1 The Balanced Scorecard

2 What lies Ahead… Overview of the Balanced Scorecard Why the Balanced Scorecard will help execute strategy Strategy Map and Balanced Scorecard Outcomes Discussion – Ideas for scorecards

3 Executing Strategy... Is the greatest challenge for organizations Vision - only 5% of workforce gets it! People – 25% of managers have incentives linked to strategy Management – 85% of executive teams spend less than 1 hour/mo discussing strategy Resource – 60% of organizations don’t link budgets to strategy

4 Strategic Execution Bad execution, not bad strategy is the cause of 70% of CEO failures Execution is not just tactics—it is a discipline and a system Source: Execution: The Discipline of Getting Things Done, by Larry Bossidy, and FORTUNE Magazine, “Why CEOs Fail”

5 Challenges in Executing Strategy Financial Management Tools Balance Sheets Income Statements Statement of Cash Flow People Management Tools MBO Training Programs HRIS 360 Feedback Customer Management Tools C R M Customer Segment Analysis Customer Surveys Process Management Tools Six Sigma Supply Chain Management TQM Strategy Management Tools ???

6 Train and Communicate Strategy The Balanced Scorecard Set goals, select performance measures and link measures to incentives Set target for each goal and re-deploy resources to activities and initiatives to achieve targets Provide feedback on performance and learn from results Feed Forward Learning

7 The Balanced Scorecard A robust tool – but keep it simple! Makes strategy tangible –everyone’s job! Tracks what’s important – hits and misses Measurement-lead management Provides feedback for short-term course corrections and long-term learning

8 Balanced Scorecard Perspectives A.Financial How do we succeed financially? B.Customer How do we appear to our customers? C.Internal Process At what processes must we excel? D.Learning and Growth How do we sustain our ability to change and grow?

9 Knowledge, Skills, Systems, and Tools Financial Results To Build the Strategic Capabilities.. Needed to Deliver Unique Sets of Benefits to Customers... To Drive Financial Success... And Realize the Vision Equip our People... InternalCapabilities Customer Benefits We Use the Scorecard to Articulate Strategic Hypotheses in Cause-effect Terms

10 Balanced Scorecard Perspectives Vision & Strategy

11 Cascading Scorecards to Build Alignment Organization Business Unit Business Unit Business Unit Teams Individual Contributors

12 Financial Sound Fiscal Mgmt Budgeting Long-Term Investment Strategy Customer – The Value Proposition Internal Process Learning & Growth The Value Proposition Product/Services PriceSelection QualityAvailability Relationship Partnership Services Brand Image Innovation New learning Partnerships Future needs Operational Excellence Admin excellence Network of supplier for Products & services Adaptability Customer Mgmt Deepen Knowledge about customer Attract Retain Grow Relationship Climate for Action Personal Growth Competencies Functional Excellence Leadership Skills Strategic Readiness

13 Scorecard Information Information TypeAre….Example is… StrategiesHigh Level GoalsIncrease Market Share ObjectivesMeasures of action plans Increase Customer Satisfaction MeasuresIndicates success or failure Average Customer Rating (scale of 1-10) TargetsDesired level of performance for a measure Achieve 9.9 of 10 Average Customer Rating InitiativesManagement actions taken to achieve target Train CSR Staff in Problem Resolution Skills Perspective: Financial / Customer / Internal Process / Learning&Growth

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15 Human Resources Mission Statement: The Human Resources Team will lead by example working to build a culture of high-energy, committed professionals who understand that continuous improvement and customer service are primary value competencies integrated into every position while developing SPS as a recognized employer of choice. Coordinate BP Certification Process Platinum Certification AchievedLead: BF Target: 9/1/03 Develop matrix; assign responsibilities; conduct regular checkpoints ObjectiveResult/DeliverableTarget & LeadInitiative

16 The TCS Model Source: Human Capital Vol.9 No.12 May 2006 ‘Redefine the HR Agenda’

17 Vision Global Top 10 by 2010 in the IT Industry Mission Customer delight by providing best-in- class consulting, IT solutions & services and also delivering value and joy to all stakeholders.

18 Shareholder Value Human Capital Effectiveness Human Resource Efficiency Employee delight Customer delight Manage Operating efficiency Manage Customer relationships Deliver world class services Team Integration Leadership Competencie s Cultural Climate Strategic Alignment /Motivation Work Capability FINANCIAL PERSPECTIVE CUSTOMER PERSPECTIVE INTERNAL PROCESS PERSPECTIVE LEARNING & GROWTH PERSPECTIVE

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

20 % Ground crew trained % Ground crew stockholders ObjectivesMeasurement Market Value Seat Revenue Plane Lease Cost FAA On Time Arrival Rating Customer Ranking (Market Survey) On Ground Time On-Time Departure Strategic Theme: Operating Efficiency Initiative Cycle time optimization program ESOP Ground crew training Quality management Customer loyalty program Target 30% CAGR 20% CAGR 5% CAGR #1 30 Minutes 90% yr. 1 70% yr. 3 90% yr % Profitability Financial Learning More Customers Ground Crew Alignment Lowest Prices Fewer Planes Customer Internal Fast Ground Turnaround Flight Is on Time Profitability More Customers Fewer planes Flight is on - time Lowest prices Fast ground turnaround Ground crew alignment Balanced Scorecard Example

21 Sample HR Measures Lagging Measures Impact of Prior Decisions Budget variance Employee relationship results Executive coaching Employee productivity Cost per hire by job class People expense/Revenues Leading Measures Guide Future Outcomes Employee strategic focus Executive retention Retraining/re-skilling Internal promotion rate Exit Rate of “C” Players Employee relationship factor

22 So Why Consider the BSC? As an HR Professional -- Strategic Thinker Business Leader As an organization -- Welcomes change – vital culture today Achieves strategic objectives

23 Keys to Success Educate your Executive and Teams Devise the right metrics Follow through to completion Start s ss small! – Report immediately Don’t over measure

24 Getting Started – Customize Your BSC 1.Describe the strategy – burning platform? Strategy Map 2.Measure the strategy Develop the measures; critical data points 3.Manage the strategy Gather detailed information about the measure and initiative

25 The Successful Scorecard… Is a dynamic process – continues to set higher targets and achieves them – Define jobs strategically from the perspective of where it fits in with the strategic business goals Supports joint decision making about what you do/don’t do based on strategic goals

26 Resources “The Balanced Scorecard,” Kaplan & Norton Balanced Scorecard Collaborative, Lincoln, MA, “The Strategy-Focused Organization,” Kaplan & Norton “The HR Scorecard,” Becker, Huselid, Ulrich “Measure Like You Mean It,” Michael Hammer “The Balanced Scorecard Step By Step: Maximizing Performance and Maintaining Results,” Paul R. Niven “The Human Resources Scorecard, Measuring the Return on Investment,” Jack J. Phillips, Ron D. Stone, Patricia Pulliam Phillips Company Case Studies Networking

27 Questions?