© Michael Selby, 2010, The Company-Wide Balanced ScoreCard Demo Navigation features work only in Slide Show (full screen) mode. If you are in Normal View, go to View, Slide Show (In Office 2007, click Slide Show, From Beginning). Then click the Menu Button. Note: To escape Slide Show, hit the Escape Key Menu

© Michael Selby, 2010, ScoreCard Demo Menu: 1.What is a Balanced ScoreCard?What is a Balanced ScoreCard? 2.ScoreCard DemoScoreCard Demo 3.How to Choose the Right Metrics: A.Strategy MappingStrategy Mapping B.Achilles Heel AnalysisAchilles Heel Analysis C.Strategic Employee AnalysisStrategic Employee Analysis 4.ScoreCard Development RoadmapScoreCard Development Roadmap 5.“The Plumbing”: Technical Issues“The Plumbing”: Technical Issues 6.Contact UsContact Us

© Michael Selby, 2010, A Balanced ScoreCard is both a Tool and a Process: The Tool: Your ScoreCard reports all key drivers of your strategic success. It lets you know if performance in each critical area is at the level you expect, and shows you trends for each major business driver. The Process: For the Exec Team, the ScoreCard is the centerpiece of your month-end review process. It is also used with your extended management team, employees, and Board to educate them on key performance issues. Menu What is a Balanced ScoreCard?

© Michael Selby, 2010, FinancialMarket/Customers Operational Excellence BayMed Balanced ScoreCard People & Culture Menu This is the ScoreCard Dashboard of our hypothetical BayMed Products company. Each of the Red/Yellow/Green Icons describes some measure of performance. Click on an Icon to take you to its corresponding Drill Down Slide. Once there, click on “Dashboard” to return. Go ahead, try clicking the green “Overall Revenue” Icon in the upper left of the screen. Then click “Dashboard” to return.

© Michael Selby, 2010, Dashboard

© Michael Selby, 2010, FinancialMarket/Customers Operational Excellence BayMed Balanced ScoreCard People & Culture Menu The Dashboard divides into 4 quadrants, or “perspectives”. The Financial perspective reports Revenues, Gross Margins, EBITDA, Operating Expense, Net Operating Income, Free Cash Flow, and any other Financial Data you choose. (hit spacebar)

© Michael Selby, 2010, FinancialMarket/Customers Operational Excellence BayMed Balanced ScoreCard People & Culture Menu The “Market/Customers” perspective reports repeat business with existing customers, new customers, new business partners, how recent releases are performing, customer complaints and customer satisfaction. (hit spacebar)

© Michael Selby, 2010, FinancialMarket/Customers Operational Excellence BayMed Balanced ScoreCard People & Culture Menu “Operational Excellence” reports the core competencies which you have to execute well to win customer loyalty. Core Competencies vary by company and industry. “BayMed” tracks sales execution, marketing effectiveness, product development speed, manufacturing and customer support excellence. (hit spacebar)

© Michael Selby, 2010, FinancialMarket/Customers Operational Excellence BayMed Balanced ScoreCard People & Culture Menu “People & Culture” looks at the workforce, reporting workforce growth, internal mobility and competency development, strategically vital employees, hiring quality, and employee engagement. (Hit spacebar)

© Michael Selby, 2010, FinancialMarket/Customers Operational Excellence BayMed Balanced ScoreCard People & Culture Menu Now you get to have some fun. Navigate your own way through the ScoreCard by clicking on any Dashboard Icon that interests you. When you are complete, click “Menu” for other options.

© Michael Selby, 2010, FinancialMarket/Customers Operational Excellence BayMed Balanced ScoreCard People & Culture Menu

© Michael Selby, 2010, Financial Metrics DashboardMenu

© Michael Selby, 2010, Dashboardx Bsns Unitx Region Overall Revenues are broken into Products and Services/OEM. Total Revenues appear above the stacked bars. In the chart on the right, we compare YTD Revenues This Year vs. Last and vs. Plan. You can see Revenues by Business Unit or Region by clicking the buttons at the bottom. (click this box to make it disappear)

© Michael Selby, 2010, DashboardOverallx Region BayMed is structured into 4 Business Units: 2 major product groups, a Consulting Services group, and an OEM business. Here you see Revenues from each unit, vs. each Business Unit’s Plan. (click this box to make it disappear)

© Michael Selby, 2010, Dashboardx Bsns UnitOverall By region, we can see that our North American and European business is ahead of Plan, and that Asia Pacific and Rest of World are behind Plan. (click this box to make it disappear)

© Michael Selby, 2010, DashboardMenu We now begin looking at the drivers of profitability, beginning with Gross Margins (in $M and in %) and OpEx. The ScoreCard reveals that OpEx has been consistently over Plan, but has recently improved. (click to disappear)

