Balanced Scorecard for Planning for Long Run ORG Success
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7/30/2019 Balanced Scorecard for Planning for Long Run ORG Success
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The BalancedScorecard
Planning for long-run
organizational success
7/30/2019 Balanced Scorecard for Planning for Long Run ORG Success
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The Balanced Scorecard:A Good Idea in 1992
“The Balanced Scorecard – Measures that Drive
Performance”
Harvard Business Review,1992
Balanced Scorecard in 1992
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The Balanced Scorecard:A Great Idea by 2002
50% usage in Fortune 500
Harvard Business Review “Hall of Fame”
50,000+ BSC on-line members
Balanced Scorecard by 2002
21 translations
17transla
tions
7/30/2019 Balanced Scorecard for Planning for Long Run ORG Success
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Balanced Scorecard Hall of Fame ImplementedStrategies and Achieved Breakthrough Results…
Fast
Saatchi & Saatchi
+ $2b
ATT Canada
+ $7b
Chemical Bank
• 99% Merged TargetAsset Retention
UPS
Southern GardenWells Fargo
Cigna
+ $3b
Brown & Root
• #1 in growth &profitability
City of Charlotte Duke Children’s
Mobil
• Last to first• Cash flow +$1.2b• ROI 6% --> 16%
Hilton Hotels
• Least Cost Producer
3 years
• Customer Satisfaction• Market Revenue Index
• Revenues 9%• Net Income 33%
• # Customers 450%• Best Online Bank
• Customer Satisfaction = 70%• Public Official Award
• Customer Satisfaction #1• Cost/Case 33%
3 years
2-5 years 3 years
3-5 years 3 years
3 years 2 years
3 years 3 years
2-5 years
2 years
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© 1998 Renaissance Worldwide, Inc. andRobert S. Kaplan, All rights reserved.
STRATEGY
HUMAN RESOURCES
BUSINESS UNITS EXECUTIVE TEAM
INFORMATIONTECHNOLOGY
BUDGETS AND CAPITALINVESTMENTS
The Balanced Scorecard process allows an organization to align and focus all its resources on its strategy
Question: How can complex organizations achieve results like this in such short periods of time?
Answer:
Alignment!
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A Gap Exists Between Mission-Vision-Strategyand Employees’ Everyday Actions
MISSIONWhy we exist
VALUESWhat’s important to us
VISIONWhat we want to be
STRATEGYOur game plan
EMPOWERMENT / PERSONAL OBJECTIVES
What I need to do
TOTAL QUALITY MANAGEMENTWhat we must improve
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The Balanced Scorecard Links Vision andStrategy to Employees’ Everyday Actions
BALANCED SCORECARDTranslate, Focus and Align
STRATEGIC INITIATIVESWhat are the priorities
MISSIONWhy we exist
VALUESWhat’s important to us
VISIONWhat we want to be
STRATEGYOur game plan
STRATEGIC OUTCOMES
SatisfiedSHAREHOLDERS
DelightedCUSTOMERS
Efficient and EffectivePROCESSES
Motivated & PreparedWORKFORCE
EMPOWERMENT / PERSONAL OBJECTIVES
What I need to do
TOTAL QUALITY MANAGEMENTWhat we must improve
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Balanced Scorecard
Balance between
Financial measures of performance
Long-range competitive abilities
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Balanced Scorecard
Four aspects of firm performance
Financial Customer
Internal business
Innovation and learning
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Financial Perspective
How do we look to stockholders?
Survive
Succeed
Prosper
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Customer Perspective
How do our customers see us?
New products
Responsiveness
Quality
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Internal Business Perspective
At what must we excel currently?
Manufacturing/service excellence
New product/service introduction
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Innovation and LearningPerspective
Can we continue to improve and create
value?
Technological leadership
Time to market
Employee training and satisfaction
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Perspectives are Interrelated
Innovation pleases customers which are
necessary for good financial results
Good financial results make financing
improvements possible
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The Complete Balanced Scorecard Strategy Map
Improve Shareholder Value
Productivity Strategy Revenue Growth Strategy
Improve CostStructure
Increase AssetUtilization
Enhance CustomerValue
Create Value fromNew Products &
Services
Human, Information, and Organizational Capital
Shareholder Value
ROCE
Cost per Unit Asset Turnover Customer Profitability
New Revenue Sources
Price
Financial
Perspective: the drivers of shareholder value
Product/Service Attributes
StrategicCompetencies
StrategicTechnologies
Climate forAction
(Processes that Produce and Deliver Products
& Services)
(Processes that Enhance Customer
Value)
Operations Theme CustomerManagement
Theme
Innovation Theme Regulatory andSociety Theme
Customer Value Proposition
Quality
Low Total Cost
Customer Solutions
Product Leader
Customer Satisfaction Customer Acquisition Customer Retention
Time Function Service Relations Brand
Relationship Image
• Market and Account Share
Customer Perspective:
the differentiating value proposition
Internal Perspective:
how value is created and sustained
Learning & Growth Perspective: role for intangible assets – people, systems,
climate and culture
(Processes that Create New Products and
Services)
(Processes that Improve the Environment
and Communities)
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Overall Concepts
Not just a set of measures
Measures must relate to strategy
Critical success factors
Measures are interrelated
Must understand how the perspectives influence each other
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Overall Concepts
Not a quick process
Implementation requires
Thought
Analysis
Data-gathering
Time
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Overall Concepts
Thought
What is our strategy?
