Description
Driving growth: need for strategy and effective deployment, Understanding the Balanced Scorecard (BSC) and its benefits
The Balanced Scorecard -
Implementing Strategy
Webinar
February 2, 2010
Agenda
• Driving growth: need for strategy and effective
deployment
• Understanding the Balanced Scorecard (BSC) and
its benefits
– The four perspectives of the BSC
• Building the BSC: Steps of the BSC process
• Cascading the BSC in the organization
Webinar – Ground Rules
• Please disable pop up blockers.
• Please keep your self on mute.
Asking Questions
• Use the “Raise Hand” icon or “Question / Chat” box in
the lower right corner.
• Submit questions as they occur to you by typing in the
box, then click submit
• Questions will be answered during Q&A session at the
end of the presentation.
Webinar – Ground Rules
Questions & Answers
• We will do our best to answer as many questions as
possible in the allotted time.
• Answer to unanswered questions will be answered on
our website/forum soon.
• We shall notify you when they are available
http://www.bmgi.groupsite.com
http://www.bmgindia.com
Growth: Need for Strategy and
Effective Deployment
Where Do We Want to Be in 5 Years?
Vision Statements – Do they really provide the direction needed?
Strategy Is
Intended Strategy Deliberate Strategy
Unrealized Strategy
Realized Strategy
Emergent Strategy
Intended = Realized?
Strategy fails if it is little more than…..
Hope Extrapolation
Rationalization
Self-Defense
Paper Exercise
Fabrication
Vision?
Strategic Vs Operational Management
STRATEGIC MANAGEMENT
• Long term future horizons
• Building sustainable
competitive advantage
• External focus
• Thinking Strategically
OPERATIONAL MANAGEMENT
• Short to medium term
• Seeking operational
improvements
• Internal focus
• Fire fighting
10
The Ambidextrous Nature of Business
Managing
Current Business
Create the
Future Business
Focus: Doing things
Better
Focus: Doing things
Different
Selectively
Abandon the Past
11
The Ambidextrous Apple
Managing
Current Business
Finding the Future
12
Preservation and Evolution
Phase1
Innovation
Phase 2
Improving
Phase 3
Maturity
Phase 4
Reinventing
the Future
Time
G
r
o
w
t
h
Growth
13
Channels for Growth
Growth is #1 agenda for almost every CEO
Primary Vehicle for Growth is through Organic Growth or
Mergers & Acquisitions (M&A)
Several Studies have shown that most M&A fail (One
study showed that over 62% of the time M&A destroy
shareholders wealth)
However delivering Organic Growth consistently and
repeatedly has been challenging due to poor success
rates with implementation of strategy
14
Forbes List of 100 Largest Companies
• To celebrate the 70th anniversary, in 1987 Forbes
published its “Forbes 100” list of largest American
companies and then compared it to its original list from
1917.
• However, only 18 of the original companies managed
to stay in “Top 100” list through 1987. Sixty one of
them no longer existed and twenty one fell off the “Top
100” list.
• The overall long-term return to the shareholders from
this is group of 18 companies was 20% less than that
of the overall market.
• Only two companies, General Electric and Kodak
performed better than the overall market. Since then
Kodak’s performance deteriorated significantly.
15
Can We Beat The Odds?
Current Business
Future Business
• 80% of all venture capital investments fail
• Over 90% of companies fail to sustain above-average
shareholder return for longer term
• 75% of all new products that established companies
put into their markets fail
Sustaining Growth is Difficult in the Long Term
Classical Management Control System
Designed Around Short-term Control Oriented Financial Framework
Budget
Personal
Incentives
Strategy &
Vision
Review &
Reorient
Planning &
Capital
Allocation
Focus on Financial
Measures
The Alignment Paradox
9 of 10
Companies Fail
to Execute
Strategy
Only 5% of the work
force understands
the strategy
60% of
organizations don’t
link budgets to
strategy
85% of executive
teams spend less
than one hour per
month discussing
strategy
Only 25% of
managers have
incentives linked to
strategy
You Can’t Manage Strategy With a System Designed for Operational Control
Source: Fortune Magazine Survey
Strategy Implementation – Need of a Framework
Vision
Long Term Goals
Balanced Framework: End
Results and Drivers of
Performance
Strategy Everyone’s
J ob
Benefits of BSC – Evidence?
