slides

Faculty Seminar Series

Building Strategy-Focused Organizations with the Balanced

Scorecard

Professor Robert S. Kaplan Harvard Business School

Copyright 2003

Copyright ©2003 1

Building Strategy-Focused Organizations with the Balanced

Scorecard

Professor Robert S. KaplanHarvard Business School

The Balanced Scorecard

©2001 Balanced Scorecard Collaborative, Inc., and Robert S. Kaplan. All rights reserved.

Implementing Strategy

How do you implement strategy?Bain: senior executives put strategy at top of list.High percentage of companies are failing in implementing strategy.Gap in management tools between the top and the front lines

Copyright ©2003 2

The Gap in Management Tools


Early Adopters

Mobil: last to first in two years Cigna Insurance: bottom to top quartileSaatchi and Saatchi: worldwide strategySouthern Garden Citrus: lower cost per poundDuke Children’s HospitalGTE (Verizon) Human Resources

Linking Vision and Strategy to Employees’ Actions


Copyright ©2003 3

The Principles of a Strategy-Focused Organization

1. TRANSLATE STRATEGY2. ORGANIZATION ALIGNMENT3. EVERYONE’S JOB4. CONTINUAL PROCESS5. EXECUTIVE LEADERSHIP


1. TRANSLATE STRATEGYMission/VisionStrategy MapsBalanced ScorecardTargetsInitiatives


2. ORGANIZATION ALIGNMENTCorporate RoleCorporate - SBUSBU - Shared ServicesExternal Partners

Copyright ©2003 4


3. EVERYONE’S JOBStrategic AwarenessGoal AlignmentLinked Incentives


4. CONTINUAL PROCESSLinked to BudgetingLinked to Operations ManagementManagement MeetingsFeedback SystemLearning Process


5. EXECUTIVE LEADERSHIPCEO SponsorshipExecutive Team Engaged“New Way of Managing”Accountable for StrategyA Performance Culture

Copyright ©2003 5

Translate the Strategy to Operational Terms


The Balanced Scorecard Strategy Map




Copyright ©2003 9

A Good Balanced ScorecardInclude revenue growth and cost reduction.Understand the customer value proposition.Ensure that employees understand the value proposition.Include short-term operational improvements and long-term innovation.Invest in people, systems, and organizational climate.

Mobil’s Strategy Map




Copyright ©2003 10





New Source of Revenues

©2003 Meredith Dunbar

Copyright ©2003 13



Social Enterprise

“Financial measures. . .tell you nothing about the effectiveness of their

organization.”

“What’s hard is delivering on your mission, and doing it with constrained resources.”

The Balanced Scorecard Framework for Nonprofit Organizations


Copyright ©2003 14

Boston Lyric Opera’s Strategy Map


Boston Lyric Opera

Mission:– Training ground for young artists– Distinctive, high-quality productions



Copyright ©2003 16





“Carmen on the Common”

(c) 2002 Richard Feldman.

Copyright ©2003 17

The Story of Your Strategy

Chain of cause-and-effect linkagesBalance between:– Outcomes (financial and customer

perspective)– Drivers

• Value proposition• Processes• People and systems


2. ORGANIZATION ALIGNMENTCorporate RoleCorporate - SBUSBU - Shared ServicesExternal Partners

Sharing the Strategy

Share the scorecard and strategy with each operating unit.Don’t dictate measures from central.Each unit creates their own customized scorecard.Include support groups.

Copyright ©2003 18

Linking HR to the Organization


HR Processes


External Partnerships

Washington State: The salmon recovery problem– Salmon is an endangered species.– Fractured governance

• Six states; Canada; twenty-seven Indian tribes

• Eight federal agencies; twelve state agencies

• Thirty-nine counties; 277 cities• Water and sewer districts

Copyright ©2003 19

State & State

Agencies

FWS Bull Trout “Definable Population Segments”

NMFS Salmon “Evolutionarily

Significant Units”

NGO’s and Enhancement

Groups

Salmon, Bull Trout, Environmental

Quality, and Hydropower Development

Watershed Councils

Tribes

Tri-Co

HB2514 WRIA

Planning

HB2496 Restoration

Projects

US/Canada Treaty

SSHIAP

SRF Board

Water Legislation

Independent Science Panel

NMFS Recovery

Team

Early Action

Package

Salmon Sec 4(d)

Rules

Bull Trout Sec 4(d)

RulesBull Trout Sec 7

Consultation

Salmon Sec 7 Consultation


Salmon Recovery Scorecard Goal: Restore salmon, steelhead, and trout populations to healthy andharvestable levels and improve habitats on which fish rely.Customer: To protect an important element of Washington’s quality of life.

