Transcript BSC - Maktabat MEPI

Executing Strategy with the Balanced Scorecard
January 30, 2006
Presented by Paul R. Niven
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Agenda
• Introductions
• Performance Measurement Background – What led us to the BSC?
• The Balanced Scorecard
• Success Stories
• Strategy Maps
• Essentials of Implementing the Balanced Scorecard
• Questions & Answers
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Introduction to Paul
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Paul Niven and the Balanced Scorecard
• BSC Practitioner first, then consultant, and writer
• Led a BSC project with large Canadian firm in mid-90s
• Have consulted with Bearing Point (Chicago) and CSC (San
Diego)
• Formed The Senalosa Group in 2001
• Have written 3 books and many articles on the subject of Balanced
Scorecard
• Speak at conferences and seminars around the world
• Have worked with clients in many different sectors
Translated into
12 languages
Released June,
2003
Released April,
2005
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Performance Measurement and Balanced
Scorecard Background
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The Changing Landscape of Performance
Management
• 80% of respondents reported making changes in their PM
system
during the last 3 years. For 33% the change was described as a
“major overhaul” More than 50% of respondents indicated their
company is currently changing its PM system. (From Strategic
Finance Magazine)
• More than 50% of the Fortune 1000 have turned to the Balanced
Scorecard. (Bain & Company study)
• Hackett reported in their 2002 Benchmarking study that 96% of
the
2000 global companies surveyed either were using a BSC or
planned to implement it
The question is why???
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Three Challenges
Rise of
Intangible
Assets
Over-reliance
on Financial
Measures
Prominence of
the Balanced
Scorecard
Difficulty
Executing
Strategy
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Our Economy is Changing
“They (knowledge workers) now account for a full third of
the American workforce, outnumbering factory workers
two to one. In another twenty years they are likely to make
up two-fifths of the workforces of all rich countries.”
-Peter F. Drucker, The Economist, November
2001
1982
The increasing
value of
intangible assets
in organizations
1992
Today
75%
62%
38%
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Financial Measures Don’t Tell the Whole
Story
• Not consistent with today’s business
realities
• Driving by rearview mirror
• Tend to reinforce functional silos
• May sacrifice long-term thinking
• Not relevant to many levels of the
organization
The Alto
© 2006 The Senalosa Group, Inc. All Rights Reserved
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The Strategy Story
Only 10% of
organizations
execute their
strategy
Barriers to Strategy Execution
Vision Barrier
People Barrier
Management
Barrier
Resource Barrier
Only 5% of the
workforce
understands the
strategy
Only 25% of
managers have
incentives linked
to strategy
85% of executive
teams spend less
than one hour per
month discussing
strategy
60% of
organizations
don’t link budgets
to strategy
Chart adapted from material developed by Robert S. Kaplan and David P. Norton
© 2006 The Senalosa Group, Inc. All Rights Reserved
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Clearly, A Change is Needed
Intangible Assets
Strategy
Financial Measures
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Balanced Scorecard Fundamentals
Financial
"To succeed
Objectives
financially, how
should we appear
to our
shareholders?"
Measures Targets Initiatives
Customer
"To achieve our Objectives
vision, how should
we appear to our
customers?"
Internal Business Process
Measures Targets Initiatives
Vision
and
Strategy
"To satisfy our
Objectives
shareholders and
customers, what
business
processes must
we excel at?"
Measures Targets Initiatives
Learning and Growth
"To achieve our Objectives
vision, how will
we sustain our
ability to change
and improve?"
Measures Targets Initiatives
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Source: Harvard Business Review, 1992
© 2006 The Senalosa Group, Inc. All Rights Reserved
Financial Perspective
• Represent the “destination” or “end
in mind” of your strategic story
Financial
• Focus on shareholder value,
revenue growth, and productivity
"To succeed
Objectives Measures Targets Initiatives
financially, how
should we appear
to our
shareholders?"
