GS_M_Kaplan | Strategic Management | Innovation

Using the Balanced Scorecard to Create the Strategy-Focused Asset Management Organization

Robert S. Kaplan
Marvin Bower Professor of Leadership Development HARVARD BUSINESS SCHOOL Chairman BALANCED SCORECARD COLLABORATIVE

The Issue: Are Financial Measures Sufficient to Drive Long-Term Performance?
• • • • • • • Occupancy cost per square foot Occupancy cost per person Square foot per person Property and occupancy costs: % of total expenses % of sales $ of vacant space Cost per move

©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved.

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The Balanced Scorecard – Financial and Nonfinancial Measures Drive Long-Term Performance
January 1996

21 translations

January - February 1992

September 2000

18 translations

September 1993

10 translations underway 60% usage in Fortune 500 Harvard Business Review “Hall of Fame” 60,000+ BSC on-line members
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 3

December 2003
February 2004

Organizations Use the Balanced Scorecard to Align and Focus All Their Resources on Strategy Implementation

BUSINESS UNITS

STRATEGY

EXECUTIVE TEAM

HUMAN RESOURCES

INFORMATION TECHNOLOGY

BUDGETS AND CAPITAL INVESTMENTS
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 4

Inc and Robert S. 5 . Financial Services Engineering Polymers North America Marketing & Refining National Reconnaissance Office Royal Norwegian Air Force Saatchi & Saatchi Information and Communication Mobile UK Ministry of Defence Commercial Vehicle Business Unit US Army ©2004 Balanced Scorecard Collaborative. Kaplan.And It Works! Balanced Scorecard Users Successfully Execute Their Strategies. All rights reserved.

Kaplan. All rights reserved.2b increase in cash flow 10% increase in ROI 9% increase in revenues 33% increase in net income 2 years Least cost producer 3-5 years + $2b 3 years ©2004 Balanced Scorecard Collaborative.Balanced Scorecard Hall of Fame Organizations Implement Strategies and Achieve Breakthrough Results … Fast 99% merged asset return 3 years + $7b 5 years #1 in growth & profitability 3 years Customer satisfaction = 70% Public Official award 3 years + $3b 2-5 years #1 in customer satisfaction 33% reduction in cost/case 3 years Increase in customer satisfaction Increase in market revenue index 2 years 450% increase in # of customers Best on-line bank 3 years Saatchi & Saatchi Last to first $1. Inc and Robert S. 6 .

7 . All rights reserved.We Know How They Do It: SFO Best Practice Benchmarks TRANSLATE STRATEGY TO OPERATIONAL TERMS ● MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP Top leadership sponsorship for change clear ● Leadership team engaged ● Vision and strategy clarified ● New way of managing Change agent identified ● ● Case Strategy refreshed ● Strategy map developed ● Balanced Scorecard ● Targets established ● Initiatives rationalized ● Accountability clear ● ALIGN THE ORGANIZATION TO THE STRATEGY Corporate role defined ● Corporate – SBUs aligned ● SBU – Human Capital aligned ● SBU – Info Capital aligned ● SBU – Support units aligned ● SBU – Suppliers aligned Board of directors aligned ● STRATEGYFOCUSED ORGANIZATION ● MAKE STRATEGY A CONTINUAL PROCESS Strategic review meetings ● BSC reporting system ● Link budgets and strategy ● Strategic investments managed separately ● HR and IT planning linked to strategy ● Governance process linked to strategy ● Strategic Management Office ● MAKE STRATEGY EVERYONE’S JOB • Strategic awareness • Comprehensive communications • Personal goals aligned • Personal incentives aligned • Competency development aligned • Accountable for results ©2004 Balanced Scorecard Collaborative. Inc and Robert S. Kaplan.

