wipfli.com long-rangestrengthvisionarytenacity. wipfli.com how many are comfortable that your...
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• How many are comfortable that your internal processes will achieve the vision?
• Would you agree there would be 100% consensus if we asked ten people in your organization, “What are the business imperatives?”
• How many believe they are maximizing the time, talent, and money of the organization?
wipfli.com
Strategy-Aligned Organization Fueled by Innovation and Driven by Balanced
Performance Indicators…
Focus
Creativity
Accountable
wipfli.com
Overview
• Current observation• Changing landscape of performance
management• Strategic translation• Linkage between strategy and
measures• Case study• Applied workshop
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What We Have Learned
• Malcolm Baldridge National Quality Award Foundation survey:• 300 CEOs• 72% felt executing strategies was more important
• Fortune Magazine• “Why CEOs fail”• 70% failures were flawed execution of strategy
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What We Do Know
• Only 5% of the workforce understand the company’s strategy
• Only 15% of the executive teams spend more than one hour per week discussing strategy
• Only 25% of the managers have incentives linked to strategy
• Only 40% of the organizations link budgets to strategy
• As a result, 30% to 50% of the company’s efforts are off strategy… “white collar waste”
Kaplan and Norton
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• 80% are making PM system changes and 33% described them as major overhaul (Strategic Finance Magazine, 2002)
• More than 50% of the Fortune 1000 have turned to Balanced Score Card principles (Bain & Company study 2001)
The Shift
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Organizational Drifting
AA
BB
Current State
Future StateTraction
Unproductive use of resources
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Changing Landscape
“They (knowledge workers) now account for a full third of the American workforce, outnumbering factory workers two to one. In another 20 years, they will make up two-fifths of the workforce of all rich countries.”
Peter F. Drucker, The Economists, November 2001
0%
10%
20%
30%
40%
50%
60%
70%
80%
1982 1992 Today
IncreasingValue ofIntangibleAssests
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Intangible Assets?
• Intangibles assets may not have a direct impact on financial results• Value is largely potential – must be
transformed • Require interdependence for success
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Think of Intangible Asset as Behaviors, Choices, and Actions of Your
Employees…
Intangible Asset
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Leadership Challenge
• Is to recognize:• Financial measures do not tell the whole
story• Benefits of leveraging talent through
strategy alignment and deployment• Measures will change the actions and
behaviors of people
Capture intangible assets
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Strategy Translation
• Unless the objective is exercise, chasing more than one rabbit is hopeless and frustrating…
• Strategy is a story of how the company will create value• Series of cause and effects• All about the future survival
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Strategy Translation
• Effort alignment
“without regards to the organization”
Organizational Traction
Unde
rsta
ndab
le
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Strategy Translation
• Everyone’s job
“change intent to action”
Organizational Traction
Alig
nmen
t
Unde
rsta
ndab
le
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Strategy Translation
• Strategy as a continual process
“part of daily management”
Organizational Traction
Ever
yone
’s jo
b
Unde
rsta
ndab
le
Alig
nmen
t
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Strategy Translation
• Mobilize change through leadership
“strategic-driven CI”
Organizational Traction
Unde
rsta
ndab
le
Alig
nmen
t
Ever
yone
’s jo
b
Cont
inua
l pro
cess
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Strategy Translation
Organizational Traction
Unde
rsta
ndab
le
Alig
nmen
t
Ever
yone
’s jo
b
Cont
inua
l pro
cess
Chan
ge le
ader
ship
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Underlying elements of the business that must be successful
Key Performance ObjectivesKey Performance Objectives
Actions taken to direct the organizations efforts toward maximizing the
benefit of critical success factors
Fundamental StrategiesFundamental Strategies
Customer promise
Value Proposition Value Proposition
Measurements developed to evaluate how effective
the strategies are in reaching established
goals
Performance Performance ManagementManagement
Visions of the future
Stakeholder Stakeholder ExpectationsExpectations
Internal ProcessesInternal Processes
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Balanced Perspectives
“How do the stakeholders
view us?”
“How do the customers view
us?”
“What processes must
we excel in?”
“What must we understand?”
Fin
anci
al
Cus
tom
er
Lear
ning
Val
ue S
trea
m
Hum
an
“How do we preserve talent?”
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Customers
Internal
Learning& Growth
Fewer Planes
More Passengers
Increase Profitability
Focus on Process Redesign
Fast Ground Turnaround
On-TimeFlights
Lowest Cost
How will our people do that?
