City Council is no stranger to municipal self-

reinvention. It launched a major transformation effort in

preparation for the 1992 Olympics that helped win Barcelona

international recognition as a best-in-class city.

In 2008, the newly elected council launched another transfor-

mation programBarcelona 2.0to address the challenges of

a rapidly changing world. These include citizens demand for

ever-more-convenient and higher-quality e-services, unprec-

edented demographic diversity and mobility stemming from

the European Unions open-borders policy, recognition of the

need for environmental and social responsibility, and the global

economic recession (which has threatened Barcelonas all-

important tourist trade).

In 2008, city manager Andreu Puig Sabanes (newly arrived from

the private sector), along with five sector heads, defined seven

projects that would constitute Barcelona 2.0. The projects

included establishing a management by objectives (MBO)

program. To support it, the team decided to adopt the Balanced

Scorecard. (The remaining six projects focused on improv-

ing relationships with citizens, establishing e-administration

systems, developing human resources and IT plans, clarifying

service-level agreements between the sectors and districts, and

designating district technicians to assess citizens needs and

to serve as the eyes of the City Council in each district.)

The team believed that the BSC would help the City Council

translate the incumbent governments political strategy for the

20082011 termpromises made to constituents and expressed

in the Municipal Action Plan (MAP)into objectives, measures,

targets, and initiatives to fulfill those promises. The BSC would

further help the council tie its budgeting process to the city

governments political strategy. In addition, the scorecard

methodology could help the council address other frustra-

tions. These included lack of communication and collaboration

among the districts and sectors, technological backwardness,

and a workforce not only exhausted by chronic conflict (in

part due to a lack of career planning) and overwork but also

highly resistant to change. Puig determined to replace the

councils culture of complacency and inefficiency with one of

performance, accountability, transparency, and alignment to an

agreed-upon strategy.

By June 2008, the council had developed its own strategy map

reflecting the priorities laid out in the MAP. The map had four

perspectivesValue, Citizens, Services, and Resourcesand six

strategic themes: Coexistence and Proximity [to citizens], Social

Inclusion, Sustainability and Commitment to the Environment,

Competitive with the Global Economy, Capital Status [citizens

economic well-being], and Successful Government. That same

month, the map was cascaded to the sectors and districts as

well as to shared services (functional) units. Twenty-four score-

cards were developed from December 2008 through April 2010.

Infusing Discipline into the Budgeting Process

In designing its BSC program, the council excelled at linking its

budgeting process to the strategic initiatives supporting the

MAP. Pre-BSC, district and sector leaders had simply referred to

the previous years budget to create the current one. But the

BSC demanded a new approachbudget by programs [initia-

tives]to determine budgets and show how leaders would

support execution of specific initiatives. Through this approach,

managers examine how well results from current strategic initia-

tives match the targets defined in their scorecards. If results fall

short of a target, managers consider whether different activi-

ties would improve results, whether existing activities need to

S t r a t e g y E x e c u t i o n C h a m p i o n s

be executed more effectively, or whether the target was too

ambitious. Based on this assessment, managers determine the

funding required to make those changes.

Managers must also answer questions about how effectively

they are using funds. For instance, to enhance citizen satisfac-

tion, Barcelona funded initiatives such as improving street

cleanliness, increasing in-house visits by social services, and

reducing traffic accidents. If satisfaction with any initiative

declined, the manager responsible for that initiative faced

questions such as, Are you spending all of the funds allocated

for this initiative? If customer satisfaction met or exceeded

targeted performance and the manager had not used all the

allocated funds, unused funds might be channeled into lower-

performing initiatives.

Thanks to such changes, Barcelonas senior managerswho

previously demonstrated lukewarm interest in (if not outright

hostility toward) the BSCnow take a keen interest in improv-

ing their performance. If results on a particular strategic objec-

tive prove disappointing, district and sector leaders demand

detailed performance data as well as assistance in analyzing

potential causes.

Combating Complacency and Resistance

Barcelonas municipal employees were understandably

complacent in the face of the citys challenges and resistant to

proposed new management approaches: most had a guarantee

of lifetime employment, and they had seen new ideas come

and go every four years when a new government was voted

into office.

To combat the complacency and resistance, the council

launched an extensive change program that began with strong

leadership from the top. The city manager himself, along with

the councils Office of Strategy Management (established in

2008), used the MAP to define corporate-level strategic objec-

tives and metrics. Then more than 700 employeesmostly

district and sector leaders and their direct reports as well as

technical personnelreceived training on the BSC framework

(including how it related to the MAP) and the technology

solution the city had adopted for performance monitoring

and reporting. Finally, all employees were given ownership of

particular objectives and metrics, so everyone had a stake in

the framework.

Thanks to this effort, managers and employees have begun

demonstrating a new excitement about Barcelonas strategy

management approach. One manager who had strenuously

protested the introduction of the new approach even remarked,

Now I see that this is for realand it works.