• Survey conducted with the US Institute of
Management Accountants’ members in 2006, the
results of which included:
– 88% of members from organizations regularly using the
Balanced Scorecard reported improvements in
performance; and
– 66% stated that they also achieved increase in profits
The Balanced Scorecard
Strategy Implementation
Using
Using
Measurement
To
To
Communicate, Focus, Review And Align
Background
Conceived In 1991
Robert Kaplan: Harvard Professor
David Norton: Management Consultant
Several insights into the process based
on work done
Balanced Scorecard: Evolved Framework
Internal Business Process
To satisfy our customers, in which
internal business processes must
we excel?
To satisfy our shareholders,
what financial objectives must
we accomplish?
Financial
The Vision & Strategy
The Vision & Strategy
Customer
To achieve our financial goals,
what customer needs must we
satisfy?
Innovation, Learning & Growth
To achieve and maintain a
competitive position, how must the
organization learn and improve?
Cause
Effect
Results
Actions
The Strategy Map
Constructing The Scorecard
BSC Addresses Barriers to Strategy Implementation
Balanced
Scorecard
A Management System Built On Strategy: Goal is to enable effective corporate
management
Translation Through
Objectives and
measures
Translating Vision & Strategy
Planning &
Resource Allocation
Driven By Strategy
Business Planning
Review Strategy In
The Light Of Recent
Performance
Feedback & Learning
Aligning
Organization,
Departmental and
Individual
Objectives
Communicating & Linking
Benefits of Implementing BSC
• It makes strategy operational
• Translates strategy into performance measures
and targets
• Brings to focus drivers of future performance
– Focused measurement for “success”
• Umbrella/filter for a variety of diverse corporate
programs
• Aligns employees to strategy execution
Keeping Up With Change
Ongoing business
Change
Failure of change
management systems
to exploit benefits
Sustaining mechanisms
to build on success
Benefit of
Balanced
Scorecard
The Four Perspectives of BSC
The Financial Perspective
“Results”
The Financial Perspective
Return On Investment
Productivity Strategy Revenue Strategy
Asset Utilization
Strategy
Cost Strategy
Consideration of risk management strategies is critical
Financial Objectives – Examples
• Increase product portfolio
• Establishing new services
• Reduce cost
• Improve asset utilization
• Increase revenue (organic/ inorganic)
• Improve productivity
The Customer Perspective
The Customer Perspective
Market Share
Customer
Retention
Customer
Acquisition
Customer
Satisfaction
Customer
Profitability
Enhancing Customer Value
Relationship
Image
Customer
Value
Product / Service Attributes
Functionality
Quality
Price
Schedule
Basic Differentiators
Customer Objectives – Examples
• Increase geographical reach
• Increase customer base
• Enhance brand image
• Build end to end solutions
• Enhance client relationships
• Providing value-added services
The Internal Process Perspective
Internal Process Perspective
Product
Service
Leadership
Customer
Intimacy
Operational
Excellence
Good
Neighbor
% New Product Sales
New Product Intro.
Vs Competitors’
Process Capability
Time to Market
Target Segment
Share
Contact
Management
Complaints
Quality
Cost
Schedule
Regulatory
Legal / Ethical
Community
Innovation
Management
Customer
Management
Supply Chain
Management
Regulatory
Management
Internal Process Objectives – Examples
• Improve supply chain performance
• Reduce waste
• Improve value creation
• Improve regulatory compliance
• Improve technology absorption
• Improve NPD performance (time to market/
success rate)
The Learning & Growth Perspective
Learning & Growth Perspective
Employee capability
Information systems
capability
Motivation, empowerment
and alignment
Technology
Infrastructure
Learning & Growth Objectives – Examples
• Enhance employee morale
• Develop leadership
• Improve knowledge management
• Build key/strategic competencies
• Improve communication
• Build required infrastructure
• Institutionalize strategic thinking
Building the Balanced Scorecard: Steps
Mission
Why we exist
Vision
What we want to be
Core Values
What we believe in
Strategy
Our game plan
Personal Objectives
What I need to do
Strategic Outcomes Strategic Outcomes
Strategic
Shareholders
Delighted
Customers
Effective
Processes
Motivated and
Prepared Workforce
Balanced Scorecard
Implementation and focus
Strategic Initiatives
What we need to do
Building the BSC
Translating the Mission and Vision into Desired Outcomes
Step 1: LT Goals – Definition
• Long Term Goals (LT Goals)
– Statements (quantitative/ qualitative) that give tangible
shape to aspirations based on the Vision
• 3 to 5 year time horizon
• Directional
• Will not include aspects of actions/ how to
– Example
• Achieve revenues of 1000 cr
• Be a global player/ number one in market
– Not a LT Goal
• Increasing sales
• Improve market share
• Enter a new market
Step 2: Strategic Objectives – Definition
• Strategic Objectives
– Provide a direction for meeting the Long-Term goals
– They are high level how's which can hold in there
umbrella a series of strategic initiatives
• Example
– Expanding geographical reach
– Entering into strategic alliances
– Deliver first time on time
• Not Objectives
– Open an office
– Appoint an agent
– Change a vendor
This assumes that
the strategy of the
organization is
articulated based
on which the
objectives can be
defined.