© Michael Selby, 2010, DashboardMenu Here we break out OpEx by Department, and also show EBITDA. We can see that the problems with OpEx come from Mftg and G&A, and that nevertheless EBITDA is above Plan. (click to disappear)

© Michael Selby, 2010, DashboardMenu Cash Flow is critical to any business. Tracking it’s key drivers helps ensure it’s control. (click to disappear)

© Michael Selby, 2010, DashboardMenu For each of our Business Units, we have a cost model, which, if met, helps ensure profitability. This chart helps us understand the key drivers of Cost of Sales. (click to disappear)

© Michael Selby, 2010, DashboardMenu This final slide in our Finance quadrant helps us understand how well we are controlling inventory costs. While our OEM inventory levels are at Plan, we are over our cost targets in both the MultiPlex and Products BU’s. (click to disappear)

© Michael Selby, 2010, Customer/ Market Metrics DashboardMenu

© Michael Selby, 2010, DashboardMenu Key to revenue growth is repeat business with existing customers. Here we track Year Over Year sales to our top customers in each of our 4 Business Units. (click to disappear)

© Michael Selby, 2010, DashboardMenu Also key to growth is our ability to attract, and then grow, business with new customers. Here we look at our largest new customers (6-18 months old), comparing revenues from the first half of their tenure to the last half. Hopefully, it’s growing! (click to disappear)

© Michael Selby, 2010, DashboardMenu Key to BayMed’s success are Business Partnerships – in product development, in shared IP, as OEM partners, and as possible acquisitions. Here we track progress, beginning with defining the opportunity, and ending with a signed contract. (click to disappear)

© Michael Selby, 2010, DashboardMenu Every product development company has revenue hopes for it’s new releases. Do these releases grow according to plan? This chart tells us how realistic our revenue assumptions were. (click to disappear)

© Michael Selby, 2010, DashboardMenu Of course, BayMed tries to keep major customer complaints to a minimum. Here we see not only the raw numbers, but complaints by type, and whether each type is getting worse or better. (click to disappear)

© Michael Selby, 2010, DashboardMenu BayMed tracks customer satisfaction in two ways: (1) When customers return registration cards for new products they have purchased, and (2) When our installation engineers install major new equipment. We compare the most recent 3 months to the previous 3 to see if we’re improving. (click to disappear)

© Michael Selby, 2010, Operational Excellence Metrics DashboardMenu

© Michael Selby, 2010, DashboardMenu The top 3 charts track (a) the raw $ value of business in the pipeline, (b) the probability of closing that business based on previous conversion rates, and (c) the resulting “real” pipeline value (a x b). Below, we see quota performance, as well as other key sales data. (click to disappear)

© Michael Selby, 2010, DashboardMenu In Marketing, we are interested in # of qualified leads by source, and the ratio between value of each lead and it’s cost. At bottom is a chart showing our most recent 12 product launches, and the ratio between 1 st 9 mo. Revenue vs. Marketing launch expense. (click to disappear)

© Michael Selby, 2010, DashboardMenu In Engineering, it’s all about meeting our milestones on major products in development. This chart shows recent and upcoming milestones, where we stand now vs. 1 mo. ago, and days early/late for each milestone. (click to disappear)

© Michael Selby, 2010, DashboardMenu In Manufacturing, we have three slides. This first slide looks at order fulfillment timeliness: do we meet our delivery commitments? We track both Product Orders as well as Service Contract milestones. (click to disappear)

© Michael Selby, 2010, DashboardMenu In Manufacturing, we have three slides. This second slide looks at Inventory Turn rates in each of our three “value-add” levels. (click to disappear)

© Michael Selby, 2010, DashboardMenu This third manufacturing slide looks at the cost of poor quality in Total, and by each of 5 key drivers. Note that quality cost is expressed as a % of COGS – we want NOT to exceed 10%. Note the problem areas of Sustaining Engineering and Inventory Accuracy. (click to disappear)

© Michael Selby, 2010, DashboardMenu Our most serious goal in the Call Center is to resolve the customer’s issue on their first call. We also measure answering speed, abandonment rate and average talk times. (click to disappear)

© Michael Selby, 2010, People & Culture Metrics DashboardMenu

© Michael Selby, 2010, DashboardMenu In this Headcount snapshot, we look at actual headcount as a % of annual operating plan (AOP). We also look at hiring speed, and the number of hires and terminations. (click to disappear)

© Michael Selby, 2010, DashboardMenu Key to a competent workforce is their training in strategically vital programs, appraising their performance, developing their skills, and ensuring their internal mobility into new and challenging positions. (click to disappear)

