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11
Balanced ScorecardBalanced Scorecard
Airline & FMCG -ImplementationAirline & FMCG -Implementation
Anand SubramaniamAnand Subramaniam
22
To navigate a plane, looking at the fuel indicator is too limited – other factors impact the success of a flight; a cockpit requires a balanced measuring system !!
33
Implementation HighlightsImplementation HighlightsChallenges around Strategy Execution Challenges around Strategy Execution
What is Balance Scorecard (BSC) and why firms What is Balance Scorecard (BSC) and why firms implement it?implement it?
My Client’s (FMCG & Airlines) :My Client’s (FMCG & Airlines) :– Challenges, Challenges, – Goals, Goals, – Benefits Seeked, Benefits Seeked, – Critical Success Factors (CSF), Critical Success Factors (CSF), – Strategy MapStrategy Map– Example – themes, CSF, measures & targets,Example – themes, CSF, measures & targets,– implementation roadmap including time frames, implementation roadmap including time frames, – Project Organisation ChartProject Organisation Chart– Lessons LearntLessons Learnt
44
Is this happening at your firm ?Is this happening at your firm ?
Strategic Learning Loop
Initiatives & Programs
test the hypotheses
Output(Results)
reportingManagement Control Loopfunding
Input(Resources)
update the strategy
PERFORMANCE
85% of management teams spend less than one hour per month on
strategy issues
92% of organisations do not report on lead
indicators
60% of organizations don’t link strategy &
budgets
78% of organisations lock budgets to an annual cycle
20% of organisations take more than 16 weeks to
prepare a budget
STRATEGY
BALANCED SCORECARD
BUDGET
55
Strategy Execution ChallengesStrategy Execution Challenges
Lack of Organisation
Alignment
Lack of Organisation
Alignment
Disjointed Planning and Processes
Disjointed Planning and Processes
Unclear Visionand Strategy
Unclear Visionand Strategy
Inability to Test and Adapt PerformanceInability to Test and Adapt Performance
“I’m not sure our resources are
allocated against priorities and our
best opportunities.”
“We spend too much time and effort creating
plans instead of getting value
from the planning process”
“Our strategic, operational, and financial plans
are not aligned.”
“Our data is of poor quality and
we have disparate
systems to report on performance.”
“We are a collection of silos
that do not collaborate.”
“We do not know if our strategy is working until it is
too late.”
“We have a strategy, we
just can’t explain it that
easily.”
“Our leadership team does not
agree on our key priorities.”
“Our employees don’t have a
clear understanding of
what the strategy is and their role in it.”
“We are trying to do 100
things, rather than do 15
critical things well.”
“Recognition and rewards are not based on driving the change we
need.”
“We don’t have the right
measures. There are too many of them and we’re not sure which ones to use”
66
Vision to Outcomes – Conceptual OverviewVision to Outcomes – Conceptual Overview
BALANCED SCORECARDTranslate, Focus and Align
STRATEGIC INITIATIVESWhat are the priorities
MISSIONWhy we exist
VALUESWhat’s important to us
VISIONWhat we want to be
STRATEGYOur game plan
STRATEGIC OUTCOMES
SatisfiedSHAREHOLDERS
Delighted CUSTOMERS
Efficient & EffectivePROCESSES
Motivated & PreparedWORKFORCE
EMPOWERMENT / PERSONAL OBJECTIVESWhat I need to do
TOTAL QUALITY MANAGEMENTWhat we must improve
77
What is a Balance Scorecard (BSC)?What is a Balance Scorecard (BSC)?
The Conclusion
Measurement Must Be Linked To Strategy
StrategyBalancedScorecard
Measurement To Communicate, Not To Control
Measurement Communicates Values, Priorities & Direction
The Premise
88
BSC PerspectivesBSC Perspectives
How can we continually get How can we continually get smarter, innovate, and improve?smarter, innovate, and improve?Knowledge and Knowledge and
InnovationInnovationOrganisational Organisational
CapacityCapacity
How can we improve internal How can we improve internal processes to improve quality, processes to improve quality, timeliness, economics, and timeliness, economics, and functionality?functionality?