Kaplan. All rights reserved. it evolves into a continual process. Unfreeze Mobilization Phase 3 . Inc and Robert S. 8 .Building your Strategy-Focused Organization starts with a project.24 month period where strategy is integrated into the day-to-day work and culture of the organization “Irreversible Momentum” “The Case for Change” “Early Wins” ©2004 Balanced Scorecard Collaborative.6 month period devoted to executive level momentum building Change Alignment Phase 6 month period in which new strategy is rolled out to top levels of the organization Sustain Sustainment Phase 12 .

All rights reserved.Phase 1: Mobilization. ©2004 Balanced Scorecard Collaborative. Kaplan. Mobilize Change through Executive Leadership Leadership Objective: • Achieve commitment at the top • Build the executive team • Build case for change These situations present an opportunity to introduce the Balanced Scorecard / Strategy-Focused Organization framework as a “new way to manage”. 9 . Getting Started A variety of situations suggest the need for a new and better way to manage strategy Mobilization Phase Get organization buy-in and leadership alignment around the need for a new process to manage strategy Triggers of Change Strategic Shift  New CEO or senior executive √ √  New strategy Underperforming  Value gap √  Poor quality or customer service √ √  Operational execution Managing Growth  Post merger acquisition √ √  Global. regional expansion Integration √  Integrating business units √  Integrating new product lines #1. Inc and Robert S.

Translate the Strategy #3.Phase 2: Alignment -. 10 . Align the Organization Leadership Objective: • Define and clarify the strategy • Align business and support units • Communicate to workforce • Rationalize initiatives C u s to m e r V a lu e P ro p o s i ti o n Growth Strategy B u il d t h e F ra n c h i s e I n n o v a t io n P ro c e s s q P ric e q Q u a lity q T im e li n e s s q F e a t u re s q S e rv ic e q B ran d q R e la t io n s h ip s In c r e a s e C u s to m e r V a lu e C u s to m e r M a n a g e m e n t P roce ss Supply Chain Strategy B e a G o o d C iti z e n R e g u la t o ry P ro c e s s e s P ro v id e O p e ra ti o n a l E x c e l le n c e O p e ra t io n a l P ro c e s s e s S tr a te g i c C o m p e te n c i e s S tr a te g i c T e c h n o l o g ie s C lim a t e fo r A c ti o n IT Strategy Human Capital Strategy The Strategy Map creates a “shared mental model” that aligns everyone in the organization ©2004 Balanced Scorecard Collaborative.Design and Cascade Balanced Scorecards The Strategy Map and Balanced Scorecard are the central organizing framework of a Strategy Focused Organization Investment Strategy CRM Strategy Alignment Phase Align the organization to the strategy through building. All rights reserved. cascading and communicating the BSC Strategy Map G r o w tth S tr a te g y h t ra Lo n g -Te rm S h a re h o ld e r V a lu e P r o d u c tiv ity S tr a te g y it y N ew R e ven u e S o u rc e s In c r e a s e C u s to m e r V a lu e Im p ro v e C o s t S tru c t u re Im p ro v e A s s e t U t iliz a t io n #2. Inc and Robert S. Kaplan.

11 . Inc and Robert S. All rights reserved. Kaplan.The Strategy Map Aligns Processes and Intangible Assets to Customer and Financial Outcomes Financial Perspective Sustained Shareholder Value Productivity Strategy Revenue Growth Strategy Improve Cost Structure Increase Asset Utilization Enhance Customer Value Expand Revenue Opportunities Customer Value Proposition Customer Perspective Price Quality Availability Selection Functionality Service Partnership Brand Image Product/Service Attributes Relationship Internal Perspective Operations Management Processes Processes that produce and deliver products and services Customer Management Processes Processes that enhance customer value Innovation Processes Processes that create new products and services Regulatory & Social Processes Processes that improve communities and the environment CREATING ALIGNMENT Strategic Job Families Learning & Growth Human Capital • • • Skills Training Knowledge CREATING READINESS Strategic IT portfolio Organization Change Agenda + • • • Information Capital Systems Databases Networks + • • Organization Capital Culture Leadership • • Alignment Teamwork ©2004 Balanced Scorecard Collaborative.

