1. Cascading the Balanced Scorecard at Commercial Vehicle Business Unit, Tata Motors An in-depth training and development seminar March 8 - 9th, 2004 C LARITAS A SIA ‘FOCUS ON THE FUTURE’

3. Module 0 Welcome

6. Module 1 The rationale for Balanced Scorecard

7. Interactive session 1 What are key issues facing today’s CEO?

8. Organisations are facing change at unprecedented speed Capability to respond to the unforeseen! Globalisation CRM M&A Technology innovation Accountability Costs AND

9. More than ever, we need clarity on our organisational goals “ Business Strategy is now the single most important issue … and will remain so for the next five years” Business Week

10. And, we need to able to implement our strategies more effectively “ Less than 10% of strategies effectively formulated are effectively executed” Fortune

11. Strategic planning is the tool we use to establish our direction If you don’t know where you are going, then…….. Any road will do!!!!

12. Interactive session 2 What are problems with typical strategic planning?

13. Some of the ‘problems’ with strategic planning Question What did you do differently as a result of the last strategic planning process?? Once a year Limited participation Form filling exercise ‘ Secret’ Not linked to budgeting

14. Interactive session 3 What are problems with implementing strategy?

15. Some of the ‘problems’ with implementing strategy Question Do you have the time to think about the strategy?? Managing to budget Not understanding the strategy Today’s crisis No ‘real’ information Inadequate resources

17. We need better processes in strategy formulation and in managing strategy implementation A new culture of performance management based on a single integrated business process

18. Many organisations have been successfully deploying an approach based around balanced scorecard Strategy Formulation Strategy Refining Global External Issues Local External Issues B S C Strategy “ Stress Test” Costing ETC. Strategic Initiatives Performance Measures Budgeting New Technologies HR Knowledge Mgmt Management Reporting Continuous Re-forecasting Strategy Loop

21. The terminology of balanced scorecard Measures are important, BUT not the whole picture!!!!! Perspectives Themes Measures Targets Accountability Initiatives Objectives

22. Successful Balanced Scorecards start with a strategy map Example Mobil (US Marketing & Refining ) Growth Theme Improve quality of revenue by understanding customer needs and differentiating ourselves accordingly. Productivity Theme Maximize utilization of existing assets and integrate the business to reduce total delivered cost. Financial Perspective Return on Capital Increased from 6% to 16% Competitive Position (profitability) From last (1993) to first (95, 96, 97, 98) Volume Growth Exceeds industry by 2-2.5% annually Reduce Cash Expenses Down by 20% Improve Cash Flow From -$500 M/Yr to +$700 M/Yr Customer Perspective Internal Perspective Customer Satisfaction Continuous improvement for 3 consecutive years Speedpass Active Increasing at rate of 1M per year Dealer Quality Perfect Orders Continuous improvement for 4 consecutive years Learning & Growth Perspective Quality Capacity Utilization Safety Lost work incidents down from 150 to 30 per year Environmental Number of incidents reduced by 63% Continuous improvement for 4 consecutive years Annual value of lost yield reduced from $175m to $50m Product Innovation Customer Management Operational Excellence Good Neighbor Motivated & Prepared Workforce Continuous improvement for 4 consecutive years Strategic Awareness Annual employee survey shows awareness of strategy increased from 20% to 80% Source: The Balanced Scorecard D. Norton & R. Kaplan

25. The Strategy Focused Organisation 1 2 3 4 5 Source: The Strategy Focused Organization D. Norton & R. Kaplan

29. Understanding how to measure performance Measures and targets are the tools of strategy assessment What should we measure & what constitutes a stretch target? Strategy Map Measures & targets

31. Given a focus on driving change, how do we ensure effective resource prioritisation? Initiative mapping allocates effort Strategy Map

34. Module 2 Cascading the balanced scorecard

35. We have seen previously how the strategy map drives the measures,……… Measures and targets are the tools of strategy assessment What should we measure & what constitutes a stretch target? Strategy Map Measures & targets