What is critical to implementing the strategy?
How can we measure our progress?
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Overall Concepts
Analysis
What are the linkages between functions?
What drives the achievement of goals?
What measures correlate with the drivers?
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Overall Concepts
Data-gathering
What data is available? What isn’t?
How should it be gathered? Reported?
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Overall Concepts
Time
Cannot be done in an afternoon
Successful implementation may take several months
Never-ending process
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Implementation Steps
Initiative must start at the top
Only senior management has grasp of overall strategy
And the authority to make strategic decisions
Doomed without commitment from the top
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Implementation Steps
Requires teamwork, collaboration
Different perspectives, expertise required
Not a one-person job
Won’t produce buy-in
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Implementation Steps
Interview senior managers
Input on strategic objectives
Input on critical success factors
Input on possible measures
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Implementation Steps
Gain consensus
Senior managers develop tentative scorecard as a group
Individual reactions
Suggested refinements
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Implementation Steps
Expand consensus
Larger group refines tentative scorecard
Finishing touches
Consensus on vision, objectives, measures, targets,
implementation program, etc.
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Implementation Steps
Selection of metrics
Must relate to strategic goals
Both leading and lagging
May not be “exact”
May come from external sources
Not too many
Not too few
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Implementation Steps
Roll-out
Link to data bases and information system
Communicate to employees
Develop scorecards for lower levels
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Implementation Steps
Periodic reviews
Has strategy changed?
Are the objectives valid? Are the activities valid?
Are the measures valid?
The scorecard evolves with the organization
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The Road to Disaster
Senior management not committed
No one else will be either
Lack of consensus
Lack of commitment
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The Road to Disaster
Consultants
Good
Provide needed expertise
Bad
Take over the project
Consensus, commitment of employees is lost
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The Road to Disaster
Failure to communicate
Employees don’t understand:
Strategy
Their roles
Importance of the scorecard measures
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The Road to Disaster
Lack of “push-down”
Lower levels operating as before
Operations are not tied to corporate scorecard
Scorecard is ignored at lower levels
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The Road to Disaster
Carve it in stone
It won’t be perfect, ever
Must evolve
Delay implementation until perfect
See above
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The Road to Disaster
The compensation issue
Powerful motivator of performance
Poorly designed scorecard will not show
strategic improvements even if individual
measures show progress
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The Scorecard as a ChangeAgent
Four steps
Translating the vision into action
Communicating and linking
Business planning
Feedback and learning
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Translating the Vision
Strategy must be reduced to a set of
objectives and measures which can be
operationalized
“We want to be the best” won’t do
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Communicating and Linking
Corporate strategy must be communicated to
all levels
Lower levels must have objectives linked to
corporate objectives
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Business Planning
Integrate the financial plan with the businessplan
Use the scorecard to allocate resources to criticalactivities
Avoids the short-term spending mentality
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Feedback and Learning
Monitor short-term results to determine if
progress is being made toward long-term
objectives
May need to refine measures, activities,
objectives, even strategy
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Building Strategy Focused Organizations
with the Balanced Scorecard Dr. Robert S. Kaplan
Marvin Bower Professor of Leadership Development
HARVARD BUSINESS SCHOOL
and
Chairman
BALANCED SCORECARD COLLABORATIVE
Th P i i l f St t
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The Principles of a Strategy-Focused Organization
TRANSLATESTRATEGY
CONTINUALPROCESS
ORGANIZATIONALIGNMENT
EVERYONE’S
JOB
EXECUTIVELEADERSHIP
• CEO Sponsorship
• Executive Team Engaged
• “New Way of Managing”
• Accountable for Strategy
• A Performance Culture
• Mission / Vision
• Strategy Maps
• Balanced Scorecard
• Targets
• Initiatives
• Linked to Budgeting
• Linked to Ops. Mgmt.