Inc and Robert S.Customer Perspective: Who are your Targeted Customers? Marine Construction Business Unit Strategic Objective Tier II • Be price-competitive on all desirable Tier II tenders Measurement C1-Pricing Index: The percentage variance between our bid prices to Tier II customers and those of our competitors Customer Tier I: • For Tier I customers. 12 . build long-term relationships based on satisfying the following customer objectives – Anticipate and solve customer’s emerging needs – High perceived value for money – Hassle free relationships – High performance professionals – Innovative work approaches C2-Market/Account Share: Market share for Tier I clients and accounts C3-Customer Ranking Survey: Customer’s perception of client and rating of our services. ©2004 Balanced Scorecard Collaborative. relative to our competition C4-Customer Satisfaction Index: To establish our customers specific aims. on an individual project basis. All rights reserved. Kaplan. to motivate and monitor our efforts in those areas.

All rights reserved. Kaplan. and ease of purchase that no one else can match” Low Total Cost Company Examples Toyota McDonalds Dell Computer Southwest Airlines Vanguard Mutual Funds Wal-Mart Best Buy Low Total Cost Customer Objectives Lowest cost supplier Consistently high quality Speedy. 13 . easy purchase Appropriate selection ©2004 Balanced Scorecard Collaborative.Defining the Customer Value Proposition: Low Total Cost “Deliver a combination of quality. Inc and Robert S. price.

accuracy. … First to market Penetrate new product segments ©2004 Balanced Scorecard Collaborative.Defining the Customer Value Proposition: Product Leadership “Continually develop products that offer superior performance for customers” Product Leadership Company Examples Sony Mercedes Merck. All rights reserved. 14 . weight. Inc and Robert S. size. Johnson & Johnson Intel Best Product Product Leadership Customer Objectives High performance products: speed. Kaplan.

Inc and Robert S. All rights reserved. 15 . Kaplan. provide them with the complete bundle of products and services they need” Customer Solutions Company Examples IBM (1960-80) Goldman Sachs Mobil Best Total Solution Customer Solutions Objectives Quality of solutions provided Number of products/ services per customer Customer retention Customer lifetime profitability ©2004 Balanced Scorecard Collaborative.Defining the Customer Value Proposition: Complete Customer Solutions “Build bonds with customers.

CORPORATE CORPORATE SCORECARD (Shared Strategic Agenda) Themes Measures SBU A LINE BUSINESSES SBU B SBU C SBU D SUPPORT UNITS EXTERNAL PARTNERS 1. Win-Win Relationships 4. Motivated & Prepared 8. Strategies Are Executed Through Business Units. Inc and Robert S. Low Cost Supplier 6. • Outsourcer Scorecard #4. Kaplan. 16 . All rights reserved. Good Neighbor 7. Each Support Unit develops a plan and BSC for “best practice” sharing to create synergies across SBUs. ©2004 Balanced Scorecard Collaborative. #1. Quality xxx xxx xxx xxx • • • • Finance Marketing Distribution Procurement Asset Management Safety Human Resources Information Technology • • • Customer Scorecards Distributor Scorecard Vendor Scorecard xxx xxx xxx xxx xx xx xx xx • • • • #2.Use Scorecards to Link And Align The Organization Around Its Strategy #3. Each SBU develops a long-range plan and BSC consistent with corporate strategic agenda. Financial Growth 2. Delight the Consumer 3. The Strategies of the Business Units Must Be Integrated If Organization Purpose and Synergies Are to Be Achieved. Safe & Reliable 5. A Corporate Scorecard defines overall strategic priorities. Plans and BSC’s define relationships with external partners consistent with SBU strategy.

” Larry D. we should probably outsource the function. Brady President FMC Corporation ©2004 Balanced Scorecard Collaborative. Inc and Robert S. All rights reserved.Shared (Corporate) Services “How does staff provide competitive advantage? Are they offering low cost or differentiated services? If they are offering neither. Kaplan. 17 .

