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Balanced scorecard master by norton condensed

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Balanced scorecard master by norton condensed

  1. 1. Executing Strategy for Breakthrough Results Based on Presentation by David P. Norton President Balanced Scorecard Collaborative/Palladium The Balanced Scorecard:
  2. 2. 2 Most organizations don’t know how to execute strategy. “Less than 10% of strategies effectively formulated are effectively executed.” – Fortune Magazine
  3. 3. Why do organizations fail to execute strategy? #1. You can’t manage something that you can’t describe! There is no generally accepted way to describe a business strategy
  4. 4. Why do organizations fail to execute strategy? #1. You Can’t Manage Something That You Can’t Describe! There is no generally accepted way to describe a business strategy #2. They Don’t Manage Strategy • 95% of the typical work force doesn’t understand the strategy • 60% of organizations do not link strategies with budgets • 70% do not link management incentives to strategy • 85% of executive teams spend less than one hour per month discussing strategy
  5. 5. Balanced Scorecard Hall of Fame for Executing Strategy Achieving Breakthrough Results
  6. 6. How did they do it? #1. They translated their strategies to operational terms #2. They put strategy at the center of their management process They created strategy-focused organizations STRATEGY Management Process Motivate STRATEGY Balanced Scorecard Strategy Maps
  7. 7. TOPIC #1: How To Describe Your Business Strategy Financial Strategy Business Strategy
  8. 8. Strategy is how an organization intends to create value for its stakeholders. "If we succeed, how will we look to our shareholders?” The Strategy Private Sector Organizations Financial Perspective "To achieve our vision, how must we look to our customers?” Customer Perspective "To satisfy our customers, at which processes must we excel?” Internal Perspective "To achieve our vision, how must our organization learn and improve Learning & Growth Introducing Strategy Maps A simple model of the value creation process
  9. 9. Sample Strategy Map: Consumer BankInternalProcess …which is all about great products and personal service… Customer …enduring value-added relationships… Financial ―Our success comes from… C3 - “Appreciate me, and get things done easily, quickly, and right.” C1 - “Understand me and give me the right information and advice.” C4 - “Be involved in my communities.” C2 - “Give me convenient access to the right products.” F1 - Achieve sustainable double- digit net income growth F2 - Maximize traditional revenue sources F4 - Manage financial resources for maximum risk-adjusted return F3 - Grow non- traditional revenue sources Learningand Growth …delivered by a motivated & prepared work force.‖ L4 - “We have the information and tools we need to do our jobs.” L1 - “We develop, recognize, retain, and hire great people.” L3 - “We understand the strategy and know what we need to do.” L2 - “I‟m developing the skills I need to succeed.” Innovation Customer Partnerships Operational Excellence Provide premium service to delight and retain valuable customers Maximize efficiency and quality of business processes Focus on the critical few activities Consistently deliver the full value proposition Migrate customers to the right channel Identify and recognize high- potential relationships Segment markets and target prospects Communicate the full value proposition Broaden offering through internal & external partnerships Develop attractive new products & services
  10. 10. The Balanced Scorecard for Consumer Bank Perspective Financial Perspective F1 Increase earnings per share F2 Add and retain high value customers F3 Increase revenue per customer F4 Reduce cost per customer Strategic Objectives Strategic Measures Customer Perspective Customer Management Internal Perspective Human Capital Learning&Growth Perspective Product Innovation Operations Management Information Capital Organization Capital • Net income (vs. plan) • Revenue mix (by target segment) • Revenue per customer • Cost per customer C1 Become a trusted financial advisor C2 Provide superior service • Customer satisfaction (survey) • Share of wallet • Target customer retention I1 Understand customer segments I2 Shift to appropriate channel I3 Cross-sell the product line • Share of segment • Channel mix change • Cross-sell ratio I4 Develop new products • Revenue from new products (%) I5 Minimize problems I6 Provide rapid response • Service error rate • Request fulfillment time L1 Insure readiness of strategic jobs • Strategic job readiness L2 Insure availability of strategic info • Information portfolio readiness L3 Create a customer-focused culture L4 Build cadre of leaders L5 Align the organization L6 Best practice sharing • Customer survey • 360° Survey (leadership model) • Strategic awareness survey • Personal goals aligned to BSC (%) • KMS utilization/currency Responsible Citizen I7 Build diversity reflecting community • Diversity mix versus community Targets +$100M 30%(A) 70%(B) $300 $75 90% 50% 90% 30% 40% 2.5 50% 0.% < 24hrs 1.0 100% 100% 100% 70% 90% 100% 100% Consumer Bank
