www.StrategyMap.com.

au

The worlds most popular Strategy Map Balanced Scorecard Software System

AIM Presentation - March 2007

A fast practical physical approach to the basic mechanics of Implementing a Balanced Scorecard (BSC) on a Personal Computer System. Phil Best BSc(Elec) CertEng(Elec)
Director Applied PC Systems P/L ABN: 64.056.607.713 Strategy Map Software System Architect t: +61.7.3871.0011 e: Phil@StrategyMap.com.au Mentors: w: www.strategymap.com.au Paul Arveson, BSC Institute
www.StrategyMap.com.au
2002 ClaritasAsia Pte Ltd. Ltd.

Nigel Penny, Claritas Asia

Welcome!
As a Guest Speaker my goal is to leave you with a simple methodology that you can immediately apply. We describe BSC basic concepts within a framework relevant to Computer Screen Tables & Relational Data Structure. Whilst it is essential that you understand Strategic Planning Concepts, it is also necessary that you be able to practically implement an automated solution using some sort of software framework and avoid the PTCLP (Office Dust) problem. Ok, I have heard all the theory, but how can I actually physically start? - NOW!
Strategic Framework -> Data (automation) Framework
2002 ClaritasAsia Pte Ltd. Ltd.

PTCLP = Post Training Course Latency Problem

Presentation Agenda
Mission > StrategyMap > BSC > Implementation
The BSC Spectrum Balanced Scorecard (BSC) & Evolution BSC Performance Grid or Table a Golf Game? Where is the Strategy in a BSC Table? Where is the How and Why? How can we be Right on the Money? HTDI Converging Starting Points Tools you can use. Types of Software Systems. Platforms and Development Systems.

Strategic Plan Static Components Strategic Components Scorecard Components Cross Referencing Strategy Map WYSIWYG

2002 ClaritasAsia Pte Ltd. Ltd.

The BSC Spectrum & Package

Harvard BS, Kaplan & Norton, BSCol - USA Cranfield CBP Performance Prism - UK Various Other Systems KRA or KPI Based Project Based Almost anything imaginable is possible Every implementation is different Software Scene & Flow Charts Software Variability and Setups Our new Version 3 has > 150 setup options Harvard or Cranfield

Strategic

Collaboration

BSC/HR Budget

2002 ClaritasAsia Pte Ltd. Ltd.

The Strategy Map is the most strategic part and now drives the more HR based BSC
Measurement System Strategy Implementation Total Strategy Management

1992 Articles in Harvard Business Review:

The Balanced Scorecard Measures that Drive Performance January February 1992 Putting the Balanced Scorecard to Work September - October 1993 Using the Balanced Scorecard as Strategic Management System January - February 1996

1996

2000

2004

1996

2000

2004

Books are pre-Internet and mainly for Reference Only

2002 ClaritasAsia Pte Ltd. Ltd.

The BSC & Initiatives Grid (not a starting point)

Obj Kra Meas Score Wt

Use Cell Merging to display grid One-to-Many relationship.

A BSC is a HR (QA style) Collaboration Tool where associates can work together to establish their quality and make improvements to their work.
Init Date Status Money Note

Implemented using a Successive Approximation refinement process where you improve the Quality of your Scorecard Quality.

2002 ClaritasAsia Pte Ltd. Ltd.

BSC Grid Objectives and Initiatives

Everything is written down and refined and checked Can be Cross Referenced, targeted and collaborated A Measurement & Status Device Why, How and When stored in Initiatives HR rather than Strategic The Work Specification Each Objective can have many Initiatives Engage the employees through Change Management Line Managers do the lower levels -> Their New Budget An Aligned strategic means to obtain funding (for everyone)

2002 ClaritasAsia Pte Ltd. Ltd.

Strategic Planning:
The tool we use to establish our direction
SM Goal: Define and Align Objectives. Refine until correct. Define BSC Col1. (Sits nice) SM Vision: Have every employee carry it in their heads (engage & think strategically). SM Objective: Look concise but sit perfectly. Not too heavy not too light. A Recursive Development Process. SM Structure: Inter-related Objectives categorized by Viewports (Perspectives) SM Mission: Provide the structural focus to answer the questions: Where are we going, Why do we come to work? Why an I doing this? How will our careers improve? Will we expand or downsize? Project Map or extra Project Perspective Child Maps with inherited Objectives Arrows pointing upwards if possible with optional goals row.
2002 ClaritasAsia Pte Ltd. Ltd.