Shared Service Unit Scorecard “A Business In a Business” 2 1 Service Agreement Financial Customer Mission Internal Customer Satisfaction Feedback L&G 4 Shared Service Unit strategies and scorecards must reflect the linkage to its “internal customers” ©2004 Balanced Scorecard Collaborative.Creating Value from Shared Services SBU 3 Linkage Scorecard Shared Service Unit • Define the SBU objectives and measures that the support unit is expected to help achieve. All rights reserved. Kaplan. Inc and Robert S. 18 .

Kaplan. uniform. Business Results Reduce total cost of Reduce total cost of occupancy occupancy Competency Competency Deliver low cost Deliver low cost occupancy occupancy solutions solutions Maximize Maximize shareholder returns shareholder returns Enhance employee Enhance employee productivity productivity Contribution Contribution Do the right things Do the right things at the right time at the right time Business Unit Alliance Improve business Improve business unit productivity unit productivity Deliver Deliver on on schedule schedule Effectively Effectively support users support users Create facilities that Create facilities that enhance business enhance business unit strategies unit strategies Solutions Leadership Propose and deliver Propose and deliver enabling solutions enabling solutions Understand Understand emerging occupancy emerging occupancy needs needs Customer Values Credibility Deliver quality Deliver quality service and service and facilities facilities Operational Excellence Internal Processes Optimize occupancy Optimize occupancy internal processes internal processes Realize Realize scale scale economies economies Manage Manage service quality service quality Leverage technology Leverage technology for facility management for facility management Understand business Understand business unit strategies unit strategies Attract and Attract and retain people retain people with key skills with key skills Focus on Focus on career career development development Promote a Promote a culture of culture of innovation innovation Develop Develop uniform.A Strategy Map Template for a Real Estate/Facilities Management Balanced Scorecard. comprehensive comprehensive data bases data bases 19 Strategic Enablers ©2004 Balanced Scorecard Collaborative. Inc and Robert S. . All rights reserved.

Solutions Oriented Culture Solutions Oriented Culture L3: Provide the Appropriate Tools L3: Provide the Appropriate Tools and Information to “Get the Job and Information to “Get the Job Done” Done” Resources F1: Strive to Maintain a Baseline F1: Strive to Maintain a Baseline Budget Budget F2: Manage Expenses versus F2: Manage Expenses versus Plan Plan ©2004 Balanced Scorecard Collaborative. understand. All rights reserved. Inc and Robert S. and Staff agree that we effectively support the Company’s work Effective and Efficient Operations Innovative Services and Solutions Consultative Customer Relationships Customer C1: “Maintains an Effective and C1: “Maintains an Effective and Efficient Work Environment” Efficient Work Environment” C2: “Understands Staff C2: “Understands Staff and Company’s Needs” and Company’s Needs” C3: “Is Easy to Do C3: “Is Easy to Do Business With” Business With” C4: “Provides New and C4: “Provides New and Innovative Services” Innovative Services” Internal Processes I1: Provide reliable and I1: Provide reliable and consistent service consistent service I3: Establish and maintain mutually agreed I3: Establish and maintain mutually agreed upon expectations upon expectations I5: Collaborate with customers I5: Collaborate with customers to develop new solutions to develop new solutions I2: Deliver specified level of I2: Deliver specified level of service in the most costservice in the most costeffective way possible effective way possible I4: Segment. L2: Nurture a Customer Focused. Kaplan. and address I4: Segment. 20 . understand. and address complex customer needs complex customer needs I6: Investigate the potential I6: Investigate the potential value of leading edge value of leading edge technologies and work technologies and work practices practices Learning and Growth L1: Maintain and Enhance Skills L1: Maintain and Enhance Skills and Knowledge and Knowledge L2: Nurture a Customer Focused. Management.Shared Services Strategy Map Directors.