Step 3: Strategic Metrics – Definition
• Finalization of Strategic Metrics and Targets
– For each strategic objective
• The targets associated with each metric will need
to be finalized based on baseline performance
which will need to be ascertained
Types Of Strategic Measures
Lagging Measures
To Gauge Outcomes Of
Strategy
Strategic Objective
Outcome Measures
Common Measures
Across The Industry
Leading Measures
To Understand processes
And Activities
Performance Drivers
Strategy Dependent
Unique Measures
Selecting Measures
• Caution
• Do not select what “can” be
measured: select what “should” be
measured
• Counter balance the measures to
prevent strategy distortion
• Restrict the number of measures to
the level of control / action
Lag / Lead Existing /
New
Strategic
I mpact
Measure
Cycle
Degree Of
Diff
Cultural
Shift
Change
Quantum
Step 4: Strategic Initiatives – Definition
• Strategic Initiatives
– Specific actions which help realize the strategic objective
and achieve associated target
– Operationalize objectives on a daily work / project level
basis
– One or more initiatives will be typically needed for
achieving an objective
• Example
– Objective is: Improve project management
– Initiatives could be:
• Create project planning templates
• Establish method for tracking risks
• Establish method for interdependency management
LT Goals – Objective – Initiatives
Sales – 1.5 bn USD
Increase win-rate
LT Goals
Customer
Objective
• Hiring people from
customer/competition
• Influence design of tender
document so that it favours USP
of Organization
Initiatives
Quality Organization
& International
Standards on QHSE
Deliver first time on
time
Process
Objective
• Set up interdependency
management
• Reduce execution defects in
process
– 1 –
Identify
Initiatives
Marketing
Projects,
Activities, etc.
Development
Projects,
Activities, etc.
Quality
Projects,
Activities, etc.
Corporate
Projects,
Activities, etc.
– 2 –
Screen
Initiatives
Financial Financial
Perspective Perspective
Customer Customer
Perspective Perspective
Internal Internal
Perspective Perspective
Organization Organization
Learning Learning
Output: Short List of Strategically Aligned Initiatives Output: Short List of Strategically Aligned Initiatives
Prioritizing Strategic Initiatives
Managing Dependencies
XYZ Strategy Map
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LT Goals
Objective 1 Objective 2
Objective 1
Objective 2
Objective 3
Objective 1
Objective 2
Objective 2 Objective 3
Objective 3
Objective 1
Objective 4
Initiative 1
Initiative 2
XYZ Group Strategy Map
Financial
Learning & Growth
Business
Processes
Customer
Enhance Long-term
Shareholder Value
Double Sales In 4 Yrs No. 1, 2 or 3 Market Player Double Profits In 3 yrs
New Customers / Markets
Business Review Process
Strategic Thinking
Brand Equity
Reputation Management Business Excellence
Finance Review Process
Code Of Conduct Internal Communication
Company / Employee
Alignment
Talent Retention /
Mobilization
Leadership
Development
Customer loyalty / value
BSC – Example
Objective Initiative Owne
r &
Team
Lead
Metric
Target Lag Metric Target
Industry wise
focused selling
Identifying and
developing
industrial specialist
(Pilot in one area-
Power/ Defense )
a) % sales
increase /
industry
b) No of
application
s
transplante
d /
industry
a) 15%
b) 25 %
hit rate >
1L
business
a) No of new
applications
developed /
Industry b) No
of applications
shown for
transplant/
Industry
a) 5 /
industry
/ annum
b) 100
% where
applicabl
e
Enhance product
portfolio through
new agencies
Identification and
finalization of
agencies (> 100L
potential business )
Business
generated
through
new
agency
> 100 L /
annum
a) No of
agencies
interacted /
month b) No of
agencies
identified and
launched
a) 10 /
month
b) 2/
annum
Enhance business
by JV workshops
Formation of JVs % increase
in turnover
from JVs
Rs 50 L /
JV /
annum
No of JVs /
Division / Year
1/Annu
m
Cascading the BSC
Step 1.
