Make Strategy Execution a Core Competency Balanced Scorecard

Make Strategy Execution a Core Competency Balanced Scorecard Center of Excellence Overview For further information please contact: Mario A. Bognanno Vice President 781. 402. 1117 mbognanno@bscol. com Balanced Scorecard Collaborative, Inc. • 55 Old Bedford Road • Lincoln, MA 01773 • Tel: 781. 259. 3737 • Fax: 781. 259. 3389 • bscol. com

Table of Contents • • The Strategy Challenge Principles of the Balanced Scorecard and Strategy. Focused Organization Critical Success Factors in Becoming a Strategy-Focused Organization The BSC Center of Excellence BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 2

Strategy Development or Strategy Execution? Organizations Need Both Sound Flawed Strategy Formulation Strategic success requires going beyond successful 1 strategy formulation to successful strategy execution Missed Strategic Opportunity Success Doomed From The Start Flawed At Risk Sound Strategy Execution Source: 1 Execution: The Discipline of Getting Things Done, by Larry Bossidy, 2002. BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 3

Strategy Execution Challenges There are generally accepted tools to manage finances, customers, processes, and people. But what about strategy? Financial Management Tools EVA Balance Sheets Process Management Tools Income Statements Six Sigma Shareholder Value Analysis Supply Chain Integration Cycle Time Reduction Strategy Management Tools TQM Customer Management Tools Customer Satisfaction Measurement People Management Tools Customer Relationship Management Core Competencies Segmentation Analysis Knowledge Management One-to-One Marketing Pay for Performance ? HRIS The Balanced Scorecard is the vehicle that fills the Strategy Management Gap BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 4

The Balanced Scorecard A Framework To Describe and Measure Strategy The Balanced Scorecard provides a framework and mechanism to integrate strategy formulation and strategy execution Financial Perspective Return on Investment Revenue Strategy Sources of Growth 1. The economic model of key levers driving financial performance Productivity Strategy Sources of Productivity Customer Perspective Value Proposition Quality Price Time Function Image Relationship Internal Process Perspective “Build the Brand” “Make the Sale” “Deliver the Product” “Service Exceptionally” Learning & Growth Perspective Staff Competencies + Technology Infrastructure + Climate for Action 2. The identification of targeted customer segments and their value proposition 3. The process-focused view of the business using the value chain 4. The intangible assets necessary to drive performance A Balanced Scorecard tells the “story of the strategy” Source: Kaplan and Norton, Strategy-Focused Organization, 2001. BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 5

Strategy-Focused Organization Profiles: Breakthrough Results BREAKTHROUGH RESULTS Private Sector Public Sector Shareholder Value Mobil • From last to first in industry • ROI 6% --> 16% Wendy’s International • Mkt. Cap $2. 5 --> $4 b • Stock Price up 75% • Profitability up $23 m • Customer Satisfaction Profitable Growth Customer Satisfaction 9% 33% Organizational Alignment • Customer Satisfaction #1 • Cost/Case 33% Defense Logistics Agency • Customer Loyalty 5% • EDITDA margins 3% above BSCol – 01497 COE Document – 02/18/03 70% • Public Official Award Duke Children’s Hospital Hilton Hotels average City of Charlotte • Customer Satisfaction = UPS • Revenues • Net Income SMDC Health System Cost Reduction © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com • $130 MM in Savings in FY 2002 • Processed $2. 2 B more requisitions for its customers 6

A Word of Caution… Using It WRONG NOT Using BSC Source: 1 BSCol Using It RIGHT 50% of organizations who claim to be using Balanced Scorecards are doing it “wrong” 1 Survey Data, Pepperdine/SUNY Albany Study. BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 7

Why Do Organizations Fail To Execute Strategy? The Vision Barrier Only 5% of the work force understand the strategy The People Barrier Only 25% of managers have incentives linked to strategy The Management Barrier 9 of 10 companies fail to execute strategy 85% of executive teams spend less than one hour/ month discussing strategy 60% of organizations do not link budgets to strategy The Resource Barrier BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 8

The “Strategy Focused Organization” Is Used To Execute Strategy for Breakthrough Results TRANSLATE MOBILIZE Translate the Strategy into Operational Terms Mobilize Change through Executive Leadership STRATEGYFOCUSED ORGANIZATION ALIGN GOVERN Govern to Make Strategy A Continual Process Align the Organization to the Strategy MOTIVATE Motivate to make Strategy Everyone’s Job BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 9

Build the Internal Capability to Execute Strategy: The Center of Excellence (COE) Successful Strategy Execution Requires People A skilled team of professionals Processes Integrated strategy management processes Tools, technologies, and support Together these people, processes, and tools form the group responsible for strategy execution in your organization: Your Center of Excellence BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 10

You Need to Select and Train the People in Your Center of Excellence A Center of Excellence Requires: The Right People The Right Skills The Right Competencies A COE requires people who can influence the execution team and the strategy A COE team member must understand the BSC and SFO concepts and methodologies A COE team must be able to facilitate, reach, and manage change A Center of Excellence will help your organization make strategy a core competency. BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 11