EfficiencyEfficiencyInternal Internal ProcessProcess
For businesses, how do we create For businesses, how do we create value for owners? value for owners?
Financial Financial PerformancePerformance
Financial Financial StewardshipStewardship
Through the eyes of our customers Through the eyes of our customers and stakeholders, how will they and stakeholders, how will they judge our products and services?judge our products and services?SatisfactionSatisfactionCustomer/ Customer/
StakeholderStakeholder
Key QuestionsKey QuestionsKey ConceptKey ConceptPerspectivePerspective
99
BSCBSC
1010
Why firm’s implement BSC? Why firm’s implement BSC? To align corporate strategy with daily operationsTo align corporate strategy with daily operations
To make informed business decisions via defined To make informed business decisions via defined reporting and analysis, to corporate best practicesreporting and analysis, to corporate best practices
To comply with regulations by disclosing corporate To comply with regulations by disclosing corporate information timelyinformation timely
To achieve the vision by building rigor To achieve the vision by building rigor
To help with innovation / new product developmentTo help with innovation / new product development
To adapt to changing technologies and marketsTo adapt to changing technologies and markets
To attract and retain talented peopleTo attract and retain talented people
A management system or a check-up for the A management system or a check-up for the business business
1111
My Client’s BSC ImplementationMy Client’s BSC Implementation
Lesson’s LearntLesson’s Learnt
1212
Challenges before BSC Challenges before BSC Measures not aligned or changed with strategy and does not Measures not aligned or changed with strategy and does not reflect critical success factors. reflect critical success factors.
Short-term focus rather than taking a long-term and the focus Short-term focus rather than taking a long-term and the focus was on what is currently being done, not what should be donewas on what is currently being done, not what should be done
Failure to measure the impact on the overall organisation Failure to measure the impact on the overall organisation
Much quantitative information could not be reduced to Much quantitative information could not be reduced to monetary amounts and some could not be quantifiedmonetary amounts and some could not be quantified
Some information provided feedback but no guidance Some information provided feedback but no guidance
Measures poorly designed and / or collected (eg. customer Measures poorly designed and / or collected (eg. customer satisfaction, employee morale) satisfaction, employee morale)
Goals were arbitrarily determined, beyond the ability of the Goals were arbitrarily determined, beyond the ability of the systemsystem
Measures produced were irrelevant, redundant, questionable, Measures produced were irrelevant, redundant, questionable, confusing (not defined) and some were manipulatedconfusing (not defined) and some were manipulated
1313
Goals seekedGoals seekedTo improve management effectiveness by having a shared To improve management effectiveness by having a shared and actionable view of the strategyand actionable view of the strategy
To provide a generic framework to translate strategy into To provide a generic framework to translate strategy into operational terms operational terms
To create a systems approach or an integrated Strategic To create a systems approach or an integrated Strategic Management Process Management Process
To provide a clear line of sight to the vision and strategy of To provide a clear line of sight to the vision and strategy of the company, providing feedback and guidancethe company, providing feedback and guidance
To provide a tool for communicating the strategy and the To provide a tool for communicating the strategy and the processes and systems required for strategy implementation processes and systems required for strategy implementation
To draw a cause and effect roadmap to stakeholder value – To draw a cause and effect roadmap to stakeholder value – shareholder, customer, and employee.shareholder, customer, and employee.