Inc and Robert S. understand. and address M9 service plan complex customer needs ©2004 Balanced Scorecard Collaborative. Kaplan. I get what I expect [accurate and in a timely manner]” C3 “Is Easy to Do Business With” I3 Establish and maintain mutually agreed upon expectations M8 Share of core services with published service level expectations Core segments for which we have developed and are using a customized I4 Segment.Shared Services Balanced Scorecard Objectives Measures EFFECTIVE AND EFFICIENT OPERATIONS C1 “Maintains an Effective and Efficient Work Environment” M1 Favorable responses to the statement “Shared Services helps me be effective in my job” I1 Provide reliable and consistent service M2 Share of services meeting performance thresholds Deliver specified level of service in I2 the most cost-effective way possible M3 Per capita overhead / cost per Institution staff member M4 Cost per unit for core services CONSULTATIVE CUSTOMER RELATIONSHIPS C2 “Understands Staff and Company’s M5 Favorable responses to the statement “Shared Services understands what Needs” I need to produce my work” M6 Favorable responses to the statement “I have a clear understanding of where and how to obtain services” M7 Favorable responses to the statement “Once I find it. All rights reserved. 21 .

Solutions Oriented Culture M16 L3 Provide the Appropriate Tools and Information to “Get the Job Done” M17 Favorable responses to the statement: “Shared Services provides me with the tools and information I need to get the job done. All rights reserved. . and work methods” Innovative services and solutions implemented New services and solutions proposed LEARNING AND GROWTH I5 I6 Collaborate with customers to develop new solutions Investigate the potential value of leading edge technologies and work practices M12 L1 Maintain and Enhance Skills and Knowledge M13 M14 M15 Training days per staff member Staff attending minimum training Favorable responses to the statement: “Shared Services nurtures a culture that enables me to make a full contribution to the Institution. Inc and Robert S.” L2 Nurture a Customer Focused. tools.Shared Services Balanced Scorecard Objectives Measures INNOVATIVE SERVICES AND SOLUTIONS C4 “Provides New and Innovative Services” M10 M11 Favorable responses to the statement “Shared Services provides new or enhanced services.” Progress on rolling hit list of Shared Services staff identified [tools and information] items FINANCIAL RESOURCES F1 Strive to maintain a baseline budget M18 M19 Success in executing divisional Work Plans Variance between allocated budget and projected out-turn 22 F2 Manage expenses versus Plan ©2004 Balanced Scorecard Collaborative. Kaplan.

Leaders Use Strategy Maps and the BSC to Communicate The Strategy Ask the President Bulletin Boards Videos ED IT O RI AL THE PUNY PAYOFF FROM OFFICE COMPUTERS H S pec ial Repo rt MA N AG EME NT'S NE W E ST S TEP C ove r Stor y THE COMPUTER SLUMP Spe cial Re po rt MA NAG EME NT DISC OVE RS T HE HU MA N SID E OF AU TOM AT IO N Newsletters Classes Training Workshops ©2004 Balanced Scorecard Collaborative. All rights reserved. 23 . Inc and Robert S. Kaplan.

24 .Royal Canadian Mounted Police V Division – Iqaluit (Baffin Island) ©2004 Balanced Scorecard Collaborative. Inc and Robert S. All rights reserved. Kaplan.