© Michael Selby, 2010, DashboardMenu BayMed devotes particular attention to the most critical 15% or so of it’s employees. For more on this, please go to “Strategic Employee Analysis” on the Menu. (click to disappear)

© Michael Selby, 2010, DashboardMenu BayMed has had a particular issue with product team deliverables and with fully staffing it’s product development teams. For more on remedying this issue, see the “Achilles Heel Analysis”, on the menu. (click to disappear)

© Michael Selby, 2010, DashboardMenu BayMed wants to ensure that new employees integrate quickly into the company, and that their managers are satisfied with the hiring process. We survey both new hires and their managers after 90 days. Look at the red horizontal patterns to see where the problems are. (click to disappear)

© Michael Selby, 2010, DashboardMenu BayMed wants to create a stimulating work culture, with knowledgeable, engaged employees. Our “pulse survey” checks one-twelfth of the workforce each month. The horizontal yellow & red rows reveal where our challenges are. (click to disappear). This is the last slide of the demo, so you may want to click Menu for other options.

© Michael Selby, 2010, Strategy Mapping Menu Strategy Mapping is the first of three methods used to identify key metrics for our ScoreCard. (hit spacebar)

© Michael Selby, 2010, Successfully Launch MPX 3000 Finance ‘10 Sales: US=$5M; EUR=$3M; Asia=$2M; Op. Margins=35% ‘10 Budget, 1.x/2.x revs=$6.5M, (+5%), tracked x function Menu A key element of our strategy is to successfully launch a MAJOR new product. Since this product is a cornerstone for our future, we set specific Finance quadrant goals for it ($10M in Sales, Op. Margins of 35%, and an operating budget of $6.5M, tracked by department. (hit spacebar)

© Michael Selby, 2010, Successfully Launch MPX 3000 Finance ‘10 Sales: US=$5M; EUR=$3M; Asia=$2M; Op. Margins=35% ‘10 Budget, 1.x/2.x revs=$6.5M, (+5%), tracked x function Customer/Markets Orders from >10 Top U.S. and >8 Top European Customers Installation Failures <10%; 80% res.<8 hrs.; 100%<72 hrs. Menu We’re looking for market BREADTH across the US and Europe, and want to ensure customer satisfaction with our installations. (hit spacebar)

© Michael Selby, 2010, Successfully Launch MPX 3000 Finance ‘10 Sales: US=$5M; EUR=$3M; Asia=$2M; Op. Margins=35% ‘10 Budget, 1.x/2.x revs=$6.5M, (+5%), tracked x function Customer/Markets Orders from >10 Top U.S. and >8 Top European Customers Installation Failures <10%; 80% res.<8 hrs.; 100%<72 hrs. Operational Excellence Order fulfillment: 90% <1 week; 100% <2 weeks QA funct. test at pre-ship <.5% functionality failures, 10% sample Menu We want to meet orders for this product on time, and we want all functionality to work, once installed. Notice how specific each bullet point is. (hit spacebar)

© Michael Selby, 2010, Successfully Launch MPX 3000 Finance ‘10 Sales: US=$5M; EUR=$3M; Asia=$2M; Op. Margins=35% ‘10 Budget, 1.x/2.x revs=$6.5M, (+5%), tracked x function Customer/Markets Orders from >10 Top U.S. and >8 Top European Customers Installation Failures <10%; 80% res.<8 hrs.; 100%<72 hrs. Operational Excellence Order fulfillment: 90% <1 week; 100% <2 weeks QA funct. test at pre-ship <.5% functionality failures, 10% sample People & Culture Sales Force (100%) trained in Product Knowledge prior to launch All Sales/Prod Team reqs filled <60 days Menu Finally, we want all our Sales Force trained in the product BEFORE it’s released, and all Sales and Product Team reqs filled (no holes in the team!). Note how, for this strategic initiative, we identify ScoreCard metrics in each of the four quadrants. This is Strategy Mapping. (click to disappear, and then click menu)

© Michael Selby, 2010, Achilles Heel Analysis Menu Achilles Heel Analysis is the second of three methods used to identify key metrics for our ScoreCard. (hit spacebar)

© Michael Selby, 2010, Possible Achilles Heels Poor Product Development Discipline Low Customer Orientation/Little Market Familiarity Little Awareness of Business Strategy/ Key Competitors No Measurement or Education in Core Processes... and in your company??? Menu Every company has core processes it must be good at. If it isn’t good at a core process, that’s an Achilles Heel for the company. For BayMed, poor Product Development Discipline is an Achilles Heel (hit spacebar)