• Management Meetings• Feedback System
• Learning Process
• Corporate Role
• Corporate - SBU
• SBU - Shared Services• External Partners
• Strategic Awareness
• Goal Alignment
• Linked Incentives
BALANCEDSCORECARD
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Principles of the Strategy Focused Organization: TRANSLATE THE STRATEGY TO OPERATIONALTERMS
Measurement is the language that gives clarity
to vague concepts.
Measurement is used to communicate, not to control.
Building the scorecard develops consensus and teamwork throughout the organization
"If we succeed, how willwe look to ourshareholders?”
The Strategy
Financial Perspective
"To achieve my vision,how must I look to my
customers?”
Customer Perspective
"To satisfy my customer,
at which processes mustI excel?”
Internal Perspective
"To achieve my vision, howmust my organization learn
and improve?”
Organization Learning
#1
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Increase ROCE to 12%
Revenue Growth Strategy Productivity Strategy
New Sources of Non-Gasoline Revenue
Increase CustomerProfitability Through
Premium Brands
Become IndustryCost Leader
Maximize Use ofExisting Assets
ROCE Net Margin (vs. industry)
Non-Gasoline Revenue & Margin
Volume vs. Industry Premium Ratio
Cash Expense (cpg)vs. Industry
Cash Flow
SpeedyPurchase
Clean Safe Quality Product Trusted Brand
Friendly HelpfulEmployees
Financial
Perspective
Customer Perspective
Help DevelopBusiness
Skills
MoreConsumerProducts
RecognizeLoyalty
Share of Targeted Segment
Mystery Shopper
Score
Dealer Profit Growth
Dealer Satisfaction
Differentiators
“Delight the Consumer” “Win-Win Dealer Relations”
Basic
Create Non-Gasoline
Products &Services
“Build the Franchise” “Increase Customer Value” “Achieve Operational Excellence” “Be a Good Neighbor”
ImproveEnvironmental,
Health andSafety
UnderstandConsumerSegments
Best-In-ClassFranchise
Teams
ImproveHardware
Performance
ImproveInventory
Management
On-SpecOn-Time
Industry CostLeader
New Product Acceptance Rate Environment
Incidents Safety Incidents Dealer Quality
Rating
Yield Gap Unplanned
Downtime
Inventory Levels
Run-Out Rate
Activity Cost vs. Competition
Internal Perspective
A Motivated and Prepared Workforce
• Aligned• Personal Growth
Climate for Action
• Functional Excellence• Leadership Skills• Integrated View
Competencies
• Process Improvement
Technology
Personal BSC
Employee Feedback
Strategic Skill
Coverage Ratio
Systems Milestones
Learning &Growth Perspective
Mobil NAM&R Strategy Map
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The Balanced Scorecard Framework Is ReadilyAdapted to Non-Profit and GovernmentOrganizations
The Mission, rather than the financial / shareholder objectives, drives the organization’s strategy
"If we succeed, how willwe look to our
taxpayers (or donors)?”
“To achieve our vision, how
must our people learn,communicate, and work together?”
The Mission
“To satisfy our customers,financial donors and mission,
what business processes must we excel at?"
”To achieve our vision,
how must we look toour customers?”
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Enhance Customer Relationships Insure Operational Excellence Increase Brand Awareness
Develop Strategic Job Competencies Strengthen Strategic Alignment Build Growth-Enabling Infrastructure
Fiscal Health Growth Planning
Supporters/Subscribers Community National/International Opera Scene
Our mission is to ensure the long-term future of opera in Boston and New England by (1) producing the highest quality professional productions of diverse operarepertoire that are artistically excellent as well as musically and theatrically innovative; (2) developing the next generation of opera talent; (3) engaging and educatinga diverse community about opera to become enthusiastic audience members, educators, supporters, and volunteers.
(HBS Case #9-101-111)
CUSTOMER
INTERNALBUSINESS
PROCESSES
LEARNINGAND
GROWTH
FINANCIAL
StreamlineTicketing/Gift
AcknowledgementProcesses
IncreaseOne-on-One
Contact
ImproveBoard Support
Systems
DevelopWeb-based
Service/Products
Contract“Best” Talent
DevelopInnovation
ReviewProcess
LaunchComprehensivePR Campaign
Increase CostEfficiency/Quality
Assurance
DevelopNew
Products/Program
Leverage BoardEffectiveness with
Education andFundraising Training
ProvideStaff with
SkillTraining
DevelopStrategic
CommunicationsPlan
IncorporateMilestone
Evaluations
Invest inStrategic
Technologies
CreateHR Plan
DevelopAdministrative
ResidencyProgram
IncreaseRevenue
SystematizeFinancial
Processes
BuildMulti-YearSupport
DevelopRealistic
Pro Formas
CreateLong-TermInvestment
Strategy
InstitutionalizeMulti-YearBudgeting
TargetGenerous and Loyal
Contributors/Prospects
Focus onBoard
Investment andRecruitment
Build ArtisticReputation
for HighStandards
Launch UniqueResidency
Program forArtists
PresentDiverse
Repertory
BuildCommunity
Support
PromoteCollaborations
Focus onEduc./Comm.Programs for
Greater Boston
Boston Lyric Opera Strategy Map
A KPI S d Th F
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A KPI Scorecard: The Four“P’s”
• Profits
• Portfolio (loan volume)
• Process (ISO certification)
• People (diversity)
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What’s missing from the 4P’s KPI scorecard?