Climate Survey 1993 1994 Target 1993 1994 Target ©2004 Balanced Scorecard Collaborative.business process errors . Dealer/Mobil Gross Profit • Total profit earned at Mobil outlets and split between our dealers/wholesale marketers and Mobil.. Kaplan. 12% 8% 7% Safe & Reliable Maintain a leadership position in safety while keeping our refineries fully utilized.reportable spills . ROCE • Income divided by capital employed including all allocations.reportable releases to air and water . Win/Win Relationship Improve Dealer/Wholesale Marketer profitability through customer-driven products and services and by developing their business competencies. that will keep us focused on achieving USM&R’s strategic themes are explained in the graphs and the bulleted text accompanying them.USM&R Strategic Themes . Inc and Robert S. 1993 1994 Target Financially Strong Reward our shareholders by providing a superior long-term return which exceeds that of our peers.” Competitive Supplier Provide product to our terminals at a cost equal to or better than the competitive market maker. All rights reserved.. USM&R Days Away From Work Manufacturing Reliability Index On Spec On Time Provide quality products supported by quality business processes that are on time and done right the first time.order shipped late . 1993 1994 Target Good Neighbor Protect the health and safety of our people.customer complaints . 1993 1994 Target 25 . lowest cost provider. Motivated & Prepared Develop and value teamwork and the ability to think Mobil. act locally. Mystery Shopper • The Mystery Shopper program rates how well each of our stations is delivering the “best buying experience. Laid-down Cost • Our cost to deliver product to the terminal vs.community reported incidents. Environmental Index • Composite of: .product off spec .. 1993 1994 Target 1993 1994 Target 1993 1994 Target 1993 1994 Target Delight the Customer Understand our consumers’ needs better than anyone and offer them products and services which exceed their expectations. the communities in which we work.cost of rework. will guide us to our vision and are defined above each graph. and the environment we all share. • Survey of employees to measure how people perceive the Mobil workplace environment. USM&R Strategic Measures .. Quality Index • Composite of incidents of: .

All rights reserved.Employee Innovations: Mobil Speedpass™ ©2004 Balanced Scorecard Collaborative. 26 . Kaplan. Inc and Robert S.

Development Projects. Kaplan. All rights reserved. etc. Leadership in Superior Products Strategic Importance Cost Benefit Required for Other Initiatives/ Time to Implement Dependencies Overall Score Overall Points —3— Select Strategic Initiatives 1 E-Bill Presentment 9 2 A 9 3 B 8 4 C 8 5 D 7 6 E 7 Prioritized List of Strategic Initiatives 27 7 F 7 N G X ©2004 Balanced Scorecard Collaborative. Activities. Criteri a In itia tiv e : S t r a t e g ic T h r u s t (s ) : P r i m a r y S t r a t e g ic O b j e c t iv e : —2— Screen Candidates to Identify Those That Qualify as “Strategic” E -B ill P r e s e n tm e n t A A re a C /IR /R C C o n t i n u e L e a d e r s h i p i n S u p e r io r P ro d u c ts S c o re P o in ts 8 -2 4 1 -2 9 C o m m e n ts • T h e “ k ille r ” a p p lic a t io n •X •$ •$ S tr a t e g ic Im p o r t a n c e C ost B e n e f it R e q u ir e d fo r O th e r In i tia t iv e s /D e p e n d e n c ie s T i m e t o Im p le m e n t O v e r a ll S c o r e •X • # m o n th s •X Ranking Initiiative Strategic Thrust(s) and Objectives(s) AC/IR/RC Cont. etc. Inc and Robert S. etc. Activities. etc.Managers Use the Scorecard to Select and Manage Initiatives —1— Identify All Potential Candidates for Strategic Initiative Consideration MIS Projects. Other Projects. . Activities. Activities. Site Selection Projects.

Kaplan. Inc and Robert S. Strategy and Map Objectives Customer C1 • Be the shared service provider of choice To provide top-notch facilities to our organization C2 Understand company facility’s needs Segment customer needs • Survey drafted by 6/04 • Survey Team • $ xxxx Internal • • I1 # of custom service plans • • • ‘04 xx% ‘05 xx% ‘06 xx% • ‘04 xx% ‘05 xx% ‘06 xx% ‘04 xx% ‘05 xx% ‘06 xx% • • Develop customerfocused teams Employee training programs • • Teams designated by 5/04 Training Schedule by 3/04 Courses completed. All rights reserved. Tactics “Management” 28 .Strategy Maps and the Balanced Scorecard provide the link between vision and strategy and short-term planning and initiatives Longer Term (3-5 year) View Mission Vision Shorter Term (Annual) View Measures • Customer satisfaction survey rating • • • Targets ‘04 xx% ‘05 xx% ‘06 xx% • Initiatives Develop organizationwide survey Milestones Accountable Resource Alloc. 6/05 Deadline met • • Facilities Marketing Group • •Facilities HR Group $ xxxx Learning L1 L2 • Enhance staff skills and knowledge $ xxxx • % jobs staffed with requisite skills • • • • • • • Resource • R3 Provide technology & resources • % new technology used by staff Learning assessment project • • Facilities IT Group • $ xxxx Strategy “Leadership” ©2004 Balanced Scorecard Collaborative.