We will have productive and diverse wild salmon populations.We will meet the requirements of the Endangered Species Act/Clean Water Act.

Processes: Our habitat, harvest, hatchery, and hydropower activities will benefit wild salmon.

Freshwater and estuarine habitats are healthy and accessible.Rivers and streams have flows to support salmon.Water is clean and cool enough for salmon.Harvest management actions protect wild salmon.Enhance compliance with resource protection laws.

Collaboration: We are engaged with citizens and our salmon recovery partners.

We will reach out to citizens.Salmon recovery roles are defined and partnerships strengthened.

Financial and Infrastructure: Our building blocks for success include…Achieve cost-effective recovery and efficient use of government resources.Use best available science and integrate monitoring and research with planning and implementation.Citizens, salmon recovery partners, and state employees have timely access to the information, technical assistance, and funding they need to be successful.


3. EVERYONE’S JOBStrategic AwarenessGoal AlignmentLinked Incentives

Copyright ©2003 20

Making Strategy Everybody’s Job

Chrysler: monthly newsletterMobil: brochure includes simplified scorecard

Win/Win Relationship

Improve Dealer/Wholesale Marketer profitability through 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.

Good Neighbor

Protect the health and safety of our people, the communities in which we work, and the environment we all share.

• Composite of:

- reportable releases to air and water

- reportable spills

- community reported incidents.

On Spec On Time

Provide quality products supported by quality business processes that are on time and done right the first time.

• Composite of incidents of:

- 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.

Financially Strong

Reward our shareholders by providing a superior long-term return which exceeds that of our peers.

• Income divided by capital employed including all allocations.

Delight the Customer

Understand our consumers’ needs better than anyone and offer them products and services which exceed their expectations.

• 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.

• Our cost to deliver product to the terminal vs. lowest cost provider.

Motivated & Prepared

Develop and value teamwork and the ability to think Mobil, act locally.

• Survey of employees to measure how people perceive the Mobil workplace environment.

USM&R Strategic Themes ...

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 graphs and the bulleted text accompanying them.


Safe & ReliableMaintain a leadership position in safety while keeping our refineries fully utilized.

Copyright ©2003 21

Competitive SupplierProvide product to our terminals at a cost equal to or better than the competitive market maker.

Our cost to deliver product to the terminal vs. lowest cost provider.

Good NeighborProtect the health and safety of our people, the communities in which we work, and the environment we all share.

Composite of:-reportable releases to air and water-reportable spills-community-reported incidents

On-Spec, On-TimeProvide quality products supported by quality business processes that are on time and done right the first time.

Composite of incidents of:

- product off-spec- order shipped late- business process errors

- customer complaints- cost of rework

Copyright ©2003 22

Win/Win RelationshipImprove Dealer/Wholesale Marketer profitability through customer-driven products and services and by developing their business competencies.

Total profit earned at Mobil outlets and split between our dealers/wholesale marketers and Mobil.

Delight the Customer

Understand our consumers’ needs better than anyone and offer them products and services that exceed their expectations.

The Mystery Shopper program rates how well each of our stations is delivering the “best buying experience.”

Making Strategy Everybody’s Job

Chrysler: monthly newsletterMobil: brochure includes simplified scorecardTruck drivers as “mystery shoppers”Boston Lyric Opera: backstage at “The Magic Flute” Mobil: SpeedpassAnn Taylor: CandylandMobil: Compensation tied to strategy

Copyright ©2003 23

Monthly Scorecard Summary


Continual process

Reporting systemsLearning environment


5. EXECUTIVE LEADERSHIPCEO SponsorshipExecutive Team Engaged“New Way of Managing”Accountable for StrategyA Performance Culture

Copyright ©2003 24

How Are Organizations Doing?

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)


Principle Questions

Breakthrough Results

Some Progress No Results

Executive Team has created a sense of urgency

84% 53% 20%

Strategy translated to a strategy map 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 the strategy 42% 29% 0%

Breakthrough Results

Some Progress No Results

Executive Team has created a sense of urgency

84% 53% 20%

Strategy translated to a strategy map 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 the strategy 42% 29% 0%


Visit our Web site @ bscol.com

For More Information

slides

Documents

mobils strategy map

lines copyright

meredith dunbar copyright

performance culture

strategyfocused organization1

strategyfocused organization4

strategyfocused organization2

strategyfocused organization5