  11. 11. Strategy describes how an organization intends to create value for its shareholders. Strategy maps are simple models of the value creation process. "If we succeed, how will we look to our shareholders?” The Shareholder Private Sector Organizations The Mission Stakeholder Government & Non-Profit Organizations Financial Perspective "To achieve our vision, how must we look to our customers?” Customer Perspective "To satisfy our customers, at which processes must we excel?” Internal Perspective "To achieve our vision, how must our organization learn and improve Learning & Growth “To satisfy our customers, financial donors and mission, what business processes must we excel at?” Internal Perspective “To achieve our vision, how must our people learn, communicate, and work together?” Learning & Growth "If we succeed, how will we look to our taxpayers (or donors)?” "To achieve our vision, how must we look to our customers?” Customer PerspectiveFiduciary Perspective
  12. 12. Architecture for an Association Strategy Map The Mission Stakeholder Associations: Member-Based Organizations “To satisfy our members, financial donors and mission, what business processes must we excel at?” Internal Perspective “To achieve our vision, how must our people learn, communicate, and work together?” Learning & Growth "If we succeed, how will we look to our donors?” "To achieve our vision, how must we look to our members?” Member PerspectiveFiduciary Perspective
  13. 13. ADA Strategy Map ADA’s Mission, Vision, Goal and Values Mission: To prevent and cure diabetes and to improve the lives of all people affected by diabetes Vision: To make an every day difference in the lives of people affected by diabetes Goal: By 2007 we will continue to be the leading diabetes organization and will support our programs of research by increasing our income to $300MM while improving net margin Values: Integrity, Passion for making a difference, inclusion, leadership, ownership, trust
  14. 14. Strategy Map: American Diabetes Association Board of Directors StakeholderInformation SeekersConstituent High Impact Individuals Community Volunteer Leadership High Risk Individuals People Affected by Diabetes Professional Section Donors Corporate Community The Strategy Map design begins with a clear definition of: • The Stakeholders (like “shareholders”) • The Constituents (like “customers”)
  15. 15. Strategy Map: American Diabetes Association Board of Directors Progress Toward Prevention/Cure Stakeholder Improve Quality of Life Information SeekersConstituent High Impact Individuals Community Volunteer Leadership High Risk Individuals People Affected by Diabetes Professional Section Donors Corporate Community Improve Quality of Care • Analysis of constituent needs leads to clear, concise definitions of the constituent objectives that we will attempt to satisfy (like a “customer value proposition”)
  16. 16. Strategy Map: American Diabetes Association Board of Directors Progress Toward Prevention/Cure Stakeholder Improve Quality of Life Improve Quality of Care Information Seekers Financial Increase Net Margin Constituent High Impact Individuals Community Volunteer Leadership High Risk Individuals People Affected by Diabetes Professional Section Donors Corporate Community Grow Revenues Operate Efficiently • The Financial strategy for an association plays a “support role”, unlike the private sector where it is the ultimate measure of effectiveness • Nonetheless, the financial strategy is structurally similar and no less intense
  17. 17. Strategy Map: American Diabetes Association Financial Board of Directors Standardized ExecutionConstituent Relationship Management Identify Resource Gaps Adopt ADA Best Practices Develop, Deliver & Evaluate Products & Services Progress Toward Prevention/Cure Understand & Prioritize Segments, Needs & Strategies Stakeholder Establish Donor Focused Fund Raising Influence Policy Makers Improve Quality of Life Improve Quality of Care Information Seekers Increase Net Margin Grow Revenues Operate Efficiently Constituent High Impact Individuals Community Volunteer Leadership High Risk Individuals People Affected by Diabetes Professional Section Donors Corporate Community Work Process Improve End to End Processes • Identify the “critical few” internal processes that create the desired impact on constituent and financial outcomes