© Michael Selby, 2010, Achilles Heel #1: Poor Discipline in Product Development Process (PDP) Product Teams are Engineering-centric; Mktg, Mftg come too late into the process Cross Functional Deliverables Between Engineering, Marketing, and Manufacturing Poorly Defined Poor Accountability re: Early Deliverables (Business Case, ROI Analysis, Competitive Analysis) Projects Don’t Meet Their Milestones; Internal Partners not Prepared with Their Pieces Menu A cross functional team from Engineering, Marketing and Manufacturing identifies key aspects of the PDP Process that need improvement (hit spacebar)

© Michael Selby, 2010, Menu From this analysis, we decide to track (a) the development of PDP Templates, (b) PDP Training, and (c) Product Team Staffing, as metrics for our ScoreCard. (click to disappear, then click Menu)

© Michael Selby, 2010, Strategic Employee Analysis Menu Strategic Employee Analysis is the third of three methods used to identify key metrics for our ScoreCard. (hit spacebar)

© Michael Selby, 2010, Strategic Themes, FY’10 1.Successfully Launch Two New Hi-Potential Products (On-Time; $10M 1 st Yr. Rev./each) 2.One or Two Successful Acquisitions 3.Achieve $30M Revenue in Eastern Europe 4.Implement LEAN Manufacturing 5.Implement “Strategic Employee” Initiative Menu We begin by identifying five Strategic Themes for (hit spacebar)

© Michael Selby, 2010, Strategically Critical Employees R&D: Project Team Leaders & Key Tech. Leads on Breakthrough Products Mktg: Product Mgrs in Recent or About-To-Be Releases Bsns Dvpt: Leaders for Key Acquisition Candidates Sales: Mgrs & Reps Responsible for New Territories/ Niches Mftg: Process-Reengineering Team Leaders and New Equipment/Technologies Central to Strategic Themes Finance: Leader of Acquisition or Strategically Vital Accounting Initiative HR: Leader of Strategic Competency Project, Strategic Pay, or Strategic Employee Identification Project Menu For each of these strategic themes, we identify key employees directly responsible for the achievement of each strategy. We identify a pool of about 15% of the workforce. (click to disappear; then hit spacebar to advance)

© Michael Selby, 2010, Menu For these strategic employees (~15% of workforce), we ensure (a) that those positions are filled with highly rated employees, (b) who have development plans in place, (c) who receive 360° evaluations, (d) who have a chance of earning 30% above base pay if they achieve their goals, (e) who have mentors, and (f) for whom we have internal replacements. This is what we’re willing to do to ensure our strategic success. (click to disappear, then click Menu)

© Michael Selby, 2010, ScoreCard Development Roadmap Step 1: Metrics Selection 1. Exec. Interviews Bsns Issues, SC wants Strategic Initiatives ID X-Func. Team 3. Choose Metrics List Possible Metrics Revu for Balance Exec Team Chooses 4. Spec Metrics I.D. Owners, Data-Providers Define Data-Sets Design Slides 6. Build ScoreCard Create Dashboard Import Charts Review w/ Execs 5. Build Excel Files Create/Revu Drafts Build Files w/ Real Data Train Data Providers Step 2: Design & Build 8. Exec Team Use Coach CEO 1-2 Exec Team Mtgs. 9. Company-Wide Use Extended Mgmt. Team All Hands Meeting Step 3: Initial Use 2. Strategy Mapping I.D. Achilles Heels I.D. X-Func. Collab. I.D. Feasible Metrics Menu Here is a high-level roadmap of the 3 month process of ScoreCard Development. Company VP’s choose the metrics and give major input on slide designs. VP’s name data providers from each function who provide the data. The external consultant leads the entire project, designing the slides, building the files, and training the data providers. (click to disappear, and then click Menu)

© Michael Selby, 2010, Metric Leader Finance Metric Leader Sales Metric Leader Mktg. Metric Leader Eng. Metric Leader Mfg. Metric Leader QA Metric Leader Cust Sppt Metric Leader HR ScoreCard Master File Executive Team PowerPoint File: The “Plumbing” Excel Files: Metrics 1-4 Metrics 5-6 Metric 7 Metric 8 Metrics 9-12 Metrics Metric 15 Metrics Shared Server Menu An Excel file tracks data for each metric. A slide from each Excel file electronically links to the PowerPoint file (which you have been reviewing in this demo). Data exists in a variety of databases (finance, manufacturing, HR). Data from these databases can be electronically dumped into the Excel files. It’s the consultant’s job, working with data providers, to expedite this process. (click to disappear, then click Menu)

© Michael Selby, 2010, For More Information, Contact: Michael Selby ScoreCard Partners (415) or Visit us on the web at Menu