• Where are the customers?
• What is the value proposition?
• How does ISO certification lead to increases in loan
volume?
• How does a more diverse work force lead to ISO
certification?
• Is there no role for information technology?
• Is innovation not important?
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A Good Balanced Scorecard Tells the Story ofYour Strategy
Every measure is part of a chain of cause and effect
linkages
All measures eventually link to organizational outcomes
A balance exists between outcome measures (financial,
customer) and performance drivers (value proposition,
internal processes, learning & growth)
The Principles of a Strategy
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The Principles of a Strategy-Focused Organization
TRANSLATESTRATEGY
CONTINUALPROCESS
ORGANIZATIONALIGNMENT
EVERYONE’S
JOB
EXECUTIVELEADERSHIP
• CEO Sponsorship
• Executive Team Engaged
• “New Way of Managing”
• Accountable for Strategy
• A Performance Culture
• Mission / Vision
• Strategy Maps
• Balanced Scorecard
• Targets
• Initiatives
• Linked to Budgeting
• Linked to Ops. Mgmt.
• Management Meetings• Feedback System
• Learning Process
• Corporate Role
• Corporate - SBU
• SBU - Shared Services• External Partners
• Strategic Awareness
• Goal Alignment
• Linked Incentives
BALANCEDSCORECARD
Principles of the Strategy-Focused Organization:
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c p es o t e St ategy ocused O ga at oLINK AND ALIGN THE ORGANIZATION AROUND ITSSTRATEGY
Strategies Are Executed Through Business Units. The Strategies of the Business
Units Must Be Integrated If Organization Purpose and Synergies Are to Be Achieved.
LINE BUSINESSES SUPPORT UNITS
CORPORATE
SBUA
SBUB
SBUC
SBUD
CORPORATE SCORECARD
(Shared Strategic Agenda)
Themes Measures
EXTERNAL PARTNERS
• Customer Scorecards
• Distributor Scorecard
• Joint Venture Scorecard
• Vendor Scorecard
• New Venture Scorecard
• Outsourcer Scorecard
#1.
A Corporate Scorecard definesoverall strategic priorities.
#3.
Each Support Unit develops a
plan and BSC for “bestpractice” sharing to create
synergies across SBUs.
#2.
Each SBU develops along-range plan and BSCconsistent with corporate
strategic agenda.
#4.
Plans and BSC’s define
relationships with externalpartners consistent with
SBU strategy.
1. Financial Growth
2. Delight the Consumer
3. Win-Win Relationships
4. Safe & Reliable
5. Competitive Supplier
6. Good Neighbor
7. Motivated & Prepared
8. Quality
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xx xx xxxx
• Finance
• Marketing
• Distribution
• Procurement
• Purchasing
• Safety
• Human Resources
• Information Technology
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• The Corporate Strategy is communicated to businessunits and agencies through key themes, opportunitiesfor integration and synergies, and shared measures
• Cooperation and greater synergy between businessunits, staff and shared service functions, and acrossdiverse organizational units becomes formalized
through the Scorecard
Summary: Top-to-Bottom Strategy AlignmentUnleashes Full Organization Potential
The Principles of a Strategy
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The Principles of a Strategy-Focused Organization
TRANSLATESTRATEGY
CONTINUALPROCESS
ORGANIZATIONALIGNMENT
EVERYONE’S
JOB
EXECUTIVELEADERSHIP
• CEO Sponsorship
• Executive Team Engaged
• “New Way of Managing”
• Accountable for Strategy
• A Performance Culture
• Mission / Vision
• Strategy Maps
• Balanced Scorecard
• Targets
• Initiatives
• Linked to Budgeting
• Linked to Ops. Mgmt.