To provide a balance between current performance and long-To provide a balance between current performance and long-term competitive abilities (financial & non-financial measures)term competitive abilities (financial & non-financial measures)
1414
Benefits achievedBenefits achievedImproved management effectiveness by having a Improved management effectiveness by having a shared and actionable view of the strategyshared and actionable view of the strategy
Ensured strategic outcomes for a given set of Ensured strategic outcomes for a given set of resourcesresources
Enabled employees to work in a coordinated, Enabled employees to work in a coordinated, collaborative fashion towards organisational goalscollaborative fashion towards organisational goals
Provided timely information for informed decision-Provided timely information for informed decision-making on resource allocationmaking on resource allocation
Provided guidance on future operations & decisionsProvided guidance on future operations & decisions
BSC was utilised as an change agent, to translate BSC was utilised as an change agent, to translate the strategy into action, providing feedback and the strategy into action, providing feedback and learninglearning
1515
Lesson’s Learnt / Success CriteriaLesson’s Learnt / Success Criteria““Story of the firm’s strategy” in actionable terms.Story of the firm’s strategy” in actionable terms.Executive InvolvementExecutive Involvement - strategic decision makers - strategic decision makers validated and owned the strategy and related validated and owned the strategy and related measures measures Cause and Effect RelationshipsCause and Effect Relationships - every objective - every objective selected was analysed for cause and effect linkages selected was analysed for cause and effect linkages and to the strategy and to the strategy Balance between outcome and leading measuresBalance between outcome and leading measures - - there was a balance and facilitated anticipatory there was a balance and facilitated anticipatory management management Financial LinkageFinancial Linkage - every objective was ultimately - every objective was ultimately linked to the financial results linked to the financial results Linkage of Initiatives and MeasuresLinkage of Initiatives and Measures - each initiative - each initiative was analysed for variance, between baseline and was analysed for variance, between baseline and target. target.
1616
Strategy Map designedStrategy Map designed
Learning & Growth Perspective:
role for intangible assets – people, systems, climate and culture
Improve Shareholder Value
Productivity Strategy Revenue Growth Strategy
Improve Cost Structure
Increase Asset Utilisation
Enhance Customer Value
Create Value from New Products &
Services
Human, Information, and Organisational Capital
Shareholder ValueROCE
Cost per Unit Asset Turnover Customer Profitability
New Revenue Sources
Price
Financial Perspective:
drivers of shareholder value
Product/Service Attributes
Strategic Competencies
Strategic Technologies
Climate for Action
(Processes that Produce and
Deliver Products & Services)
(Processes that Enhance Customer
Value)
Operations Theme Customer Management
Theme
Innovation Theme Regulatory and Society Theme
Customer Value Proposition
Quality
Low Total Cost
Customer Solutions
Product Leader
Customer Satisfaction Customer Acquisition Customer Retention
Time Function Service Relations Brand
Relationship Image
� Market and Account Share
Customer Perspective:
differentiating value proposition
Internal Perspective:
how value is created and sustained
(Processes that Create New Products
& Services)
(Processes that Improve the
Environment and Communities)
1717
Example - Internal / Operations Themes Example - Internal / Operations Themes
Objective Objective Statement Measure Initiatives
•Certification Rates of allcourse.
•Charter attrition work group.
•% deploying BCT receiving deployment training across
all modules. •TBD
•Adherence to the (re) verification, (re) validation, and
(re) accreditation process.
•Incorporate audit guidance.
•Improve Access to •Products and Services
•Enhance accessibility of our products and services to our customers through innovative, cutting edge delivery.
•% of products available via online and traditional
methods (hard copy, CDs)
•Market products and service.
•Increase Organisational Efficiency and
Standardisation
•Institutionalise processes that increase our efficiency and get rid of those that don’t.
•% increase in updated policies and procedures from baseline.
•Survey employees concerning alignment and
duplication of efforts.
•Improve Joint Integration
•Posture our organisation to optimise joint integration
•Adherence to Schedule•Comprehensive and integrated program management plan.
Enhance Training & Development
•Ensure health services assets of all three •components are trained and modular and
•cutting edge to support full spectrum •operation and joint force requirements.
Inte
rna
l Pe
rsp
ect
ive
1818
Example - Critical Success Factors Example - Critical Success Factors Success Factor Imp. Cap. Supporting Actions
Imp. - Importance 1- Minor Relevance 10 - CriticalCap. - Current Capability 1 - Major Weakness 10 - Best Practice
Business-wideclarity on customer needs & concerns
10 3 Customer Focus Groups0800 complaint lineSystem of ‘Listening Posts’
Effective internal communications
10 7 Team Listening structureIntranet Web-sites for all projects48 hour responses to all project queries
Involvement and Participation (I&P) at all levels
8 2 Management workshop on I&P ideasPilot participative ‘event’Staff design of business forums
Demonstrable support for new culture / ethos
9 6 Regular business forumsTeam charters at all levelsOpen access to performance data
ProcessOwnership Infrastructure
7 9 Formal ownership guidelinesRegular process owners forumsCentral process design repository
1919
Measures & Targets - ExampleMeasures & Targets - ExampleE
mp
loye
eE
mp
loye
e
Cu
sto
me
rC
ust
om
er
What do we have to do to get What do we have to do to get there?there?