StrategyMap Needs Design Strategies

Balanced Scorecard terminology

Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives

Strategic Theme: Operating Efficiency

Financial Profitability Fewer planes Customer Flight Is on time Lowest prices More customers

Statement of what strategy must achieve and whats critical to its success

How success in achieving the strategy will be measured and tracked

The level of performance or rate of improvement needed

Key action programs required to achieve objectives

Objectives
Internal Fast ground turnaround

Measurement

Target

Initiative

Fast ground
turnaround

On Ground Time On-Time

Departure

30 Minutes 90%

Cycle time
optimization

Learning Ground crew alignment

South-West Airlines Non KRA example (an early SM/BSC) Possible Grid Conflict now with automation
2002 ClaritasAsia Pte Ltd. Ltd.

BSC Needs to be aligned (driven by) the Strategy Map

Harvard K&N Southwest Airlines Example
Strategic Theme: Operating Efficiency
Financial Profitability Fewer Planes Customer Flight Is on Time More Customers

Objectives

Measurement

Target

Initiative

Profitability More
Customers

Market Value Seat Revenue Plane Lease

Cost FAA On Time Arrival Rating Customer Ranking (Market Survey)

30% CAGR 20% CAGR 5% CAGR #1 #1 Quality

management Customer loyalty program

Fewer planes Flight is on

Lowest Prices

-time Lowest prices

Internal Fast Ground Turnaround

Fast ground
turnaround

On Ground Time 30 Minutes Cycle time optimization 90% On-Time

Departure program 70% yr. 3 90% yr. 5 100%

Learning Ground Crew Alignment

Ground crew
alignment

% Ground crew yr. 1

trained

% Ground crew
stockholders

ESOP Ground crew

training

Stylised SM->BSC no clear responsibility or one-to-many structure

2002 ClaritasAsia Pte Ltd. Ltd.

Perspectives as view-ports or windows

Balanced Scorecard provides the framework to translate strategy into operational terms.
Organisation Vision

Strategy is described using four perspectives Cause and effect is a key element Measures are developed to monitor performance

Financial Perspective
If we succeed, how will we look to our shareholders?
Profitability Growth Shareholder Value

Customer Perspective
To achieve our vision, how must we look to our customers?
Price Service Quality

Internal Perspective
To satisfy our customers, what management processes must we excel at?
Cycle Time Productivity Cost

Organization Learning

Commit this Framework to your memory!

2002 ClaritasAsia Pte Ltd. Ltd.

To achieve our Market Innovation vision, how must Continuous our organisation Learning learn and Intellectual Assets improve?

With Forward Planning, New Strategies kick-in to take us to the next level of growth
Needs Collaboration & Alignment: Vision, Persps, Objectives, Inits. & Budgets

S2
..

Business growth

T1

T2 S1

Plan for T2 before reaching the top of T1 Especially in IT and Share Trading
2002 ClaritasAsia Pte Ltd. Ltd.

Successful Balanced Scorecards start with a Strategy Map Example Mobil (US Marketing & Refining)
Growth Theme Productivity Theme Improve quality of revenue by understanding customer Maximize utilization of existing assets and integrate needs and differentiating ourselves accordingly. the business to reduce total delivered cost. Financial Return on Capital Perspectiv Increased from 6% to 16% e
Competitive Position
(profitability)

From last (1993) to first (95, 96, 97, 98) Volume Growth Exceeds industry by 2-2.5% annually Reduce Cash Expenses Down by 20% Improve Cash Flow From -$500 M/Yr to +$700 M/Yr

Customer Perspectiv e Internal Perspectiv e

Customer Satisfaction Continuous improvement for 3 consecutive years Product Innovation Speedpass Active Increasing at rate of 1M per year
Customer Management

Dealer Quality Continuous improvement for 4 consecutive years

Perfect Orders Continuous improvement for 4 consecutive years

Good Neighbor

Operational Excellence

Quality Continuous improvement for 4 consecutive years

Capacity Utilization Annual value of lost yield reduced from $175m to $50m

Safety Lost work incidents down from 150 to 30 per year

Environmental Number of incidents reduced by 63%

Learning & Growth Perspectiv e

Motivated & Prepared Workforce

Strategic Awareness Annual employee survey shows awareness of strategy increased from 20% to 80%
2002 ClaritasAsia Pte Ltd. Ltd.