• Management Meetings• Feedback System
• Learning Process
• Corporate Role
• Corporate - SBU
• SBU - Shared Services• External Partners
• Strategic Awareness
• Goal Alignment
• Linked Incentives
BALANCEDSCORECARD
Principles of the Strategy Focused Organization:
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Top-Down “BridgingProcess” To Share
the Strategy & Alignthe Workforce
Bottom-Up Processto Internalize &
Execute the Strategy
CORP
SBU
The Strategy Focused Workforce
• EDUCATION
• PERSONAL GOALALIGNMENT
• BALANCED PAYCHECKS
Principles of the Strategy Focused Organization: MAKE STRATEGY EVERYONE’S EVERYDAY JOB
#3
HR Processes Are Essential for Moving Strategy
From the Top to the Bottom
Making Strategy Everyone’s
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Making Strategy Everyone s
Job
Creating a Climateto Support
Strategic Change
Create StrategicAwareness
Align PersonalObjectives
Align IncentiveCompensation
1
2
3
• Insure that each individual has sufficient
understanding of the strategy (You can’t executewhat you don’t understand)
• Insure that each individual knows where they fit into the overall game plan
• Reinforce desired behavior and increase intensity of awareness
Win/Win Relationship
Improve Dealer/Wholesale Marketer profitability through
t d i d t d i d b
Good Neighbor
Protect the health and safety of our people, the
USM&R Strategic Themes ...
will guide us to our vision and are defined above
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customer-driven products and services and by
developing their business competencies.
• Total profit earned at
Mobil outlets and
split between our
dealers/whole-sale
marketers and
Mobil.
communities in which we work, and the environment we
all share.
• Composite of:
- reportable releases
to air and water
- reportable spills
- community reportedincidents.
1993 1994 Target
Environmental Index
On Spec On Time
Provide quality products supported by quality business
processes that are on time and done right the first time.
1993 1994 Target
Quality Index
• Composite of incidentsof:
- product off spec
- order shipped late
- business process errors
- customer complaints
- cost of rework.
Safe & Reliable
Maintain a leadership position in safety while keeping our
refineries fully utilized.
1993 1994 Target
Financially Strong
Reward our shareholders by providing a superior long-
term return which exceeds that of our peers.
• Income divided bycapital employed
including all
allocations.
ROCE
1993 1994 Target 1993 1994 Target
USM&R Days Away Manufacturing From Work Reliability Index
7%
8%
12%
1993 1994 Target
Delight the Customer
Understand our consumers’ needs better than anyone
and offer them products and services which exceed their
expectations.
Mystery Shopper
• The Mystery Shopper
program rates how well
each of our stations is
delivering the “best
buying experience.”
Competitive Supplier
Provide product to our terminals at a cost equal to or better
than the competitive market maker.
1993 1994 Target
Laid-down Cost
• Our cost to deliver
product to the terminal
vs. lowest cost
provider.
1993 1994 Target
Motivated & Prepared
Develop and value teamwork and the ability to think Mobil,
act locally.
Climate Survey
• Survey of employees
to measure how
people perceive the
Mobil workplace
environment.
will guide us to our vision and are defined above
each graph.
USM&R Strategic Measures ...
that will keep us focused on achieving USM&R’s
strategic themes are explained in the graphsand the bulleted text accompanying them.
1993 1994 Target
Dealer/Mobil Gross Profit
Employee Innovations: Mobil
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Employee Innovations: MobilSpeedpass™
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Making Strategy Everyone s
Job
Creating a Climateto Support
Strategic Change
Create StrategicAwareness
Align PersonalObjectives
Align IncentiveCompensation
1
2
3
• Insure that each individual has sufficient
understanding of the strategy (You can’t executewhat you don’t understand)
• Insure that each individual knows where heor she fits into the overall game plan
• Reinforce desired behavior and increase intensity of awareness
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A performance model providesthe framework for cascading andaligning personal goals
A personal scorecard focuses individualson the part of the performance model theycan impact
Corporate Measures Balanced Scorecard Business Unit Measures Individual Goals
1993 1994 1995 1996 1997
100 120 160 180 250
100 450 200 210 225
100 85 80 75 70
100 75 73 70 64
100 97 93 90 82
100 105 108 109 110
Targets
Targets Financial
Operating
1993 1994 1995 1996 1997
Targets
Targets
• Earnings
• Net Cash Flow
• Overhead & Operating Expense
• Overhead & Operating Costs
• Finding & Development Costs
• Total Annual Production
(Indexed: 1993=100)
And Near Term Action Steps
1.
2.
3.
4.
5.
Corporate Objectives Individual Measures
1.
2.
3.
4.
5.
• Double ourvalue in 10 years.
• Increase ourearnings byan average of 20% ayear
• Achieve an internal rate of return 2% above thecost of capital.
• Reduce ouroverhead & operating costs byafurther30% by1997.
