“Money isn’t Everything” - I knew we were in trouble As soon as he said- “Money isn’t Everything” - I knew we were in trouble

It is important to focus on the means used to achieve the ends … … It is important to focus on the means used to achieve the ends … …..not just on the ends themselves… To only focus on traditional financial accounting measures (such as ROI, ROE, EPS…) …..does not give mgt the whole picture….

Performance needs to be judged thru mix of both financial & non-financial measures…. As - non-financial measures are drivers of financial outcomes Will Make $$$ - if sell product Will sell product if consumer wants, knows about , can get, & LIKES product To achieve “above’ everyone must effectively do their job To effectively do job must know what to do

Organizations Often Have A Gap Between Strategy and Action Strategy Is a Step In a Continuum MISSION Why we exist VALUES What’s important to us VISION What we want to be STRATEGY Our game plan (11) Does a strategic focus make sense in a tactical business world? STRATEGIC OUTCOMES Satisfied SHAREHOLDERS Delighted CUSTOMERS Efficient and Effective PROCESSES Motivated & Prepared WORKFORCE

The Balanced Scorecard Is A Bridge To Close That Gap Strategy Is a Step In a Continuum MISSION Why we exist VALUES What’s important to us VISION What we want to be STRATEGY Our game plan BALANCED SCORECARD Implementation & Focus STRATEGIC INITIATIVES What we need to do STRATEGIC OUTCOMES Satisfied SHAREHOLDERS Delighted CUSTOMERS Efficient and Effective PROCESSES Motivated & Prepared WORKFORCE PERSONAL OBJECTIVES What I need to do (11) Does a strategic focus make sense in a tactical business world?

Strategic Thinking- the ten big ideas 9 9. Metrics that matter Balanced score card- a system that attempts to balance financial performance w/ consideration of customer's perspective, learning & growth perspective, & internal business process perspective

Balanced Scorecard History Measurement and Reporting Enterprise-wide Strategic Management Alignment and Communication 1992 1996 2000 Articles in Harvard Business Review: “The Balanced Scorecard — Measures that Drive Performance” January - February 1992 “Putting the Balanced Scorecard to Work” September - October 1993 “Using the Balanced Scorecard as a Strategic Management System” January - February 1996 1996 2000 Acceptance and Acclaim: “The Balanced Scorecard” is translated into 18 languages Selected by Harvard Business Review as one of the “most important management practices of the past 75 years.“

Balanced Scorecard Hall of Fame Implemented Strategies and Achieved Breakthrough Results… Fast Mobil ATT Canada Saatchi & Saatchi Last to first Cash flow +$1.2b ROI 6% --> 16% 3 years 3 years + $2b + $7b 2-5 years Cigna Brown & Root 2-5 years 3 years + $3b #1 in growth & profitability City of Charlotte Duke Children’s 3 years 3 years Customer Satisfaction = 70% Public Official Award Customer Satisfaction #1 Cost/Case 33% Wells Fargo Southern Garden 3-5 years 3 years # Customers 450% Best Online Bank Least Cost Producer 2 years UPS Chemical Bank 3 years Hilton Hotels 2 years 99% Merged Target Asset Retention Revenues 9% Net Income 33% Customer Satisfaction Market Revenue Index

What is measured gets noticed What is noticed gets acted on What is acted on gets improved Today … ~ 70% of Fortune 1,000 companies utilize a Balanced Scorecard to help manage performance— because…..