What do we have to do to get What do we have to do to get there?there?
Fin
an
cia
lF
ina
nci
al
Pro
cess
Pro
cess
Strategic GoalsStrategic Goals MeasuresMeasures
How do we know if we are How do we know if we are achieving our goals?achieving our goals?
How do we know if we are How do we know if we are achieving our goals?achieving our goals?
TargetsTargets
What will we measure our What will we measure our progress against?progress against?
What will we measure our What will we measure our progress against?progress against?
Vis
ion &
Mis
sion
Wh
at a
ctiv
ities a
re w
e d
oin
g to
reach
ou
r targ
ets
?W
hat a
ctiv
ities a
re w
e d
oin
g to
reach
ou
r targ
ets
?
InitiativesInitiatives
2020
BSC - Airways BSC - Airways Balanced Scorecard
Measurement Target
• Market Value
• Seat Revenue
• Plane Lease Cost
• 30% CAGR
• 20% CAGR
• 5% CAGR
• FAA On-Time Arrival Rating
• Customer Ranking• # Repeat Customers• # Customers
• #1
• #1• 70%• Increase
12% annual
• On Ground Time
• On-Time Departure
• 30 Minutes
• 90%
• % Ground Crew Stockholders
• Strategic Awareness
• Strategic Job Readiness
• Info System Availability
• 100%
• 100%
• Yr 1 - 0%Yr 3 - 90%Yr 5 - 100%
• 100%
Action Plan
Initiative Budget
• Customer Loyalty Program
• $XXX
• On Ground Cycle Time Optimisation
• Quality Management
• $XXX
• $XXX
• ESOP
• Ground Crew Training
• Crew Scheduling System Rollout
• CRM System
Total Budget $XXXX
• $XXX
• $XXX
• $XXX
• $XXX
Strategy Map
Theme: Operating Efficiency Objective
• Profitability
• Grow revenues
• Fewer planes
Financial Profits & RONA
Grow Revenues
Fewer Planes
• Flight is on-time
• Lowest prices
• Attract and retain more customers
CustomerAttract & Retain More Customers
On-time Service
Lowest Prices
Fast Ground Turnaround
Internal • Fast ground turnaround
• Ground crew aligned with strategy
• Develop the necessary skills
• Develop the support system
Learning
Strategic JobRamp Agent
Strategic SystemsCrew Scheduling
Ground Crew Alignment
MeasureMeasureCommunicateCommunicate ExecuteExecute
2121
Implementation RoadmapImplementation Roadmap
Ongoing Management
• Define and Clarify Mission & Vision
• Develop Strategic Goals
• Identify Unit Objectives/ Critical Success Factors / Architecture
• Draft Strategic Map with linkages & themes
• Develop Baseline
• Define Measures• Set Targets
• Identify Initiatives• Allocate Resources
• Get Buy-in!• Plan & Implement
Step 3 Step 4 Step 5 Step 6
Step 2
Step 1
Week 1 2 4 6 8 10 12 14 16 18
2222
Implementation - Steps 1 ~ 3Implementation - Steps 1 ~ 3Step 1Step 1
Develop aDevelop aBusiness CaseBusiness Case
Step 2Step 2
BuildBuildStrategicStrategic
ArchitectureArchitecture
Step 3Step 3
Draft a Draft a Strategy MapStrategy MapWith LinkagesWith LinkagesAnd ThemesAnd Themes
Step 4Step 4
Determine Measures Determine Measures and Targetsand Targets
Step 5Step 5
Select Strategic Select Strategic InitiativesInitiatives
Step 6Step 6
Plan and Plan and implementationimplementation
Week 2 4 6 8 10 12 14 16 18
Work/Inputs
• Strategy Documents
• Draft themes & linkages based on Strategic Destination
Outputs:
• Agreed upon stretch targets
• Finalised themes
• Strategy map
Agree upon stretch targets