• Reduce our5-yearaverage finding &
development costs by20%.
• Reach the top quartile of industryprofitabilityby
1997.
• Increase production by10% by1997. Name:
Location:
If we can achieve all these
business objectives, we will be
a top quartile competitor
Ultimately, Team and Individual Goals andObjectives Are Aligned to the Strategy
• Customer retention
• First Pass Yield • Schedule
Adherence
• Line Availability
• Schedule adherence
• On time delivery
Customer Example Financial Example
CorporateParent
Division
VP of Opns
• Operating Margin
Plant Manager
Shift Supervisor
• Variable Costs • Mfg Overhead
• Scrap rate
• Labor/
Unit
• Customer Satisfaction
• Variable Costs • Period Expenses
• Operating Margin
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Making Strategy Everyone s
Job
Creating a Climateto Support
Strategic Change
Create StrategicAwareness
Align PersonalObjectives
Align IncentiveCompensation
1
2
3
• Insure that each individual has sufficient
understanding of the strategy (You can’t executewhat you don’t understand)
• Insure that each individual knows where he or she fits into the overall game plan
• Reinforce desired behavior and increaseintensity of awareness
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Mobil USM&R Incentive Plan
Poor Average Best-inIndustry
Base Pay 90% 90% 90%
Corporate Award 0-1 3-6 10
(Return-on-Capital,
Earnings Growth)
USM&R/SBU
M&R (30%) 0 5-8 20
SBU (70%)
Total Pay 91% 98-104% 120%
(% of Market)
Linking Compensation to the
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g Co pe sat o to t eBalanced Scorecard
Experience with successful BSC users indicates that
linking the BSC to incentive compensation is essential to success
Executive Perspectives Supported by Research
“People got that scorecard out and did
the calculations to see how much
money they were going to get. We
could not have got the same focus on
the scorecard if we didn’t have the link
to pay.”
Brian Baker, Mobil
“It would be hard to get people to
accept a totally different way of
measurement - which the BSC is - if
you don’t reinforce that change
through incentive compensation.”
Gerry Isom, CIGNA
Mercer survey of compensation practices in 214 companies (1999)
• 88% of responding companies
consider the use of balanced
scorecard measures linked to
reward systems to be effective.
The Principles of a Strategy-
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The Principles of a Strategy-Focused Organization
TRANSLATESTRATEGY
CONTINUALPROCESS
ORGANIZATIONALIGNMENT
EVERYONE’S
JOB
EXECUTIVELEADERSHIP
• CEO Sponsorship
• Executive Team Engaged
• “New Way of Managing”
• Accountable for Strategy
• A Performance Culture
• Mission / Vision
• Strategy Maps
• Balanced Scorecard
• Targets
• Initiatives
• Linked to Budgeting
• Linked toOperationalImprovements
• ManagementMeetings
• Feedback System
• Learning Process
• Corporate Role
• Corporate - SBU
• SBU - Shared Services• External Partners
• Strategic Awareness
• Goal Alignment
• Linked Incentives
BALANCEDSCORECARD
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Making Strategy a Continual Process
Imbed the Strategy
in OngoingManagement
Processes
Integrate Strategy
with Planning andBudgeting
Introduce the NewReporting System
Conduct the NewManagement
Meeting
1
2
3
• Establish stretch targets; Select initiatives, Align operational improvement programs (TQM, Six Sigma, Activity Based Management); Allocate resources to projects
• Develop systems for data collection, analysis,and reporting
• Open discussion of performance shortfalls; team problem-solving; adapting and learning
Mobil NAM&R: Setting Targets and
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Performance Factors
How to think about performance factors:
Objective:
External Benchmark1.00 means target equals
the average of competition
1.25 means target equals thetop of the competitive group
Subjective:
Internal Benchmark1.00 means the difficulty
of the dive is average
Business Group Variable Pay Opportunity . . . . . .
Variable
Pay
Percent
Performance
Factor Qualitative
20 1.25 BEST IN CLASS
1.20 Well
1.15 Average
1.12
1.09
1.06 Above Average
1.03
7 1.00 Average
0.90
0.80
1 0.75 Below Average
- 13 -
A hi i St t h T t P f M
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Achieving Stretch Target Performance MayRequire
Strategic Initiatives
Capital Investments
New Products/Services
New Customers
New Regions
New Partners
Th S d P P id Ri f
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—1— Identify All Potential
Candidates forStrategic Initiative
Consideration
—2— Screen Candidates toIdentify Those That
Qualify as “Strategic”
—3— Select Strategic
Initiatives
Initiative:
E-Bill Presentment StrategicThrust(s):
AC/IR/RC
PrimaryStrategicObjective: Continue Leadership in Superior
Products
Area Score
Strategic Importance
Cost
Benefit
Required for OtherInitiatives/Dependencies
Time to Implement
Points
8
-2
4
1
-2
Comments
• The “killer” application• X
• $
• $
• X
• # months
Overall Score 9 • X
Ranking
1
2
3
4
5
6
7
N
Initiiative
E-BillPresentment
A
B
C
D
E
F
G
StrategicThrust(s)and Objectives(s)
AC/IR/RCCont. Leadership inSuperiorProducts
StrategicImportance
Cost BenefitRequired for Other
Initiatives/Dependencies
Time to Implement Overal l ScoreOverallPoints
9
9
8
8
7
7
7
X
MarketingProjects,
Activities, etc.