36. … ..and helps to prioritise resources Initiative mapping allocates effort Strategy Map

40. Understanding the cascade process There are a number of different approaches to cascading a balanced scorecard Three sample approaches: 2) Contributory Organisation Unit Translated objectives (Parent) (Child)

41. Understanding the cascade process There are a number of different approaches to cascading a balanced scorecard Three sample approaches: 3) Hybrid Organisation Unit Identical, translated & unit specific objectives (Parent) (Child)

43. Module 3 Strategy mapping

44. In their latest book, Norton and Kaplan look at experiences derived from what is the most important part of all balanced scorecards The visual representation of our strategy A way to define ‘discrete’ components of strategy The basis for resource prioritisation The guide to setting meaningful measures 2004

46. A strategy map is an X and Y axis diagram Customer Proposition Internal Processes Learning & Growth Financial Theme A Theme C Theme B The X Axis consists of the generic four perspectives of balanced scorecard The Y Axis consists of strategic themes which are specific to each organisation

47. Experience shows two types of strategy map Type A Customer Proposition Internal Processes Learning & Growth Financial Theme A Theme C Theme B Strategic themes run from top to bottom through all four perspectives

49. Experience shows two types of strategy map Type B Customer Proposition Internal Processes Learning & Growth Financial Theme A Theme C Theme B Strategic themes are developed within internal perspective only

54. Now that we understand themes, lets look in more detail at the ‘X axis’ Customer Proposition Internal Processes Learning & Growth Financial

60. Strategy maps in support functions -Example of an HR scorecard Financial Learning & Growth Internal Customer Organizational Competency Organizational Efficiency Leadership & Talent Support Business Growth Performance Based Culture Manage HR Cost Efficiency Operating Efficiency Themes Customer Objectives Strategic Objectives Organisational Enablers Leadership/ Competencies & Skills Retention of Leaders Change & Performance Driven Culture Optimize Human Capital Align HR Strategy with Business Strategy Rewards Performance/ Execution Right People, Right Job, Right Time Optimizing Service Delivery through Streamlined Processes & Automation Performance Driven Internal Group/Division/Subsidiaries External Statutory Bodies/Vendors/Consultants Employees Strategic Business Partner Financial Destination

62. Module 4 Developing your cascaded strategy maps Workshop exercises

63. KEY CHALLENGES 1. Creation of world class products  Performance  Cost  Time 2. Successful exploration of new Frontiers  Markets  Businesses  Alliances, etc. 3. Continuous cost reduction 4. Organization to make it happen  Competencies  Performance ethic 5. Develop attitude for being World class 6. Develop passion for Customer Satisfaction 7. Create in customer, a blindfold trust in our Quality The most important challenges being faced by CVBU are…

64. Be amongst the top 5 profitable CV manufacturers globally Be a dominant player in domestic market in all segments Enhance product offerings Excel in Corporate governance social responsibility Financial Customer Business Process Learning & Growth Revenue growth Productivity improvement Enhance Value for Channel partners OF1 OF2 OC4 OP4 OC2 Increase accessibility for customers Identify and acquire Information technologies in line with company strategy Align employees to company strategy OL1 A motivated, prepared and disciplined workforce OL5 OC3 Excel in the journey to excellence (TBEM) Culture and climate for action Strategic competencies Corporate Citizenship Channel Partner End Consumer OL6 Map and source/ develop strategic competencies Enhance Employee satisfaction OL3 Continuous Improvement Be the lowest cost manufacturer of CVs globally CVBU Strategy Map 2003-04 Value proposition OF5 Value creation Create High performance culture amongst employees OL4 OL2 Enhance Customer satisfaction through safe, reliable and good value products and services OC1 STRATEGIC OBJECTIVES – Strategy Map Design and Development (NPI) Install Globally benchmarked processes in... OP1 Manufacturing & Vendor management OP2 Sales & Marketing OP3 Grow non-cyclical business revenue (Export + Defence + LOB4 + FBV + Plant sales ) Grow International Business OF3 OF4 Tata Commercial Vehicles strategy map Strategic Objectives

67. Creating the model of strategy The financial model What is our overarching financial goal, and how will we achieve it? Sources of revenue Asset utilisation Cost & productivity management Financial goal (NEV, ROCE Etc.)