Review and refine themes
Refine and rework draft
linkagesDiscuss next
steps
2323
Implementation - Step 4Implementation - Step 4Step 1Step 1
Develop aDevelop aBusiness CaseBusiness Case
Step 2Step 2
BuildBuildStrategicStrategic
ArchitectureArchitecture
Step 3Step 3
Draft a Draft a Strategy MapStrategy MapWith LinkagesWith LinkagesAnd ThemesAnd Themes
Step 4Step 4
Determine Measures Determine Measures and Targetsand Targets
Step 5Step 5
Select Strategic Select Strategic InitiativesInitiatives
Step 6Step 6
Plan and Plan and implementationimplementation
Week 2 4 6 8 10 12 14 16 18
Work/Inputs
• Refined strategy
• Existing measures assigned to objectives
• Draft measures developed
Refine and validate linkages
Review draft
measures
Design new measures
Begin targets
discussion
Plan for measures
development
Outputs:
• 90% complete linkages
• Complete measures
• Measures development plan in place
2424
Implementation - Step 5 & 6Implementation - Step 5 & 6Step 1Step 1
Develop aDevelop aBusiness CaseBusiness Case
Step 2Step 2
BuildBuildStrategicStrategic
ArchitectureArchitecture
Step 3Step 3
Draft a Draft a Strategy MapStrategy MapWith LinkagesWith LinkagesAnd ThemesAnd Themes
Step 4Step 4
Determine Measures Determine Measures and Targetsand Targets
Step 5Step 5
Select Strategic Select Strategic InitiativesInitiatives
Step 6Step 6
Plan and Plan and implementationimplementation
Week 2 4 6 8 10 12 14 16 18
Review and
validate linkages
and measures
Review existing
initiatives
Brainstorm new
initiatives
Align/rationalise initiatives to themes
Work/Inputs:
• Refined linkages and measures
• Inventory of existing initiatives
• Proposed new initiatives
Outputs:
• “Locked in” on objectives and linkages
• Measures defined
• Initiatives defined
• Plan for initiatives review established
• implementation
2525
Project Organisation Project Organisation
Vendor Engagement
Manager(part-time)
ExecutiveSponsor/Steering
Committee
VendorProjectTeam
1-2Consultants
(full-time)
ClientCoreTeam
Staffknowledgeable
of businessstrategies andorganisation
VendorProjectLeader
(full-time)
ClientProjectLeader
ExecutiveLeadership
Team
• Overall project ownership
• Consultations/workshopsas needed
• 2-4 staff
• 3- 5 days/week
• Briefings with othersas needed
• 3 days/week • 8 Half-dayworkshops
• One 90-minutebriefing/interview
• Consultations/workshopsas needed
2626
Lessons LearntLessons LearntMeasures must relate to the strategy and interrelatedMeasures must relate to the strategy and interrelated– Must understand how the perspectives influence each otherMust understand how the perspectives influence each other– Organisation-wide view replaces local focusOrganisation-wide view replaces local focus
Determine the critical success factorsDetermine the critical success factors– Identify long-term and short-term business objectives and prioritise them Identify long-term and short-term business objectives and prioritise them
based on business goals based on business goals
– What must be achieved to survive, or what will cause the company to fail What must be achieved to survive, or what will cause the company to fail if it is not achieved? if it is not achieved?