DevelopmentProjects,
Activities, etc.
OFS Projects, Activities, etc.
Other Projects, Activities, etc.
Prioritized List of Strategic Initiatives
The Scorecard Process Provides Rigor forSelecting and Managing Initiatives
Criteria
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The Principles of a StrategyFocused Organization
TRANSLATESTRATEGY
CONTINUALPROCESS
ORGANIZATIONALIGNMENT
EVERYONE’S
JOB
EXECUTIVELEADERSHIP
• CEO Sponsorship
• Executive Team Engaged
• “New Way of Managing”
• Accountable for Strategy
• A Performance Culture
• Mission / Vision
• Strategy Maps
• Balanced Scorecard
• Targets
• Initiatives
• Linked to Budgeting
• Linked toOperational
Improvements
• Management Meetings
• Feedback System
• Learning Process
• Corporate Role
• Corporate - SBU
• SBU - Shared Services
• External Partners
• Strategic Awareness
• Goal Alignment
• Linked Incentives
BALANCEDSCORECARD
Using the BSC to Link Strategy to Operational
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Using the BSC to Link Strategy to Operational
Management
Activity-Based Costing • Cost of Internal Processes
• Customer Profitability
Shareholder Value
• Explicit Value Proposition• Path for Revenue Growth Strategy
Quality Programs
•Link to Customer and Financial Outcomes
• Identify New Processes; Set Priorities
• Integrated Strategic Management Approach
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Explicit Causal Links from Operational Improvements toa Customer-Based Value Proposition
Explicit Linkages to Productivity Enhancements and
Financial Outcomes
Identify Entirely New Processes for Improvement
Set Priorities among Processes to Improve
BSC Adds to Total Quality Programs
The Principles of a Strategy-
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The Principles of a StrategyFocused Organization
TRANSLATESTRATEGY
CONTINUALPROCESS
ORGANIZATIONALIGNMENT
EVERYONE’S
JOB
EXECUTIVELEADERSHIP
• CEO Sponsorship
• Executive Team Engaged
• “New Way of Managing”
• Accountable for Strategy
• A Performance Culture
• Mission / Vision
• Strategy Maps
• Balanced Scorecard
• Targets
• Initiatives
• Linked to Budgeting
• Linked to Operational
Improvements
• ManagementMeetings
• Feedback System
• Learning Process
• Corporate Role
• Corporate - SBU
• SBU - Shared Services
• External Partners
• Strategic Awareness
• Goal Alignment
• Linked Incentives
BALANCED
SCORECARD
Reporting and Feedback:
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F i n a n c i a l
L e a r n i n g & G r o w t h
C u s t o m e r
I n t e r n a l P r o c e s s e s
Maximize ShareholderValue
Reputation,Brand and
Trust
Develop,Acquire and
RetainNeeded Skills
PromoteDiversity
PromoteInnovation andBest Practices
Sharing
Regulatoryand
LegislativeCompliance
Live CoValues
(commonversion)
Meet or ExceedCommitments Manage InvestmentBase
CompetitivePriceService Quality
CustomerSatisfactionand Loyalty
P r i o r i t y
O n
S a f e t y
Effectively
Manage Risks
Profitably Acquire,Retain and
ManageCustomers
Favorably Positioned forSuccess in a Competitive
Environment
Develop, Acquireand Retain
Profitable SupplyPositions
Reliability andCost Excellence
Priority on Safety
and EnvironmentalExcellence
LegendAbove target
On Track (within limits)
Significantly below targetData Not Available
p gMonthly Scorecard Summary
Effective Strategic Management Is Based Upon a
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Financial Perspective
Customer Perspective
Internal Perspective
The Strategy
Learning Perspective
Strategic Learning Loop
Performance
Initiatives & Programs
incorporatelearning
output
result
Operational Control Loop
corrections
input
F i n a n c i a l
C u s t
I n t e r n a l
L
& G
Strategic Objectives
Financially Strong
Delight the Consumer
Win-Win Relationship
Safe & Reliable
Competitive Supplier
Motivated & Prepared
Strategic Measures
Return of Capital Employed
Mystery Shopper Rating
Dealer/Pioneer Gross Profit Split
Manufacturing Reliability Index
Days Away from Work Rate
Laid Down Cost vs. BestCompetitive Ratable Supply
Strategic Competency Availability
Balanced Scorecard
update thestrategy
Effective Strategic Management Is Based Upon a“Double Loop” Learning Approach
Test hypotheses
