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Long-range

Strength

Visionary

Tenacity

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• How many are comfortable that your internal processes will achieve the vision?

• Would you agree there would be 100% consensus if we asked ten people in your organization, “What are the business imperatives?”

• How many believe they are maximizing the time, talent, and money of the organization?

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Strategy-Aligned Organization Fueled by Innovation and Driven by Balanced

Performance Indicators…

Focus

Creativity

Accountable

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Overview

• Current observation• Changing landscape of performance

management• Strategic translation• Linkage between strategy and

measures• Case study• Applied workshop

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Balanced Score Cards Are Not Enough…

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What We Have Learned

• Malcolm Baldridge National Quality Award Foundation survey:• 300 CEOs• 72% felt executing strategies was more important

• Fortune Magazine• “Why CEOs fail”• 70% failures were flawed execution of strategy

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What We Do Know

• Only 5% of the workforce understand the company’s strategy

• Only 15% of the executive teams spend more than one hour per week discussing strategy

• Only 25% of the managers have incentives linked to strategy

• Only 40% of the organizations link budgets to strategy

• As a result, 30% to 50% of the company’s efforts are off strategy… “white collar waste”

Kaplan and Norton

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• 80% are making PM system changes and 33% described them as major overhaul (Strategic Finance Magazine, 2002)

• More than 50% of the Fortune 1000 have turned to Balanced Score Card principles (Bain & Company study 2001)

The Shift

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The Real Question is Why???

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Organizational Drifting

AA

BB

Current State

Future StateTraction

Unproductive use of resources

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Changing Landscape

“They (knowledge workers) now account for a full third of the American workforce, outnumbering factory workers two to one. In another 20 years, they will make up two-fifths of the workforce of all rich countries.”

Peter F. Drucker, The Economists, November 2001

0%

10%

20%

30%

40%

50%

60%

70%

80%

1982 1992 Today

IncreasingValue ofIntangibleAssests

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Intangible Assets?

• Intangibles assets may not have a direct impact on financial results• Value is largely potential – must be

transformed • Require interdependence for success

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Think of Intangible Asset as Behaviors, Choices, and Actions of Your

Employees…

Intangible Asset

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Leadership Challenge

• Is to recognize:• Financial measures do not tell the whole

story• Benefits of leveraging talent through

strategy alignment and deployment• Measures will change the actions and

behaviors of people

Capture intangible assets

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Strategy Translation

• Unless the objective is exercise, chasing more than one rabbit is hopeless and frustrating…

• Strategy is a story of how the company will create value• Series of cause and effects• All about the future survival

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Strategy Translation

• Understandable terms

“everyday speak”

Organizational Traction

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Strategy Translation

• Effort alignment

“without regards to the organization”

Organizational Traction

Unde

rsta

ndab

le

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Strategy Translation

• Everyone’s job

“change intent to action”

Organizational Traction

Alig

nmen

t

Unde

rsta

ndab

le

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Strategy Translation

• Strategy as a continual process

“part of daily management”

Organizational Traction

Ever

yone

’s jo

b

Unde

rsta

ndab

le

Alig

nmen

t

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Strategy Translation

• Mobilize change through leadership

“strategic-driven CI”

Organizational Traction

Unde

rsta

ndab

le

Alig

nmen

t

Ever

yone

’s jo

b

Cont

inua

l pro

cess

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Strategy Translation

Organizational Traction

Unde

rsta

ndab

le

Alig

nmen

t

Ever

yone

’s jo

b

Cont

inua

l pro

cess

Chan

ge le

ader

ship

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Linkage Between Strategy and Measures

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Underlying elements of the business that must be successful

Key Performance ObjectivesKey Performance Objectives

Actions taken to direct the organizations efforts toward maximizing the

benefit of critical success factors

Fundamental StrategiesFundamental Strategies

Customer promise

Value Proposition Value Proposition

Measurements developed to evaluate how effective

the strategies are in reaching established

goals

Performance Performance ManagementManagement

Visions of the future

Stakeholder Stakeholder ExpectationsExpectations

Internal ProcessesInternal Processes

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Balanced Perspectives

“How do the stakeholders

view us?”

“How do the customers view

us?”

“What processes must

we excel in?”

“What must we understand?”

Fin

anci

al

Cus

tom

er

Lear

ning

Val

ue S

trea

m

Hum

an

“How do we preserve talent?”

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Statements of Strategy

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Customers

Internal

Learning& Growth

Fewer Planes

More Passengers

Increase Profitability

Focus on Process Redesign

Fast Ground Turnaround

On-TimeFlights

Lowest Cost

How will our people do that?

–Educate and compensate personnel for cycle-time reduction

What must the internal focus be?

– Fast turnaround

How will we do that?