– Determine success factors for each of the four perspectivesDetermine success factors for each of the four perspectives
– Limit the number to items that are critical, not just interestingLimit the number to items that are critical, not just interesting
– Must understand the linkages between the activities and the goalsMust understand the linkages between the activities and the goals
Develop metrics to evaluate performanceDevelop metrics to evaluate performance– Provide feedback and also indicate risk / opportunity areasProvide feedback and also indicate risk / opportunity areas
– Metrics may be financial, non-financial, trends, surrogates, internally or Metrics may be financial, non-financial, trends, surrogates, internally or externally gatheredexternally gathered
– Should include leading and lagging measures, not too much or littleShould include leading and lagging measures, not too much or little
2727
Requires teamwork and collaborationRequires teamwork and collaboration– Different perspectives and expertise are requiredDifferent perspectives and expertise are required
– No one individual has a complete view of the organisationNo one individual has a complete view of the organisation
– Greater participation produces greater “buy-in”Greater participation produces greater “buy-in”
– Employees have a sense of ownership in the resulting scorecardEmployees have a sense of ownership in the resulting scorecard
– More likely to use the scorecard to guide their decisions More likely to use the scorecard to guide their decisions
Identify owners and assign responsibilitiesIdentify owners and assign responsibilities
Initiative must start with Senior ManagementInitiative must start with Senior Management– Who understand the overall strategy and have authority to make Who understand the overall strategy and have authority to make
strategic decisionsstrategic decisions
– Their Commitment level will determine success or failureTheir Commitment level will determine success or failure
The project may fail if senior management does not show continued interest The project may fail if senior management does not show continued interest and support in the design processand support in the design process
The scorecard will be ignored if management does not promote its use for The scorecard will be ignored if management does not promote its use for performance evaluation and guidanceperformance evaluation and guidance
Lessons Learnt (Contd.)Lessons Learnt (Contd.)
2828
Requires teamwork and collaborationRequires teamwork and collaboration– Different perspectives and expertise are requiredDifferent perspectives and expertise are required
Link to databases and IT systemLink to databases and IT system– Modify information system if necessary to collect and report the metricsModify information system if necessary to collect and report the metrics
What data is available / not available? What data is available / not available?
The scorecard should determine what data is collected and The scorecard should determine what data is collected and the data available should the data available should not determine the scorecardnot determine the scorecard
– Determine reporting proceduresDetermine reporting proceduresWho gets the information? How is it reported? How often is it reported?Who gets the information? How is it reported? How often is it reported?
Communicate to employees regularly - tactics, Communicate to employees regularly - tactics, objectives, assumptions, timetablesobjectives, assumptions, timetables– What is being measuredWhat is being measured
– Why it is being measuredWhy it is being measured
– What is expected of the employeesWhat is expected of the employees
– How to use the informationHow to use the information
Lessons Learnt (Contd.)Lessons Learnt (Contd.)
2929
Develop scorecards for lower levelsDevelop scorecards for lower levels– For staff to understand what they must do to support the level aboveFor staff to understand what they must do to support the level above
Interview senior managersInterview senior managers– Input on strategic objectives, critical success factors, possible measuresInput on strategic objectives, critical success factors, possible measures
Periodic reviews and re-alignPeriodic reviews and re-align– Has company strategy changed?Has company strategy changed?
– Are the critical success factors still valid?Are the critical success factors still valid?
– Are the activities still valid?Are the activities still valid?
– Are the metrics still valid?Are the metrics still valid?
– Analyse resultsAnalyse results
Pitfall to avoidPitfall to avoid– Senior management committed and there is consensusSenior management committed and there is consensus
– Staff buy in and regular communication between staff and managementStaff buy in and regular communication between staff and management
Lessons Learnt (Contd.)Lessons Learnt (Contd.)
3030
ROI & BSCROI & BSC
It may not be obvious to YOU or YOUR managers, how to increase sales, decrease costs, and decrease investments in a way that is consistent with the company’s strategy.
A well constructed balanced scorecard can provide YOU with a road map that indicates how YOUR company intends to increase ROI.
3131
Take AwayTake AwayBSC not only supports management decisions, but also identifies possibilities for change and motivates people
Reports on the performance against the corporate goals
Supports management decisions & establishes priorities regarding human and other resources
Identifies ways to improve performance
Identifies the need for adjusting processes and the flaws in supporting systems and infrastructure
Identifies the need for change in the organisational culture
Motivates people in their work by giving signals about what is important to the organisation
3232
Good LuckGood Luckhttp://www.linkedin.com/in/anandsubramaniamhttp://www.linkedin.com/in/anandsubramaniam