–Educate and compensate personnel for cycle-time reduction
What must the internal focus be?
– Fast turnaround
How will we do that?
–Attract targeted customer segments who value price and on-time arrivals
What will drive operating efficiency?
–More customers on fewer planes
Financial
Southwest Airlines – Operating Efficiency
From Performance Measurement.ca
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Customers
Internal
Learning& Growth
Fewer Planes
More Passengers
Increase Profitability
On-TimeFlights
Fast Ground Turnaround
Lowest Cost
Financial
WE
IGH
TIN
G
MEASURE
0F SUCCESS
PROCESS/
PROJECT
PROCESS
MEASURE
ROLEOW
N/LE
AD
AP
PR
OV
E
RE
VIE
W
DE
VE
LOP
/ EX
EC
UT
E
15% • # Customers • Marketing • # Contacts BLK SGL BPK Mktg• Travel Agent
Blitz• # New
AgentsBLK TS BPK Mktg
5% • Plane Lease Cost • Renegotiate Leases
• Sublease Program
• Time to Sublease
PM PM PBK Legal
15% • Price Ranking •Pricing • # Days at Lowest Cost
• # Price Changes
BLK SGL BPK Mktg
20% • FAA On-Time Rating
• Customer Ranking
• Project On-Time
• # Late Arrivals
• # Late Departures
JAK OPN TT Grnd
30% • On-Ground Time• Hands-On Time
• Plane Servicing
• Cycle Time BR BLK JAM Grnd
• Passengers Off and On
• Off/On Cycle Time
JAK PIL TT Crew
15% • % People Trained
• BPR Project • Training Hours
• Total Identified NVAT
JAK PIL JAM Exec
• % Employee Shareholders
• ESOP • # Shareholding Employees
JW TT PBK Exec
Focus on Process Redesign
From Performance Measurement.ca
wipfli.com
• Determine the fundamental strategies
• Create the linkage
Score Card Essentials
“what must we do in order to achieve the vision and imperatives?”
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• Determine key performance objectives
Score Card Essentials
“what needs to be accomplished in order to be successful?”
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• Identify key performance indicators
Score Card Essentials
“how will we know our efforts are working?”
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• Identify key processes and action plans
Score Card Essentials
“what action needs to occur in the gemba?”
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Customers
Internal
Learning& Growth
Fewer Planes
More Passengers
Increase Profitability
On-TimeFlights
Fast Ground Turnaround
Lowest Cost
Financial
WE
IGH
TIN
G
MEASURE
0F SUCCESS
PROCESS/
PROJECT
PROCESS
MEASURE
ROLEOW
N/LE
AD
AP
PR
OV
E
RE
VIE
W
DE
VE
LOP
/ EX
EC
UT
E
15% • # Customers • Marketing • # Contacts BLK SGL BPK Mktg• Travel Agent
Blitz• # New
AgentsBLK TS BPK Mktg
5% • Plane Lease Cost • Renegotiate Leases
• Sublease Program
• Time to Sublease
PM PM PBK Legal
15% • Price Ranking •Pricing • # Days at Lowest Cost
• # Price Changes
BLK SGL BPK Mktg
20% • FAA On-Time Rating
• Customer Ranking
• Project On-Time
• # Late Arrivals
• # Late Departures
JAK OPN TT Grnd
30% • On-Ground Time• Hands-On Time
• Plane Servicing
• Cycle Time BR BLK JAM Grnd
• Passengers Off and On
• Off/On Cycle Time
JAK PIL TT Crew
15% • % People Trained
• BPR Project • Training Hours
• Total Identified NVAT
JAK PIL JAM Exec
• % Employee Shareholders
• ESOP • # Shareholding Employees
JW TT PBK Exec
Focus on Process Redesign
From Performance Measurement.ca
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• Place the right measures
Score Card Essentials
“what processes measures will monitor the action plan?”
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• Close enough to show trends…
• Can get better over time…
• Move quickly…
• Part of the current business…
• Understandable and believable…
Effective Measures
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Tangible Benefits
• Renewed purpose and focus
• Improvements without any real change• 15% to 20% new management capacity• 25% to 30% meeting time reduction• 5% to 10% shop floor productivity bump • 15% to 20% administrative productivity
• Competitive weapon
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Measurement drives agreement on what matters and the communication of strategy, leading to successful change efforts and, ultimately, improved financial results
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