A Corporate Scorecard
defines overall strategic
priorities and context
Step 2.
Each SBU develops
a long-range plan
and BSC consistent with the
corporate strategic agenda
Step 4.
Departments, teams
and individuals develop
scorecards consistent
with their organization’s
strategy
Corporate / Group Corporate / Group
SBU C SBU C
SBU SBU
B B
SBU SBU
A A
Teams and
Individuals
Support Functions Support Functions
Step 3.
Each Support Unit
develops a scorecard to
support the internal
customers
Align All Levels Of The Organization
Org Strategy Map Final Draft
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Target 2012
•XY bn USD Turnover
•12% + PBIT /Year
•ROCE – 40%
C1 - Focus on new
products, services and
regions
F1 - Increase
revenue
(international &
domestic)
Target 2012
•Major Player in rrr regions
•International standard on QHSE
•New products - mnp
F2 - Cost
competitiveness
P3 - Reduce cost and
time over-run
Indicate cause and effect linkage
Sample SBU - Strategy Map:
Cascaded from Corporate
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Target 2012
•ZZ Bn USD Turnover
•8% + PBIT /Year
•Best regional service provider
(MENA)
F1 - Establish the
presence in the segment
(grow revenue)
P3 - Improve
adherence to internal
project milestones
F3 – Cost
Competitiveness
Example of Strategic Initiatives for Procurement
1. Identify and source from low cost countries (including India)
for competitive sourcing, and establish and implement the
process
2. Create the infrastructure to make skids in-house
3. Develop alternate vendors in single source situation
P F1 Enable Cost
Competitiveness for
Organization
Strategic KRAs Routine KRAs
Performance
Planning for
Appraisal
Development
Planning
Strategic
Competencies
Other Skill
Gaps
Performance Appraisal Aligned to BSC
BSC
Routine Job
based on JD
BSC Tracking
BSC – Performance Tracking
Initiatives
Objectives
SBU/ J V/ BE BSC
Initiatives
Objectives
SBU/ J V/ BE BSC
Initiatives
Objectives
Corporate BSC
Validation of Assumptions
• Collect information on actual status on
assumptions made at the time of defining each
Objective/ initiative
• Ratify assumption
– Assumption incorrect
• Possibility of initiative failure
BSC – Performance Tracking
• Review mechanism
– Integrated with business review
– Coordinated by BSC coordinators
– Use of defined templates and presentations
– Compilation prior to review meet
• Outcomes
– Mid-course corrections
doc_362131880.pdf
Driving growth: need for strategy and effective deployment, Understanding the Balanced Scorecard (BSC) and its benefits
The Balanced Scorecard -
Implementing Strategy
Webinar
February 2, 2010
Agenda
• Driving growth: need for strategy and effective
deployment
• Understanding the Balanced Scorecard (BSC) and
its benefits
– The four perspectives of the BSC
• Building the BSC: Steps of the BSC process
• Cascading the BSC in the organization
Webinar – Ground Rules
• Please disable pop up blockers.
• Please keep your self on mute.
Asking Questions
• Use the “Raise Hand” icon or “Question / Chat” box in
the lower right corner.
• Submit questions as they occur to you by typing in the
box, then click submit
• Questions will be answered during Q&A session at the
end of the presentation.
Webinar – Ground Rules
Questions & Answers
• We will do our best to answer as many questions as
possible in the allotted time.
• Answer to unanswered questions will be answered on
our website/forum soon.
• We shall notify you when they are available
http://www.bmgi.groupsite.com
http://www.bmgindia.com
Growth: Need for Strategy and
Effective Deployment
Where Do We Want to Be in 5 Years?
Vision Statements – Do they really provide the direction needed?
Strategy Is
Intended Strategy Deliberate Strategy
Unrealized Strategy
Realized Strategy
Emergent Strategy
Intended = Realized?
Strategy fails if it is little more than…..
Hope Extrapolation
Rationalization
Self-Defense
Paper Exercise
Fabrication
Vision?
