Balanced Scorecard Collaborative

1. An Introduction to the Balanced
Scorecard and the Strategy Focused
Organization
March 6, 2009
Balanced Scorecard Collaborative - Teacher Farias Souza – @FariasSouza

2. Why Do Organizations Struggle So Hard With
Strategy?
1 in 10 organizations
execute their strategies
successfully
Fortune Magazine, 1998
72% of CEOs believe that
executing their chosen
strategy is more difficult
than developing a good
strategy
Malcolm Baldrige CEO Survey, 2002

3. #5
MAKE STRATEGY A CONTINUAL PROCESS
The Problem:
The Strategic Management Process Is Missing in Most Organizations
STRATEGY
60% of organizations
don’t link strategy & update the test the 85% of management
budgets strategy hypotheses teams spend less than
Strategic Learning Loop one hour per month on
strategy issues
BALANCED
SCORECARD
BUDGET
78% of organizations lock
budgets to an annual cycle funding Management Control Loop reporting
92% of organizations do
20% of organizations take not report on lead
more than 16 weeks to PERFORMANCE indicators
prepare a budget
Input Initiatives & Output
Programs
(Resources) (Results)

4. Strategy Development or Strategy Execution?
Organizations Need Both
Strategic success requires going beyond successful 1 strategy
formulation to successful strategy execution
Sound
Strategy Formulation
Missed Strategic
Opportunity Success
Flawed
Doomed From
At Risk
The Start
Flawed Sound
Strategy Execution
Source: 1Execution: The Discipline of Getting Things Done, by Larry Bossidy, 2002.

5. Strategy Execution Challenge
There are generally accepted tools to manage finances, customers,
processes, and people. But what about strategy?
Financial Management Tools
EVA
Balance Sheets
Process Management Tools
Income Statements Six Sigma
Shareholder Value Analysis Supply Chain Integration
Strategy Management Tools
Cycle Time Reduction
TQM
Customer Management Tools
Customer Satisfaction Measurement
?
People Management Tools
Customer Relationship Management
Core Competencies
Segmentation Analysis
Knowledge Management
One-to-One Marketing
Pay for Performance
HRIS
The Balanced Scorecard is the vehicle that fills the
Strategy Management Gap

6. Balanced Scorecard Organizations Are Achieving
Breakthrough Results
BREAKTHROUGH
RESULTS
Private Sector Public Sector
Shareholder
Mobil Value SMDC Health System
• From last to first in industry • Profitability up $23m
• ROI 6% --> 16% • Customer Satisfaction
Profitable
Wendy’s Growth City of Charlotte
International
• Mkt. Cap $2.5 --> $4b • Customer Satisfaction =
• Stock Price up 75% 70%
Customer • Public Official Award
Satisfaction
UPS Duke Children’s Hospital
• Revenues 9% • Customer Satisfaction #1
• Net Income 33% • Cost/Case 33%
Organizational
Alignment
Defense Logistics
Hilton Hotels
Agency
• Customer Loyalty 5% • $130MM in Savings in FY2002
• EDITDA margins 3% above • Processed $2.2B more requisitions
average Cost for its customers
Reduction

7. How Did They Do It?
They Created “Strategy-Focused Organizations”
STRATEGY:
They made strategy the central
organization agenda
FOCUSED:
They created incredible focus on the
STRATEGY strategy
ORGANIZATION:
They mobilized their employees to act
in fundamentally different ways,
guided by the strategy
The Balanced Scorecard Is a Performance Management
Program That Puts Strategy at the Center of the Process

8. …Reflecting a “Natural Cause and Effect Logic”
of Business Performance
And Realize
the Vision
Financial
To Drive Financial
Results Success...
Customer
Benefits Needed to Deliver Unique
Sets of Benefits to Customers...
Internal
To Build the Strategic Capabilities..
Capabilities
Knowledge, Skills, Systems, and Tools Equip our People...

9. The Balanced Scorecard Should Tell the Story
of the Strategy
Illustrative Example: Southwest Airlines
Strategic Theme:
Operating Efficiency
Financial
Profitability What will drive operating efficiency?”
Fewer planes
More • More customers on fewer planes
customers
Customer
How will we do that?
Flight Lowest
Is on time prices • Attract targeted customer segments who
value price and on time arrivals
Internal What must the internal focus be?
Fast ground
turnaround • Fast turnaround
Learning
Will our people do that?
Ground crew
alignment • Educate and compensate ground crew
regarding how they contribute to the firm’s
success
• Employee stockholder program

10. Let’s Take a Minute to Agree Upon Some
Common Vocabulary
Diagram of the cause and effect Statement of
relationships between strategic what
objectives (Strategy Map) strategy How success
must in achieving The level of Key action
Strategic Theme: achieve and the strategy performance programs
Operating Efficiency what’s will be or rate of required to
Financial critical to its measured and improvement achieve
Profitability success tracked needed objectives
More
Fewer planes
customers
Customer
Flight Lowest
Is on time prices
Objectives Measurement Target Initiative
Internal
• Fast ground • On Ground Time • 30 Minutes • Cycle time
Fast ground turnaround • On-Time • 90% optimization
turnaround Departure
Learning
Ground crew
alignment

11. ASME Balanced Scorecard Strategy Map
Young Engineers Industry / F1 Grow revenue
through new products
Customer
Continue Government
C1 Become C2 Enhance and global growth
Financial
to serve our core
indispensable to relevance to Industry
customers, such as
Young Engineers & Government
Academia
F2 Sunset F3 Run a cost
C3 Identify and effective
lower-value
Address Future Markets operation
programs
and Applications
Build Communities Build Content / Knowledge Advocate and Communicate
I1 Enable self- I3 Increase & I6 Provide I7 Improve
Internal
forming communities Expand Market- effective coordination
of interest Relevant Content representation and
and advocacy effectiveness of
for the corporate
engineering communication
I2 Stimulate individual profession s
membership growth I4 Digitize &
I5 Accelerate
with different repackage
time to market
membership models content
Learning & Growth
L2 Develop future
L1 Develop new product and business volunteer leaders
development capabilities through a
culture that is adaptive, continually L3 Strengthen
evolving (risk taking), entrepreneurial environmental L4 Share best
and agile scanning and practices and
competitive lessons learned
intelligence
V 3.0 11/11/03

12. Thanks!
Farias Souza
farias.souza@gmail.com
@FariasSouza