–Attract targeted customer segments who value price and on-time arrivals

What will drive operating efficiency?

–More customers on fewer planes

Financial

Southwest Airlines – Operating Efficiency

From Performance Measurement.ca

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Customers

Internal

Learning& Growth

Fewer Planes

More Passengers

Increase Profitability

On-TimeFlights

Fast Ground Turnaround

Lowest Cost

Financial

WE

IGH

TIN

G

MEASURE

0F SUCCESS

PROCESS/

PROJECT

PROCESS

MEASURE

ROLEOW

N/LE

AD

AP

PR

OV

E

RE

VIE

W

DE

VE

LOP

/ EX

EC

UT

E

15% • # Customers • Marketing • # Contacts BLK SGL BPK Mktg• Travel Agent

Blitz• # New

AgentsBLK TS BPK Mktg

5% • Plane Lease Cost • Renegotiate Leases

• Sublease Program

• Time to Sublease

PM PM PBK Legal

15% • Price Ranking •Pricing • # Days at Lowest Cost

• # Price Changes

BLK SGL BPK Mktg

20% • FAA On-Time Rating

• Customer Ranking

• Project On-Time

• # Late Arrivals

• # Late Departures

JAK OPN TT Grnd

30% • On-Ground Time• Hands-On Time

• Plane Servicing

• Cycle Time BR BLK JAM Grnd

• Passengers Off and On

• Off/On Cycle Time

JAK PIL TT Crew

15% • % People Trained

• BPR Project • Training Hours

• Total Identified NVAT

JAK PIL JAM Exec

• % Employee Shareholders

• ESOP • # Shareholding Employees

JW TT PBK Exec

Focus on Process Redesign

From Performance Measurement.ca

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How to Build an Effective Navigational Chart and Strategic Map

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Score Card Essentials

• Determine the business imperatives

“what are the expectations?”

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• Navigational Chart

Score Card Essentials

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• Determine the fundamental strategies

• Create the linkage

Score Card Essentials

“what must we do in order to achieve the vision and imperatives?”

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• Navigational Chart

• Strategic Map

• Strategic Options

Score Card Essentials

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• Determine key performance objectives

Score Card Essentials

“what needs to be accomplished in order to be successful?”

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• Navigational Chart

• Strategic Map

Score Card Essentials

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• Identify key performance indicators

Score Card Essentials

“how will we know our efforts are working?”

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• Navigational Chart

• Strategic Map

• Strategic Options

Score Card Essentials

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• Identify key processes and action plans

Score Card Essentials

“what action needs to occur in the gemba?”

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Customers

Internal

Learning& Growth

Fewer Planes

More Passengers

Increase Profitability

On-TimeFlights

Fast Ground Turnaround

Lowest Cost

Financial

WE

IGH

TIN

G

MEASURE

0F SUCCESS

PROCESS/

PROJECT

PROCESS

MEASURE

ROLEOW

N/LE

AD

AP

PR

OV

E

RE

VIE

W

DE

VE

LOP

/ EX

EC

UT

E

15% • # Customers • Marketing • # Contacts BLK SGL BPK Mktg• Travel Agent

Blitz• # New

AgentsBLK TS BPK Mktg

5% • Plane Lease Cost • Renegotiate Leases

• Sublease Program

• Time to Sublease

PM PM PBK Legal

15% • Price Ranking •Pricing • # Days at Lowest Cost

• # Price Changes

BLK SGL BPK Mktg

20% • FAA On-Time Rating

• Customer Ranking

• Project On-Time

• # Late Arrivals

• # Late Departures

JAK OPN TT Grnd

30% • On-Ground Time• Hands-On Time

• Plane Servicing

• Cycle Time BR BLK JAM Grnd

• Passengers Off and On

• Off/On Cycle Time

JAK PIL TT Crew

15% • % People Trained

• BPR Project • Training Hours

• Total Identified NVAT

JAK PIL JAM Exec

• % Employee Shareholders

• ESOP • # Shareholding Employees

JW TT PBK Exec

Focus on Process Redesign

From Performance Measurement.ca

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• Place the right measures

Score Card Essentials

“what processes measures will monitor the action plan?”

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Effective Measures Are Created,Not Copied

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• Close enough to show trends…

• Can get better over time…

• Move quickly…

• Part of the current business…

• Understandable and believable…

Effective Measures

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Tangible Benefits

• Renewed purpose and focus

• Improvements without any real change• 15% to 20% new management capacity• 25% to 30% meeting time reduction• 5% to 10% shop floor productivity bump • 15% to 20% administrative productivity

• Competitive weapon

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Measurement drives agreement on what matters and the communication of strategy, leading to successful change efforts and, ultimately, improved financial results

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The Complexity of Strategy is Keeping it Simple…

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Questions