Govern the Organization • • • • • Focus the staff Align accountability / rewards Develop human capital Redefine governance process Get results The Strategic Management Office Role: “Chief of Staff” #1. educate and sell a new way of managing • • • • Design Strategy Maps Design Scorecards/Targets Create Alignment/Cascade Overcome Resistance • Use it to manage • Shape the executive agenda • Integrate governance processes • • • • • • Strategic job families Personal scorecards Competency development Planning / governance process BSC info system New management meeting Methodology and Tools • Executive education (the need for strategic execution) . Translate the Strategy #3.In-house . Inc and Robert S. All rights reserved. Kaplan. 29 .Conference . “The Case for Change” “Early Wins” “Irreversible Momentum” Mobilization Phase SFO Principle Alignment Phase #2. Mobilize Change through Executive Leadership • Achieve commitment at the top • Build the executive team • Build case for change Leadership Objective Core Competency The Catalyst Role: Missionary • Advocate.Building your strategic management process evolves from a project to a process. Align the Organization • • • • Define and clarify the strategy Specify long-term targets Communicate to workforce Link business and support units to the strategy The Project Team Role: Consultants and Change Agents Sustainment Phase #4. Motivate the Staff #5.Readings • SFO Readiness Assessment • Strategy Maps • Balanced Scorecard • Business unit and support group scorecards • Communications program • Initiative rationalization ©2004 Balanced Scorecard Collaborative.

Align Employees to the Strategy Through Personal Scorecards and Incentive Programs • Align Personal Objectives: all employees learn how they fit into the overall game plan • Align Incentive Compensation: develop extrinsic motivation by explicitly tying reward systems to achievement of individual and organizational objectives • Reinforces desired behavior and increase intensity of awareness ©2004 Balanced Scorecard Collaborative. 30 . Kaplan. All rights reserved. Inc and Robert S.

©2004 Balanced Scorecard Collaborative. 31 . Kaplan.Management by Strategic Objectives (MBSO) Corporate VP Region Director Tactics Activities Manager Associate Strategy Scorecards. Metrics must be relevant to each employee for them to feel connected to the strategy. All rights reserved. and links to compensation should be cascaded throughout the organization to create a common focus on and awareness of the strategy. targets. Inc and Robert S. These connections “Make Strategy Everyone’s Job” and enable rapid strategic execution.

Mobil “It would be hard to get people to accept a totally different way of measurement .Link Compensation to the Balanced Scorecard Experience with successful BSC users indicates that linking the BSC to incentive compensation contributes to success Executive Perspectives “People got that scorecard out and did the calculations to see how much money they were going to get. Inc and Robert S. All rights reserved.” Brian Baker. 32 .if you don’t reinforce that change through incentive compensation. CIGNA Supported by Research Mercer survey of compensation practices in 214 companies • 88% of responding companies consider the use of balanced scorecard measures linked to reward systems to be effective. We could not have got the same focus on the scorecard if we didn’t have the link to pay. ©2004 Balanced Scorecard Collaborative. Kaplan.” Gerry Isom.which the BSC is .

33 . All rights reserved. Kaplan. Inc and Robert S.Case Study: Making strategy everyone’s job at Hilton Hotels Education Personal Goals Balanced Scorecard Communication Incentive Compensation ©2004 Balanced Scorecard Collaborative.