about your
strategy Assess changes
in the
environment
Identify
emergingstrategies
Strategic Feedback That Encourages Learning
The Principles of a Strategy-
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The Principles of a StrategyFocused Organization
TRANSLATESTRATEGY
CONTINUALPROCESS
ORGANIZATIONALIGNMENT
EVERYONE’S
JOB
EXECUTIVELEADERSHIP
• CEO Sponsorship
• Executive Team Engaged
• “New Way of Managing”
• Accountable for Strategy
• A Performance Culture
• Mission / Vision
• Strategy Maps
• Balanced Scorecard
• Targets
• Initiatives
• Linked to Budgeting
• Linked to Operational
Improvements
• Management Meetings
• Feedback System
• Learning Process
• Corporate Role
• Corporate - SBU
• SBU - Shared Services
• External Partners
• Strategic Awareness
• Goal Alignment
• Linked Incentives
BALANCED
SCORECARD
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To Succeed, the Executive Leader Must beEngaged in the Strategic Change Process…
Unfreeze ChangeBreakthroughand Sustain
Achieve commitment and
momentum at the top
Align and focus the
organization on change
Institutionalize capabilities
and culture required forbreakthrough results
“The Case for Change” “Early Wins” “Irreversible Momentum”
“A successful Balanced Scorecard program is a
transformation process not a “metrics” project.”
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Pitfalls
Middle Management Team: Lack of Senior
Management Commitment (“Bacon and EggsBreakfast”)
Done Only by One or Two Individuals
Held at the Top: For Senior Management Only
Too Long a Development Process: “Best Becomes theEnemy of the Good”
“Just Do It!”
Treating the Balanced Scorecard as a Systems Project
Just a “checklist” for compensation purposes (the 4P’s)
Typical Balanced Scorecard
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Task 1: Define Strategic
Architecture
Project Kickoff
Task 2: Draft the Balanced
Scorecard
Workshop I
Task 3: Develop Measures,
High Level Targets &
Initiatives
Workshop II
Task 4: Develop
Implementation Plan
Workshop III
Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
2 Wks
4 Wks
4 Wks
2 Wks
ypProject Schedule
Balanced Scorecard Project Team
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BSCol
EngagementOfficer/
Principal(part-time)
ExecutiveSponsor/Steering
Committee
BSCol
ProjectTeam
1-2Consultants
(full-time)
ClientCore
Team
Staffknowledgeable
of businessstrategies andorganization
BSCol
ProjectLeader
(full-time)
ClientProjectLeader
ExecutiveLeadership
Team
• Overall project ownership
• Consultations/pre-presentsas needed
• 1-2 staff• 2-3 days/week
• Briefings with othersas needed
• 2 days/week • 3 half- to full-day
workshops• One 90-minutebriefing/interview
• Consultations/pre-presentsas needed
Balanced Scorecard Project Team
Ho are Organi ations Doing on the
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How are Organizations Doing on theJourney?
A survey of online members of the BSCol:500 responses; 250 reported, “Yes, we have BSC.” 50% of these: too early to tell about impact.
Of the 125 who had sufficient experience with the program:
Achieved breakthrough results 15% (n = 19)
Some progress 64% (n = 80)
No or limited results 21% (n = 26)
What Separates the Winners
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pfrom the Losers?
Breakthrough Results Some Progress No ResultsExecutive Team has created a
sense of urgency 84% 53% 20%
Strategy translated to a strategy
ma and Balanced Scorecard 84% 41% 0%
Corporate/Business Unit
measures are linked & aligned 72% 39% 0%
Employees are aware of the
strategy 56% 32% 0%
Individual and team goals are
aligned with the strategy 42% 26% 0%
The BSC is an integral part of the
strategic planning process 100% 40% 0%
The budget is driven by thestrategy 42% 29% 0%
For further information visit www bscol com
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Our Mission:
“To facilitate the worldwide awareness,
use, enhancement, and integrity of the
Balanced Scorecard as a value-added
management process”
ConsultingConferences
Training PublicationsNetworking
Membership Research
Certification
For further information, visit www.bscol.com
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