COE’s Need To Establish and Maintain Processes for Strategy Execution in Your Organization Successful Strategy Execution Requires: BSCol – 01497 COE Document – 02/18/03 Mobilize A process to mobilize the organization to change Translate A process to describe and communicate strategy Align A process to align the organization around the strategy Motivate A process to ensure personal objectives and incentives are supporting the strategy Govern An integrated reporting and decision making process © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 12

Leveraged Tools and Approaches Help Rapidly and Effectively Build the Capability to Execute Strategy Successful Strategy Execution Requires: Proven, Repeatable Approaches • BSC Design • Communication • BSC Cascade • Reporting Leveraged Technology • Online Training • Online Design • Measure Library • Online Learning • Industry Templates Center COE’s set of tools and approaches ensure knowledge transfer and repeatable, scalable processes BSCol – 01497 COE Document – 02/18/03 © 2003 Balanced Scorecard Collaborative, Inc. • bscol. com 13

A Center of Excellence Is Built In Three Phases Phase I: Phase III: Launch Build Sustain • Builds understanding of the strategic challenges • Develops the internal capabilities to execute strategy through: • Enhances internal strategic capabilities through continuous learning and involvement • Develops commitment by providing a Plan of action • Education • Facilitation • Knowledge Transfer Source: Kaplan and Norton, Strategy-Focused Organization BSCol - 01436 - 11/21/02 © 2002 Balanced Scorecard Collaborative, Inc. • bscol. com 14

Phase 1: Launch with Assessment & Design Evaluate the Current Status Relative to BSCol Best Practices Best Practice 90 Self Assessment Define a Program to Build and Sustain a Strategy-Focused Organization Best Practice Total BSCol Score 80 70 Task 60 Time I. Mobilize 1. Assessment 2. Plan 3. Workshop Sense of Urgency Case for Change Vision & Strategy Align Executive Team New Way of Managing Accountability II. Build 1. Executive Education 2. Pilot Program (Coaching) 3. BSCol Leverage Toolkit Training Change Agents Strategic Readiness SFO Development Plan SFO Competency Mobilization Translate Status Action III. Sustain 1. Benefits Tracking 2. Coaching & Check Point Reviews 3. Executive Updates 4. Change Agent Roundtables Alignment Empower Governance BSCol - 01436 - 11/21/02 © 2002 Balanced Scorecard Collaborative, Inc. • bscol. com 15

Phase 2: Build by Executing the Program The Program Design Will Detail the Knowledge Transfer Requirements That are Needed Task I. Mobilize 1. Assessment 2. Plan 3. Workshop II. Build 1. Executive Education 2. Pilot Program (Coaching) 3. BSCol Leverage Toolkit Training III. Sustain 1. Benefits Tracking 2. Coaching & Check Point Reviews 3. Executive Updates 4. Change Agent Roundtables Time People/Process and Tools are selected to meet the requirements of the Client Executive Education BSC Awareness Building Strategy-Focused Organizations Coaching and Advisory Support Expert Facilitation Pilot Program Development and Deployment Corporate/Pilot BSC Cascading Process Implementation Planning BSCol Leveraged Toolkit Online Learning Communities Executive Awareness E-Library Development & Transfer of Core Competencies Leveraged Trainer Training BSCol - 01436 - 11/21/02 © 2002 Balanced Scorecard Collaborative, Inc. • bscol. com 16

Phase 3: Sustain the Program by Creating Irreversible Momentum The Program Design Will Detail the Key Processes and “Habits” to Create Change Processes Are Put Into Place That Create “Irreversible Momentum” Benefits Tracking Task Continuous focus on defining, documenting, and harvesting the benefits created by the BSC program Time I. Mobilize 1. Assessment 2. Plan 3. Workshop Coaching and Check-Point Reviews Periodic check-point reviews of progress against SFO development plan II. Build 1. Executive Education 2. Pilot Program (Coaching) 3. BSCol Leverage Toolkit Training Executive Updates Periodic executive education sessions on topics of importance to maintaining momentum III. Sustain 1. Benefits Tracking 2. Coaching & Check Point Reviews 3. Executive Updates 4. Change Agent Roundtables Change Agent Roundtable A community of BSC program managers from different organizations sharing issues of common interest “A New Way of Managing” BSCol - 01436 - 11/21/02 “Irreversible Momentum” © 2002 Balanced Scorecard Collaborative, Inc. • bscol. com 17

Center of Excellence Critical Success Factors Leadership Commitment From The Leader And The Majority Of The Leadership Team Integrated Program Coordination A Designated Position Responsible For The Program – Advocacy, Monitoring And Facilitation Expert Internal Advocates/Consultants A Group Of Trained Internal Facilitators Who Can Consult And Support Internal Clients Expert Resources Affinity Groups/Community – Learning Technology – Program Management Technology BSCol - 01436 - 11/21/02 © 2002 Balanced Scorecard Collaborative, Inc. • bscol. com 18

For Further Information Our Mission: “To facilitate the worldwide awareness, use, enhancement, and integrity of the Balanced Scorecard as a value-added management process” Join Balanced Scorecard Online™ at bscol. com Tel: (USA) 781. 259. 3737 Consulting Consortia BSCol - 01436 - 11/21/02 Conferences Certification Training Partnerships © 2002 Balanced Scorecard Collaborative, Inc. • bscol. com Publications Online Services 19