She was right; it does work. Barcelona has seen improvements

across key performance criteria such as tourism, business

activity, and customer service. Says Puig, Implementing a

robust, comprehensive performance management system to

support our new management framework sharpens our

strategic focus. We are the pioneers of strategic management of

government in Spain, starting with making Barcelona a better

city. And 500 multinational managers agree: in the 2008 annual

European Cities Monitor Report, Barcelona was named the

Best European City in Quality of Life and ranked within the top

10 for establishing a business.

(All results from 20082010)

City Halls total public debt decreased 20%.

The number of new businesses registered increased

by 55%.

Revenues rose 21%.

The number of in-house visits by social services

increased 42%.

Traffic accidents decreased 10%.

The proportion of services delivered online to citizens

grew 34%.

The number of citizens using municipal facilities

increased 16%.

The number of municipal job opportunities covered

internally increased 150%.

More than 700 municipal employees have been trained

in strategy management.

Execution Premium

Instituting a driver model for each unit to better link

the citys strategy management process to operations

managementby identifying operational processes

and activities that support performance on strategic

objectives and metrics and establishing dashboards to

monitor them.

Extending the BSC model and its supporting technol-

ogy to public institutions within the councils control,

such as the Institut Municipal dInformtica (Technical

Institute) and Barcelona Serveis Mobilitat (Mobility

Services).

Future Focus

P a l l a d i u m B a l a n c e d S c o r e c a r d H a l l o f F a m e R e p o r t 2 0 1 1

Boys & Girls Clubs of Puerto Rico

Following its own financial

crisis, this nonprofit serving

Puerto Rican youths got serious

about goals and performance.

The key to its success: a relentless focus on employ-

ee awareness, alignment, and development.

Established four decades ago, the Boys & Girls Clubs of Puerto

Rico (BGCPR, an affiliate of the Boys & Girls Clubs of America) is

a nonprofit organization aimed at helping young people reach

their full potential as productive, caring, responsible citizens.

With a budget of $6.2 million and eight facilities throughout

Puerto Rico, it provides services and programs to promote

healthy youth development, ranging from career development

to recreational pursuits. More than 200 full- and part-time

employees serve about 7,500 youths. The organization is run by

a board of directors, with day-to-day management handled by a

CEO and an executive team.

Back in 2004, however, BGCPRs situation was dramatically differ-

ent. BGCPR underwent a financial crisis, and was unable to make

payroll for six months. When the organization emerged from the

crisis, executives decided never again to put BGCPRs services

and employees at risk. Once BGCPR was back on its feet, in 2005,

CEO Jos Campos and EVP Eduardo Carrera decided it was time

to expand the number of facilities and services. But myriad ob-

stacles stood in the organizations way, including a lack of public

awareness, limited resources, a paucity of donors, and the inabil-

ity to measure the impact of its services. And with no mechanism

in place for retaining key employees, retention had fallen to

55%a human capital cost the organization could no longer

afford. To address the many obstacles and boost organizational

effectiveness, Campos turned to the Balanced Scorecard.

An Urgent Need for Employee Alignment

The first step: creating a more efficient organizational structure

and ensuring that the right people were in the right positions.

Campos and his executive leadership team added departments

(including human resources) and administrative personnel.

Campos also instituted a job rotation system to build compe-

tencies for some employees and ensure that others, already

endowed with knowledge, skills, and abilities, could pursue

new goals. A year later, the executive leadership team began

the planning process.

The team articulated an ambitious vision: becoming the lead-

ing nonprofit in Puerto Rico, offering high-quality programs,

and being the best investment choice for donors. It created a

strategy map organized around four areas: Donors and Partici-

pants, Clubs and Administration, Personnel and Organizational

Culture, and Finances. Clubs and Administration, for example,

focused on becoming the programmatic and organizational

leader of the third [nonprofits] sector, with such objectives

as Excelling in process quality. Objectives under Finances

included increasing not only the amount but also the sources of

income, as well as establishing a reserve fund.

The effort represented a significant cultural change. Initially,

commitment among many corporate as well as club leaders

was lukewarm. Many were skeptical of the BSC process and

balked at the prospect of being measured for the first time. To

foster staff alignment, Carrera strove from the beginning to

involve employees in strategy development. At the annual strat-

egy review meeting, for instance, a team of employee represen-

tatives evaluates performance results and provides feedback to

management on ways to improve processes and generate new

tactics and operational plans to fix red flag items. In addition,

the Office of Strategy Management (OSM) conducts interviews

and surveys in the business and support units to get a full

picture of strategy execution. BGCPR has also put consider-

able resources into a multifaceted communications plan that

includes simulation games (such as interactive quizzes and role

playing), town meetings, and videos. A handbook provides de-

tailed information on everything from strategy maps to objec-

tives (including definitions). So comprehensive and professional

is the document that the board of directors also uses it when

approaching donors.