  18. 18. Financial Board of Directors Standardized ExecutionConstituent Relationship Management Identify Resource Gaps Adopt ADA Best Practices Develop, Deliver & Evaluate Products & Services Progress Toward Prevention/Cure Understand & Prioritize Segments, Needs & Strategies Stakeholder Establish Donor Focused Fund Raising Influence Policy Makers Improve Quality of Life Improve Quality of Care Information Seekers Increase Net Margin Grow Revenues Operate Efficiently Constituent High Impact Individuals Community Volunteer Leadership High Risk Individuals People Affected by Diabetes Professional Section Donors Corporate Community Work Process Improve End to End Processes Strategy Map: American Diabetes Association Enablers Train the Workforce Identify & Recruit Qualified Talent Integrate X- Functionally Integrate Data Align with Priorities Keep the Best People Achieve Appropriate Fund Balance
  19. 19. Topic #2 – How did they create Strategy Focused Organizations #1. They translated their strategies to operational terms #2. They put strategy at the center of their management process They created strategy-focused organizations STRATEGY Management Process Motivate STRATEGY Balanced Scorecard Strategy Maps
  20. 20. There is a consistent set of ―best practices‖ applied by successful BSC users. 1.1 Top leadership committed 1.2 Case for change clearly articulated 1.3 Leadership team engaged 1.4 Vision and strategy clarified 1.5 New way of managing understood 1.6 Program manager identified 5. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS 3.1 Corporate role defined 3.2 Corporate – SBUs aligned 3.3 SBU – Support units aligned 3.4 SBU – External Partners aligned 3.5 Board of directors aligned 5.1 BSC reporting system established 5.2 Strategy review meetings conducted 5.3 Planning, budgeting, and strategy integrated 5.4 HR and IT planning linked to strategy 5.5 Process management linked to strategy 5.6 Knowledge sharing linked to strategy 5.7 Strategy Management Office established 2.1 Strategy map developed 2.2 Balanced Scorecard created 2.3 Targets established 2.4 Initiatives rationalized 2.5 Accountability assigned 4.1 Strategy awareness created 4.2 Personal goals aligned 4.3 Personal incentives aligned 4.4 Competency development aligned 4. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB STRATEGY- FOCUSED ORGANIZATION BEST PRACTICES 2. TRANSLATE STRATEGY TO OPERATIONAL TERMS 1. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP
  21. 21. Principles of the Strategy-Focused Organization Mobilize Change through Executive Leadership 1 A successful Balanced Scorecard program starts with a recognition that it is not a metrics project… IT’S A CHANGE PROCESS Best Practices 1.1 Top leadership committed 1.2 Case for change clearly articulated 1.3 Leadership team engaged 1.4 Vision and strategy clarified 1.5 New way of managing understood 1.6 Program manager identified Principle 1: Mobilize Change through Executive Leadership The executive team is responsible for overseeing the formation and execution of strategy. Formulate & Communicate The Strategy Oversee Execution of The Strategy Executive Team CIO SMO CFO CEO MKTG OPS R&D HRO Held together by a shared view of the strategy
  22. 22. Best Practices 2.1 Strategy map developed 2.2 Balanced Scorecard created 2.3 Targets established 2.4 Initiatives rationalized 2.5 Accountability assigned Principle 2: Translate the Strategy to Operational Terms Principles of the Strategy-Focused Organization Translate the Strategy to Operational Terms 2 You can’t manage something that you can’t describe! The Objective: Link management process to strategy The Problem: How do you describe a strategy?.
  23. 23. The Balanced Scorecard provides a framework to link long term strategic objectives to short term targets, initiatives and accountability. Objectives Milestones • Provide technology & resources • % new technology used by staff • Learning assessment project InternalLearningCustomer Accountable • HR Committee • $ xxxx Resource Alloc.Targets InitiativesMeasuresVisionMission • Provide personalized care • Customer satisfaction survey rating • „04 xx% • „05 xx% • „06 xx% • Survey drafted by 6/04 • Deadline met • Mkg. Team • $ xxxx Toprovidetop-notchhealthcaretoour community Bethecommunityhospitalofchoice Longer Term (3-5 year) View Shorter Term (Annual) View Strategy ―Leadership‖ Tactics ―Management‖ • Service level spot check rating • Electronic notes project • Dept. Chairs• Complete by 2004 • All patients logged in • $ xxxx• Keep patients informed • „04 xx% • „05 xx% • „06 xx% Financial • Grow high- margin service • % revenue from high- margin services • „04 xx% • „05 xx% • „06 xx% • Develop organization- wide survey • „04 xx% • „05 xx% • „06 xx% Strategy and Map L4 P1 P2 F1 F2 C1
  24. 24. Principles of the Strategy-Focused Organization Align the Organization to the Strategy 3 Best Practices 3.1 Corporate role defined 3.2 Corporate & SBUs aligned 3.3 SBU & Support units aligned 3.4 SBU & External partners aligned 3.5 Board of Directors aligned Principle 3: Align the Organization to the Strategy BSC provides a framework for describing strategy and managing its execution (“Strategy Focused Organizations”) BSC provides a framework for aligning the governance process and promoting greater transparency Employees Shareholders Board CEO Corporate Group Division SBU SBUSBUSBUSBU