Perspectives Encompass all Respective Functional Domains

Customer… Business Processes…Learning & Growth For Each Perspective: Financial… Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3. Customer… Business Processes…Learning & Growth

Basic Scorecard Terminology (Southwest Airlines Example) Strategy Map Strategic Theme: Operating Efficiency Measures How performance is measured against objectives Targets The level of performance or rate of improvement needed InitiativesKey action programs required to achieve targets Objectives: What the strategy is trying to achieve Profits and RONA Financial Grow Revenues Fewer planes Attract & Retain More Customers Customer On-time Service Lowest prices Objectives Fast ground turnaround Measures Targets Initiatives Internal Fast ground turnaround On Ground Time On-Time Departure 30 Minutes 90% Cycle time optimization Learning Ground crew alignment 17

A Complete Scorecard is a Program for Action Strategic Theme: Operations Excellence Objectives Measures Targets Initiatives Strategic Theme: Operating Efficiency Profits and RONA Financial Profitability Grow Revenues Fewer planes 30% +/yr 20% 5% Grow Revenues Fewer planes Attract & Retain More Customers More Customers Flight is on -time Lowest prices # Customers FAA On Time Arrival Rating Market Survey 12% growth Ranked #1 Customer loyalty program Quality management Customer On-time Service Lowest prices Internal Fast ground turnaround On Ground Time On-Time Departure 30 Minutes 90% Cycle time optimization Fast ground turnaround Ground crew alignment % Ground crew trained % Ground crew stockholders yr. 1 70% yr. 3 90% yr. 5 100% Ground crew training ESOP Learning Ground crew alignment 17

The Complete Balanced Scorecard Strategy Map Improve Shareholder Value Financial Perspective: the drivers of shareholder value Productivity Strategy Shareholder Value ROCE Revenue Growth Strategy Improve Cost Structure Increase Asset Utilization Enhance Customer Value Create Value from New Products & Services Cost per Unit Asset Turnover Customer Profitability New Revenue Sources Market and Account Share Customer Acquisition Customer Retention Customer Satisfaction Customer Perspective: the differentiating value proposition Product Leader Customer Solutions Customer Value Proposition Low Total Cost Product/Service Attributes Relationship Image Price Quality Time Function Service Relations Brand Internal Perspective: how value is created and sustained (Processes that Produce and Deliver Products & Services) (Processes that Enhance Customer Value) Customer Management Theme Operations Theme Innovation Theme Regulatory and Society Theme (Processes that Create New Products and Services) (Processes that Improve the Environment and Communities) Learning & Growth Perspective: role for intangible assets – people, systems, climate and culture Human, Information, and Organizational Capital Strategic Competencies Strategic Technologies Climate for Action

Mobil NAM&R Strategy Map Increase ROE to 12% Financial Perspective Revenue Growth Strategy ROCE Net Margin (vs. industry) Productivity Strategy New Sources of Non-Gasoline Revenue Increase Customer Profitability Through Premium Brands Become Industry Cost Leader Maximize Use of Existing Assets Non-Gasoline Revenue & Margin Volume vs. Industry Premium Ratio Cash Expense (cpg) vs. Industry Cash Flow Customer Perspective “Delight the Consumer” “Win-Win Dealer Relations” Share of Targeted Segment Mystery Shopper Score Basic Differentiators Dealer Profit Growth Dealer Satisfaction Clean Safe Quality Product Trusted Brand Speedy Purchase Friendly Helpful Employees Recognize Loyalty More Consumer Products Help Develop Business Skills “Build the Franchise” “Increase Customer Value” “Achieve Operational Excellence” “Be a Good Neighbor” Create Non-Gasoline Products & Services Understand Consumer Segments Improve Hardware Performance Improve Inventory Management Improve Environmental, Health and Safety Internal Perspective Yield Gap Unplanned Downtime Inventory Levels Run-Out Rate Best-In-Class Franchise Teams New Product Acceptance Rate On-Spec On-Time Industry Cost Leader Environment Incidents Safety Incidents Dealer Quality Rating Activity Cost vs. Competition A Motivated and Prepared Workforce Climate for Action Competencies Technology Learning & Growth Perspective Aligned Personal Growth Functional Excellence Leadership Skills Integrated View Process Improvement Personal BSC Employee Feedback Strategic Skill Coverage Ratio Systems Milestones

Capstone's Balanced Scorecard

Analyst Report Company Round Analysis Additional – AFTER-the-FACT Tools for Managing & Assessing Your Performance: Company Round Analysis Analyst Report

Round Aanalysis -example

Simulation Scoring System