Customer
Internal Business Process
"To achieve our Objectives Measures Targets Initiatives
vision, how should
we appear to our
customers?"
Vision
and
Strategy
"To satisfy our Objectives Measures Targets Initiatives
shareholders and
customers, what
business
processes must
we excel at?"
Example Measures:
Learning and Growth
"To achieve our Objectives Measures Targets Initiatives
vision, how will
we sustain our
ability to change
and improve?"
• Return on invested capital
• Gross revenue
• Revenue by segment
• Asset utilization
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Customer Perspective
• Should answer three questions:
• Who are our customers?
• What is our value proposition in
serving them?
Financial
• Operational Excellence
"To succeed
Objectives Measures Targets Initiatives
financially, how
should we appear
to our
shareholders?"
• Product Leadership
Customer
Internal Business Process
"To achieve our Objectives Measures Targets Initiatives
vision, how should
we appear to our
customers?"
Vision
and
Strategy
"To satisfy our Objectives Measures Targets Initiatives
shareholders and
customers, what
business
processes must
we excel at?"
• Customer Intimacy
• What do customers expect or
demand?
Learning and Growth
"To achieve our Objectives Measures Targets Initiatives
vision, how will
we sustain our
ability to change
and improve?"
Example Measures:
• Customer Loyalty
• Market Share
• Customer Retention
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Customer Value Propositions
To attract and retain customers, different “value propositions”
are required based on your strategic choice………….
Innovation/Product Leadership
“A Product leadership company
pushes its products into the realm
of the unknown, the untried, or the
highly desirable…Superior
performance for customers.”
Sony
Intel
Most Innovative Product
Customer Solutions (Customer
Intimacy)
“A Customer Intimate company
builds bonds with customers; it
knows the people it sells to and
the products and services they
need”
Nordstrom
Mobil (Early BSC adopter)
Best Solution
Lowest Total Cost (Operational
Excellence)
“Operationally excellent companies
deliver a combination of quality,
price, and ease of purchase that no
one else can match”
Costco
McDonalds
Dell Computer
Best Total Cost
System Lock In
“Lock in companies provide the best
platform for buyers and sellers to
meet”
E-Bay
Microsoft
Yellow Pages
Best Exchange
The first three value propositions are based on Treacy & Wiersema, The Discipline of Market
Leaders, Addison Wesley, 1995
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Internal Process Perspective
• Key processes we must excel at to
drive value for customers
Financial
• Also focus on customer value
proposition
"To succeed
Objectives Measures Targets Initiatives
financially, how
should we appear
to our
shareholders?"
Customer
Internal Business Process
"To achieve our Objectives Measures Targets Initiatives
vision, how should
we appear to our
customers?"
Vision
and
Strategy
"To satisfy our Objectives Measures Targets Initiatives
shareholders and
customers, what
business
processes must
we excel at?"
• Normally contains the largest
number
of measures
Example Measures:
Learning and Growth
"To achieve our Objectives Measures Targets Initiatives
vision, how will
we sustain our
ability to change
and improve?"
• On-time delivery
• Product development cycle time
• Customer response time
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Employee Learning & Growth Perspective
• Often overlooked
• Represent the “enablers” of the
other
three perspectives
Financial
"To succeed
Objectives Measures Targets Initiatives
financially, how
should we appear
to our
shareholders?"
Customer
Internal Business Process
"To achieve our Objectives Measures Targets Initiatives
vision, how should
we appear to our
customers?"
Vision
and
Strategy
"To satisfy our Objectives Measures Targets Initiatives
shareholders and
customers, what
business
processes must
we excel at?"
• “Soft” measures can drive “hard”
results
Example Measures:
Learning and Growth
"To achieve our Objectives Measures Targets Initiatives
vision, how will
we sustain our
ability to change
and improve?"