  25. 25. Top-Down “Bridging Process” To Share the Strategy & Align the Workforce Bottom-Up Process to Internalize & Execute the Strategy CORP SBU The Strategy Focused Workforce Principles of the Strategy-Focused Organization: Make Strategy Everyone’s Job 4 Best Practices 4.1 Create strategic awareness 4.2 Align personal goals 4.3 Align personal incentives 4.4 Align competency development Principle 4: Making Strategy Everyone’s Job HR processes are essential for moving strategy from the top to the bottom
  26. 26. Principles of the Strategy-Focused Organization Govern to Make Strategy a Continual Process 5 Best Practices 5.1 BSC reporting system established 5.2 Strategy review meetings conducted 5.3 Planning, budgeting and strategy integrated 5.4 HR and IT planning linked to strategy 5.5 Process management linked to strategy 5.6 Knowledge sharing linked to strategy 5.7 Strategy Management Office established Principle 5: Govern to Make Strategy a Continual Process Continuous Improvement Integrated Planning Review & Learning Reporting & Analysis Organizational Alignment Human Capital Alignment Strategy Leadership
  27. 27. Strategy Management—An Integrated Closed Loop Process Human Capital Planning Q1 Q2 Q3 Q4 STRATEGY MANAGEMENT PROCESS Enterprise Strategy Planning Business Unit Strategy Planning Financial Planning Management Control & Learning Strategy Reviews Initiative Management Knowledge Sharing Q1 Q2 Next Year Strategy Update Strategy Update • Clarify Vision • Update Strategy Financial Resource Alignment • Budgets • Initiatives Strategy Map / Scorecard Design & Update Organization Alignment • Corporate role updated • Corporate-SBU aligned • SBU support unit aligned • Board of Directors aligned Human Resource Alignment • Personal goals • Incentives • Personal development This Year Strategy Communication
  28. 28. There is a consistent set of ―best practices‖ applied by successful BSC users. 1.1 Top leadership committed 1.2 Case for change clearly articulated 1.3 Leadership team engaged 1.4 Vision and strategy clarified 1.5 New way of managing understood 1.6 Program manager identified 5. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS 3.1 Corporate role defined 3.2 Corporate – SBUs aligned 3.3 SBU – Support units aligned 3.4 SBU – External Partners aligned 3.5 Board of directors aligned 5.1 BSC reporting system established 5.2 Strategy review meetings conducted 5.3 Planning, budgeting, and strategy integrated 5.4 HR and IT planning linked to strategy 5.5 Process management linked to strategy 5.6 Knowledge sharing linked to strategy 5.7 Strategy Management Office established 2.1 Strategy map developed 2.2 Balanced Scorecard created 2.3 Targets established 2.4 Initiatives rationalized 2.5 Accountability assigned 4.1 Strategy awareness created 4.2 Personal goals aligned 4.3 Personal incentives aligned 4.4 Competency development aligned 4. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB STRATEGY- FOCUSED ORGANIZATION BEST PRACTICES 2. TRANSLATE STRATEGY TO OPERATIONAL TERMS 1. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP
  29. 29. What is your organization’s strategic readiness? SFO Strategic Readiness Assessment 2. TRANSLATE STRATEGY TO OPERATIONAL TERMS 3. ALIGN THE ORGANIZATION TO THE STRATEGY 1. MOBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP 5. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS 4. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB 2.2 – Balanced Scorecard Created 3 2.1- Strategy Map Developed 2 2.3 – Targets Established 3 2.4 – Initiatives Rationalized 2 2.5 – Accountability Assigned 2 4.1 – Strategic Awareness Created 2 4.2 – Personal Goals Aligned 3 4.3 – Personal Incentives Aligned 2 4.4 – Competency Development Aligned 3 3.1 – Corporate Role Defined 2 3.2 – Corporate-SBUs Aligned 2 3.3 – SBU-Support Units Aligned 2 3.4 – SBU-External Partner Aligned 1 3.5 – Board of Directors Aligned 1 5.1 – BSC Reporting System 2 5.2 – Strategic Review Meetings 2 5.3 – Budgets and Strategy Integrated 2 5.4 – HR/IT Linked to Strategy 2 5.5 – Process Mgt. Linked to Strategy 2 5.6 – Knowledge Sharing Linked 2 5.7 – Strategy Management Office 2 1.2 – Case for Change Clear 3 1.1 – Top Leadership Committed 2 1.3 – Leadership Team Engaged 3 1.4 – Vision & Strategy Clarified 2 1.5 – New Way of Managing 2 1.6 – Program Manager Identified 2 STRATEGY- FOCUSED ORGANIZATION 2.4 2.3 1.6 2.0 2.5 Key: Level of Excellence 5 - We are “best practice’ at this 4 – We are good at this 3 – We are okay at this 2 – We are not good at this 1 – We are awful at this
  30. 30. Just as with other management disciplines, you must build the capability to execute strategy as a permanent, enduring competency of your organization. “A New Way of Managing” Enterprise Strategy Management Financial Management Human Resource Management Marketing / Communications Technology Management Strategic Planning Organizational Unit A Organizational Unit B Organizational Unit C Organizational Unit D

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