To foster staff alignment, Carrera strove from

the beginning to involve employees in strategy

development. At the annual strategy review meeting,

for instance, a team of employee representatives

evaluates performance results and provides

feedback to management on ways to improve

processes and generate new tactics and operational

plans to fix red flag items.

But the BSC is more than just a tool for performance measure-

ment and employee alignment. BGCPRs board, in fact, actively

uses the Balanced Scorecard and has its own strategy map to

align itself with BGCPRs strategy. Every trimester, the board

convenes for an organizational briefing, and, once a year,

members hold a retreat to evaluate the boards as well as the

organizations performance.

Investing in Employees

The BSC plays a vital role in employees professional develop-

ment at BGCPR. At the beginning of every fiscal year, employ-

ees meet with their supervisors to discuss personal action

plans and how their activities relate to organizational and

S t r a t e g y E x e c u t i o n C h a m p i o n s

department goals. Throughout the year, supervisors monitor

progress and suggest areas for improvement. During formal

performance reviews, employees and their supervisors create

a development plan based on strategic goals. Employees who

achieve the targets they set with their supervisors receive a

performance bonus.

The system has been a hit. Employee satisfaction surveys reveal

that BGCPR staff regards professional development as the most

valuable organizational asset. The system has also heightened

employee engagement and employees appreciation of the fact

that financial growth enables BGCPR to support more pro-

grams. This appreciation has prompted employees to conceive

of several ingenious initiatives. For example, at the 2009 annual

meeting, an employee with technology expertise proposed

starting a new business that would offer technological,

educational, and career services to corporations, government

agencies, and the public. Shortly thereafter, another project

emerged: Club Pizza, which allowed the organization to train

youths in sales skills while also generating extra revenue.

Big on Best Practices

To keep everyone on the same pageand to advance opera-

tional excellenceBGCPR encourages best practice sharing.

Soon after introducing the BSC, for example, the executive team

discovered that some clubs were considerably more successful

than others in implementing the new system. To share infor-

mation and standardize best practices, it formed committees

composed of directors and employees who performed the same

tasks in different SBUs. The team also established a best practice

sharing meeting for all employees called Quarterly Encounter.

Best practice sharing is also an important part of strategy

review meetings, from weekly department heads meetings to

the monthly meetings of the director of operations and each

SBU, to the quarterly review meetings.

Through its performance management software, BGCPR

identifies trends and patterns in performance results, and

makes constant adjustments. For example, if the number of

participants in any given week is lower than usual, the appro-

priate SBU can evaluate whether theres also been a drop

in other, relevant indicators, such as participant satisfaction,

and take corrective steps.

Exceeding Expectations, Despite the Economy

Armed with the ability to measure resultsand provide evi-

dence of its success to potential donorsBGCPR has won over

new contributors. Between 2005 and 2010, revenues more than

tripled, from $1.9 million to $6.2 million, and the organization

went from a loss of more than $50,000 to more than $85,000

in profits. It also established a reserve fund thats now worth

nearly half a million dollars. These financial gains occurred

during the economic recession. Moreover, during a time when

Puerto Ricos unemployment rate hit 15%, BGCPR grew from 60

to more than 200 employees.

Through a disciplined, creative approach to best practice shar-

ing, BGCPR has made important progress toward its operational

excellence goals. Satisfaction among youths served soared, em-

ployee strategic readiness rose significantly, and key employee

retention increased markedly.

Collectively, these successes have contributed to BGCPRs

effectiveness in its core mission. During a time of economic

crisis, the organization has been able to provide safety from the

storm for thousands of disadvantaged youthsfar more than it

could ever have hoped to help only a few years earlier.

(All results from 20052010)

BGCPR expanded its facilities from four to eight, and the

number of participants served increased from 2,500 to

more than 7,500.

Average daily attendance by participants (measured

against building capacity) went from 68% to 102%; the

number of participants who came to clubs three or more

times a week rose from 9% to 40%.

Participant satisfaction rose by nearly a factor of 6, from

9% to 53%.

Revenues from repeat donors jumped from $1.9

million to $4.5 million, and revenues from new donors

rose $1.7 million.

Technology project completion (e.g., centralizing

networks, security measures, the website) went from

zero to 73%.

Employee strategic readiness (as measured by surveys

and quizzes) rose from 60% to 94%; key employee reten-

tion increased from 82% to 90%.

Execution Premium

Mentoring other nonprofits in Puerto Rico on the use of

the Balanced Scorecard.

Implementing such process improvement methods as

Six Sigma, Lean Six Sigma, and the Baldrige Performance

Excellence program.

Encouraging more local autonomy in refining BSCs and

managing the BSC process.

Future Focus

P a l l a d i u m B a l a n c e d S c o r e c a r d H a l l o f