Source: The Balanced Scorecard D. Norton & R. Kaplan

Back at the BSC Coal-Face Implementation

Assign SM Objective to an employee Break down each (broad) Objective with related measurable concepts in one or more columns called KRA, KPI, CPI, Target, Focus, etc. How to Measure it and Score it? Repeat the planning and building process until correct. Correctness = Alignment = Efficiency = Collaborative Cross Referencing. Every Org BSC is different and changes regularly. New BSC every year for Planning & Budgeting Comparison between Planned and Actual Income and Expenses
2002 ClaritasAsia Pte Ltd. Ltd.

1. 2. 3.

Static Done! Strategic Done! Scorecard Components with SM Alignment

Choice of Objective Grid Columns

Where does the actual strategy live?

Both these companies make cars but its the strategy that differentiates

KPI Brand Image

KPI Value for money

2002 ClaritasAsia Pte Ltd. Ltd.

The SM >> BSC Full Data Structure

Static Components Vision Mission Goals Perspectives (4 or 5 is common) possible Multiple Goals
Make it sit just right

Objectives KRAs Measures & Scores Initiatives with Dates, Gauges, Budgets Monthly Outcomes Planned Vs Actual Income Vs Expense

Does not have to be overly complex. Eventually involves a series of Tiered One-to-Many relationships
2002 ClaritasAsia Pte Ltd. Ltd.

How to do it
SM/BSC is not a Tertiary Education Concept (not Rocket Science). It is practical & hands-on and requires your extensive company structural knowledge. It is a successive approximation process using the industry skills that you already have. The CEO flies Solo with managers as flight attendants.
1. 2. Train CEO and Upper Management. Run strategic retreat for managers. Discard current roles. Combine their industry and company knowledge. Use Strategic Facilitator (Quality >> Outcome). 3. Define Static Components: Vision, Mission, Market, SWOT, Values, Policies, etc. 4. Strategic Components: Persps. & Objectives 5. Alignment with (KISS) Objectives in Strategy Map 6. Build Alignment & Accountability. Define & assign Employee KRAs/KPIs to Objectives 7. Engage and Train Employees in Your Vision/SM/BSC Framework and how they can help. 8. Focus on Change Management if needed. 9. Train and engage Managers & Employees to complete the picture and prepare budgets. 10. Monitor & Continue to improve the SM&BSC.

The CEO Leads from the front.

2002 ClaritasAsia Pte Ltd. Ltd.

Scorecard Benefits for Your Organisation?

Clarify the vision Gain consensus and ownership Align the organisation Integrate strategic planning Drive resource allocation Improve management effectiveness

The journey is not easy or short The journey is not easy or short
Source:The Strategy Focused Organization, D. Norton & R. Kaplan Source:The Strategy Focused Organization, D. Norton & R. Kaplan
2002 ClaritasAsia Pte Ltd. Ltd.

Tools you can use

AIM Training, Facilitators to guide you, Case Studies. Software BSC Systems SM front End, Adaptable, Cross Referencing Strategy Map WYSIWYG
Strategy Map Balanced Scorecard

Avoid the Post-Training-Course Latency Period (The Office Dust) by using an office automation and collaborative software product.
2002 ClaritasAsia Pte Ltd. Ltd.

Types of software systems

Word tables with cell merging Excel with formulas Old Tech Windows Forms based BSC Products Dedicated Windows Forms based BSC Products Dedicated Windows Forms based SM/BSC products More complex systems that link to Outlook Tasks Web Browser Based Systems (Insecure or Expensive) Lower usability, sometimes better availability. The Strategic Planning system is not an accounting system. (Some finance data may be duplicated) It has different users and data entry permissions. It operates in a different time-zone.
2002 ClaritasAsia Pte Ltd. Ltd.

Thankyou

Questions Please

2002 ClaritasAsia Pte Ltd. Ltd.