• Employee satisfaction
• Strategic job coverage ratio
• Internal communication rating
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Employee Learning & Growth Perspective
Human Capital – Understand
what competencies we need,
what we have, and how to
close the gap
Information Capital –
Understand the IT applications
and infrastructure we need to
support the strategy
Organizational Capital Culture – Build an organization that internalizes the
shared vision, strategy, and values required to execute
Leadership – Develop leaders who can effectively
leverage human capital
Goal Alignment – Encourage personal contribution
through goal and incentive alignment
Knowledge Sharing/Teamwork – Share knowledge and
experience through teamwork
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Who is Using Performance Measurement?
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Everybody!
Can you guess the
country represented by
this flag???
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Company Success Stories
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Strategy Maps
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Maps Get Us From “A” to “B”
Sydney
Antigonish
Truro
Halifax
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Strategy is Also a New Destination
Successfully
Executed
Strategy
Landmark 2
Landmark 1
Formation of a
Strategy
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A Good Balanced Scorecard Tells the Story of
Your Strategy on a Strategy Map
Illustrative Example: Southwest Airlines
Strategy Map
Financial
What will drive operating efficiency?
Increase Profitability
Attract More
customers
Fly Fewer planes
Customer
Offer on
time
flight
• More customers on fewer planes
How will we do that?
Ensure Lowest
prices
• Attract targeted customer segments who
value price and on time arrivals
What must the internal focus be?
Internal
Maintain Fast
ground
turnaround
Learning
Align
ground
crew
operations
• Fast turnaround
Will our people do that?
• Educate and compensate ground crew
regarding how they contribute to the firm’s
success
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Maximize
Sustainable Value for
Our Shareowners
Financial
Perspective
Customer
Perspective
Internal
Process
Perspective
Learning &
Growth
Perspective
Profitable Growth
Operational Productivity
Grow Revenue & Earnings
Achieve optimal
ROIC levels
Build customer loyalty
Exceed customer
expectations in service
delivery
Offer superior
value in distribution and supply
chain services
Introduce/enhance
Products and services
Provide
simple, consistent and
reliable processes
Leverage best practices
to achieve best in class
performance
Hire, develop,
and retain the
best performers
Leverage technology
to improve productivity
and drive customer
results
Exercise
and outwardly communicate
business practices that drive
channel integrity
Exercise best in class
governance/controls
Foster a culture
that rewards
teamwork and
promotes
balance
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© 2005 The Senalosa Group, Inc. All Rights Reserved
Government I.S. Strategy Map
Increase customer satisfaction
Customer
Internal
Understand and
anticipate
customers’ business
needs
Continuously
improve and simplify
customer
experience
Participate
knowledgably and
contribute to
meeting needs
Proactively provide
effective and
innovative solutions
Efficient delivery
through consensus
Keep system up and
running
Proof of concept
Get off the 3rd floor
Explore alternatives
and anticipate use
of new technology
Continuously review
and simplify internal
practices and
procedures
Build it right, keep
it healthy
Skills & Training: Hire, develop and retain solid performers
Information & Communication: Share information, listen more, and respond
Employee
Learning
and
Growth
Culture:
Foster an environment that encourages, recognizes, and rewards contribution
Create accountability and ownership
Ensure teamwork that fosters mutual respect, support, and learning
Be consistent
Get more bang for our buck!