68. Creating the model of strategy The financial model (cont.) Establishing the source of revenue growth? Sources of revenue New product New customer Old customer Old product Increased customer penetration (65%) New customer acquisition (35%)

69. Creating the model of strategy The financial model (cont.) Establishing the role of asset management? A/cs receivable Capex Asset utilisation Stock Cash A/cs payable Working capital

70. Creating the model of strategy The financial model (cont.) Establishing the impact of cost and productivity Cost & productivity management

73. Creating the model of strategy The critical internal processes The themes are probably more than just operational excellence Be a Good Citizen Regulatory Processes Provide Operational Excellence Operational Processes Increase Customer Value Customer Management Process Build the Franchise Innovation Process

75. Build objectives within each theme Expand coverage of profitable outlets Improve call frequency Increase availability of key packages Ensure Product Availability Establishing cause and effect is a key element

77. Creating the model of strategy The learning & growth infrastructure What are the people, infrastructure and culture issues? Strategic Competencies Strategic Technologies Climate for Action [ ) ] ( ) ( ) ( + +

78. Module 5 Developing Performance Measures Workshop exercises

79. Interactive session What makes a good measure?

81. The need for leading and lagging measures Our scorecard will be a balance of leading and lagging measures Lagging measures valid our past performance e.g. operational readiness They help us understand if our strategy is working Leading measures are the drivers of future performance e.g. average time to requisition They help us understand what we can manage today

88. Module 6 Resource allocation through initiatives prioritisation

90. Initiatives close a performance gap Initiatives help close the gap between our current and desired performance INITIATIVE Implement automated case management system and train Every Rep in 99 Customer Satisfaction Survey Rating 90% favorable overall Measure Target Target Actual 90% 45% $M gap Measures track our progress toward achieving and communicating the intent of the objective MEASURE / TARGET OBJECTIVE Increase Customer Satisfaction Objectives articulate the components of our strategy

91. Initiative mapping is a valuable tool Objectives Asset Productivity Be the Lowest Cost Service Provider New Revenue Sourcing Timely response Promised Delivery Partnering Integrate and Align Resources New Service Development Focused Technology Dvpmt Perfect fulfillment Performance Leadership Strategic Comp. and Skills Individual and Team Perf Customer Sensitive Culture Perspective Financial Customer Internal Learning and Innovation Initiatives

92. Initiatives prioritisation processes can be developed Fit Business Case Time to result Strategic Importance Cost ($) Lapse Time (Months) Very Low Low Moderate High Very High Very High > $1m High $1m - 750k Moderate 750k - 500k Low 500k - 350k Very Low < 350k Very Long > 18 Long 18 - 12 Moderate 12 - 9 Short 9 - 6 Very Short < 6 Scores Weight Criteria 0 25 50 75 100

93. Module 7 Designing an ongoing management process

96. Year end forecasting options The ‘Windsock’ Copyright Metapraxis Ltd

97. Innovative reporting techniques - 1 Copyright Metapraxis Ltd

98. Innovative reporting techniques - 2 Copyright Metapraxis Ltd

99. Innovative reporting techniques - 3 Copyright Metapraxis Ltd

103. A communication planning template WHO User Groups WHAT Method of Communication WHEN Frequency of Communication WHO Responsibility for Communication Materials required Initial Education Ongoing Information

104. Module 8 Next Steps

105. For more information on the Balanced Scorecard... Contact Nigel Penny at +65 9815 7830