Corporate Strategy Map Corporate Measure Corporate Initiatives ©2004 Balanced Scorecard Collaborative...A Balanced Scorecard Reporting System automates data collection and reporting . Inc and Robert S. 34 . Kaplan. All rights reserved.

or new skills and technology would be helpful? How can you learn from the experience of other units? Is an inter-departmental initiative required? •Why are you over-budget? ©2004 Balanced Scorecard Collaborative. 35 . Inc and Robert S. All rights reserved.… and stimulates a new process of strategic learning at the management meeting Control Learning What have you learned about the strategy? •Why have you failed to achieve your target? What resources. Kaplan.

Inc and Robert S. All rights reserved. Kaplan.  Learning/ Adapting √ √ √ √ √  Create strategy √ map  Refresh strategy  Create top-level scorecards  Set targets / rationalize initiatives √ √  Corporate / SBU  Communicate cascade to / educate workforce  Corporate / SBU  Align personal / support unit cascade objectives √ √ √ √ √ √ √ √ √ √ = $ BREAKTHROUGH RESULTS  External linkages (customers / suppliers) √   √ Align personal development Align incentives ©2004 Balanced Scorecard Collaborative. and sustainment produces breakthrough results SFO Best Practices Ø1 Mobilize  Create case for change  Develop vision and strategy  Executive team aligned  Create accountability Ø2 Translate Ø3 Align Ø4 Motivate Ø5 Govern  Monthly/Quarterly strategic reviews  Develop info system  Link BSC to planning / budgeting process  Link BSC to operational mgmt. 36 .In summary: A process of mobilization. alignment.

Inc and Robert S.SFO Best Practice Benchmarks: Mobilize. Align. Sustain TRANSLATE STRATEGY TO OPERATIONAL TERMS ● MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP Top leadership sponsorship for change clear ● Leadership team engaged ● Vision and strategy clarified ● New way of managing Change agent identified ● ● Case Strategy refreshed ● Strategy map developed ● Balanced Scorecard ● Targets established ● Initiatives rationalized ● Accountability clear ● ALIGN THE ORGANIZATION TO THE STRATEGY Corporate role defined ● Corporate – SBUs aligned ● SBU – Human Capital aligned ● SBU – Info Capital aligned ● SBU – Support units aligned ● SBU – Suppliers aligned Board of directors aligned ● STRATEGYFOCUSED ORGANIZATION ● MAKE STRATEGY A CONTINUAL PROCESS Strategic review meetings ● BSC reporting system ● Link budgets and strategy ● Strategic investments managed separately ● HR and IT planning linked to strategy ● Governance process linked to strategy ● Strategic Management Office ● MAKE STRATEGY EVERYONE’S JOB • Strategic awareness • Comprehensive communications • Personal goals aligned • Personal incentives aligned • Competency development aligned • Accountable for results ©2004 Balanced Scorecard Collaborative. All rights reserved. Kaplan. 37 .

Why Do Organizations Fail to Get Results from Their Balanced Scorecard Programs? #1. mostly financial measures. Kaplan. done as a systems project. Inc and Robert S. Motivate. done only for compensation) #3.just KPIs in 4 perspectives. Scorecard Not Linked to Management Processes (Mobilize. Govern) ©2004 Balanced Scorecard Collaborative. All rights reserved. long development process) Using It RIGHT NOT Using BSC Using It WRONG #2. Translate. No Executive Ownership (done by middle management team only. 38 . Align. Scorecard Not Linked to Strategy (no strategy map .

Kaplan. use. All rights reserved.bscol.For Further Information Our Mission: “To facilitate the worldwide awareness.com Consulting Consortia Conferences Certification Training Partnerships Publications Online Services ©2004 Balanced Scorecard Collaborative. and integrity of the Balanced Scorecard as a value-added management process” Join Balanced Scorecard Online™ at www. Inc and Robert S. enhancement. 39 .

All rights reserved.Creating the Strategy-Focused Asset Management Organization • QUESTIONS? ©2004 Balanced Scorecard Collaborative. 40 . Inc and Robert S. Kaplan.

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