Financial
Customer Focus
Know Our Business
Keep Pace With Technology
© 2006 The Senalosa Group, Inc. All Rights Reserved
Work Smarter
Always On
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Aliant Inc. Strategy Map
Financial
Increase Shareholder Value
Grow Aliant
Profitably
Customer
Everything Begins With The Customer
Serve Customers on Their
Terms With Passion and
Integrity to Build Loyalty
Deliver More Value Through
Integrated Offerings
Internal Process
Innovate, Collaborate,and Allocate
Continuously Improve and
Simplify End to End Customer
Experiences
Allocate All Aliant Resources
Effectively
Stimulate New Product and
Service Development &
Adoption
Employee Learning
& Growth
Create a Workforce that
is Informed, Developed,
Engaged and Inspired
Build an Environment Where
People Feel Valued and
Maximize Their Potential
Share Information, Listen More
and Respond
Create a Safe & Healthy
Environment That Respects the
Balance in People’s Lives
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© 2005 The Senalosa Group, Inc. All Rights Reserved
Brother Industries (USA)
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© 2005 The Senalosa Group, Inc. All Rights Reserved
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© 2006 The Senalosa Group, Inc. All Rights Reserved
The BSC has gained wide acceptance, but
problems exist
• More than 50% of the Fortune 1000 have turned to the Balanced
Scorecard. (Bain & Company study)
• Hackett reported in their 2002 Benchmarking study that 96% of
the
2000 global companies surveyed either were using a BSC or
planned to implement it
• Harvard Business Review calls the BSC one of the 75 most
influential business ideas of the 20th century
• But as many as half of all BSC users aren’t achieving the
results
they hoped for
It’s all about Implementation practices!!!
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Balanced Scorecard Implementation Essentials
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Overview of Implementation Essentials
• A guiding rationale for the BSC
• Executive Sponsorship
• An effective team
• A Balanced Scorecard “Champion”
• Training, Education, and
Communication
• Strategy Maps
• Measures
• Cascading the Balanced Scorecard
• Reporting Results
• Linkage to Management Processes
• Living It!
Let’s examine a few of these in more detail…..
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Executive Sponsorship
“To make initiatives work it took passionate, allconsuming commitment from the top…Every
leadership action must demonstrate total
commitment to the initiative.”
-Jack Welch, Jack: Straight From the Gut
• No BSC initiative will survive without
active executive sponsorship
• Executives hold key knowledge for BSC
success
• Everyone watches what the boss
watches
• You can influence executive
sponsorship
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Balanced Scorecard Reporting
• Can be high-tech or low-tech
• Key point is to begin
discussing results soon!
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Balanced Scorecard Reporting
• Hold strategy centered management meetings
• Most meetings suffer from serious faults*:
• Lack of drama
• Lack of contextual structure
• “The Discipline of Getting Things Done”
* Based on “Death by Meeting” by Patrick Lencioni
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Cascading the Balanced Scorecard
Mission, Values, Vision
Department, Group
level
B.U. Level, etc.
Highest Level
Scorecard
Strategy
Internal Processes
Customer
Financial
Objectives
Measures Targets Initiatives
Objectives
Measures Targets Initiatives
Objectives
Measures Targets Initiatives
Objectives
Measures Targets Initiatives
Objectives
Measures Targets Initiatives
Objectives
Measures Targets Initiatives
Emp. L. & G.
Objectives
Objectives
Measures Targets Initiatives
Objectives
Measures Targets Initiatives
Measures Targets Initiatives
Emp. L. & G.
Objectives
Internal Processes
Customer
Financial
Measures Targets Initiatives
Internal Processes
Customer
Financial
Objectives
Measures Targets Initiatives
• Allows everyone
to demonstrate
how they
contribute to
overall goals
• Creates a
consistent
language through
measurement
Emp. L. & G.
Objectives
Measures Targets Initiatives
• Achieves a laserlike focus on
strategy
Team and Personal Balanced Scorecards
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Cascading Example
City Scorecard
Perspective
Objective
Customer
Provide safe,
convenient
transportation
Measure
Increase in average
ridership of public
transportation
Target
10%
Department of Transportation Scorecard
Perspective
Objective
Customer
Provide safe,
convenient
transportation
Measure
Percentage of fleet
available
Target
90%
Maintenance Department Scorecard
Perspective
Objective
Measure
Customer
Provide safe,
convenient
transportation
Percentage of
vehicle repairs
completed within
24 hours
Target
75%
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© 2006 The Senalosa Group, Inc. All Rights Reserved
Questions???
Thank you for your time. If you have any other questions, please feel
free to contact me at: (760) 789-2449 or [email protected]
www.senalosa.com
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© 2006 The Senalosa Group, Inc. All Rights Reserved