Strategic Vs Operational Management
STRATEGIC MANAGEMENT
• Long term future horizons
• Building sustainable
competitive advantage
• External focus
• Thinking Strategically
OPERATIONAL MANAGEMENT
• Short to medium term
• Seeking operational
improvements
• Internal focus
• Fire fighting
10
The Ambidextrous Nature of Business
Managing
Current Business
Create the
Future Business
Focus: Doing things
Better
Focus: Doing things
Different
Selectively
Abandon the Past
11
The Ambidextrous Apple
Managing
Current Business
Finding the Future
12
Preservation and Evolution
Phase1
Innovation
Phase 2
Improving
Phase 3
Maturity
Phase 4
Reinventing
the Future
Time
G
r
o
w
t
h
Growth
13
Channels for Growth
Growth is #1 agenda for almost every CEO
Primary Vehicle for Growth is through Organic Growth or
Mergers & Acquisitions (M&A)
Several Studies have shown that most M&A fail (One
study showed that over 62% of the time M&A destroy
shareholders wealth)
However delivering Organic Growth consistently and
repeatedly has been challenging due to poor success
rates with implementation of strategy
14
Forbes List of 100 Largest Companies
• To celebrate the 70th anniversary, in 1987 Forbes
published its “Forbes 100” list of largest American
companies and then compared it to its original list from
1917.
• However, only 18 of the original companies managed
to stay in “Top 100” list through 1987. Sixty one of
them no longer existed and twenty one fell off the “Top
100” list.
• The overall long-term return to the shareholders from
this is group of 18 companies was 20% less than that
of the overall market.
• Only two companies, General Electric and Kodak
performed better than the overall market. Since then
Kodak’s performance deteriorated significantly.
15
Can We Beat The Odds?
Current Business
Future Business
• 80% of all venture capital investments fail
• Over 90% of companies fail to sustain above-average
shareholder return for longer term
• 75% of all new products that established companies
put into their markets fail
Sustaining Growth is Difficult in the Long Term
Classical Management Control System
Designed Around Short-term Control Oriented Financial Framework
Budget
Personal
Incentives
Strategy &
Vision
Review &
Reorient
Planning &
Capital
Allocation
Focus on Financial
Measures
The Alignment Paradox
9 of 10
Companies Fail
to Execute
Strategy
Only 5% of the work
force understands
the strategy
60% of
organizations don’t
link budgets to
strategy
85% of executive
teams spend less
than one hour per
month discussing
strategy
Only 25% of
managers have
incentives linked to
strategy
You Can’t Manage Strategy With a System Designed for Operational Control
Source: Fortune Magazine Survey
Strategy Implementation – Need of a Framework
Vision
Long Term Goals
Balanced Framework: End
Results and Drivers of
Performance
Strategy Everyone’s
J ob
Benefits of BSC – Evidence?
• Survey conducted with the US Institute of
Management Accountants’ members in 2006, the
results of which included:
– 88% of members from organizations regularly using the
Balanced Scorecard reported improvements in
performance; and
– 66% stated that they also achieved increase in profits
The Balanced Scorecard
Strategy Implementation
Using
Using
Measurement
To
To
Communicate, Focus, Review And Align
Background
Conceived In 1991
Robert Kaplan: Harvard Professor
David Norton: Management Consultant
Several insights into the process based
on work done
Balanced Scorecard: Evolved Framework
Internal Business Process
To satisfy our customers, in which
internal business processes must
we excel?
To satisfy our shareholders,
what financial objectives must
we accomplish?
Financial
The Vision & Strategy
The Vision & Strategy
Customer
To achieve our financial goals,
what customer needs must we
satisfy?
Innovation, Learning & Growth
To achieve and maintain a
competitive position, how must the
organization learn and improve?
Cause
Effect
Results
Actions
The Strategy Map
Constructing The Scorecard
BSC Addresses Barriers to Strategy Implementation
Balanced
Scorecard
A Management System Built On Strategy: Goal is to enable effective corporate
management
Translation Through
Objectives and
measures
Translating Vision & Strategy
Planning &
Resource Allocation
Driven By Strategy
Business Planning
Review Strategy In
The Light Of Recent
Performance
Feedback & Learning
Aligning
Organization,
Departmental and
Individual
Objectives
Communicating & Linking
Benefits of Implementing BSC
• It makes strategy operational
• Translates strategy into performance measures
and targets
• Brings to focus drivers of future performance
– Focused measurement for “success”
• Umbrella/filter for a variety of diverse corporate
programs
• Aligns employees to strategy execution
Keeping Up With Change
Ongoing business
Change
Failure of change
management systems
to exploit benefits
Sustaining mechanisms
to build on success
Benefit of
Balanced
Scorecard
The Four Perspectives of BSC
The Financial Perspective
“Results”
The Financial Perspective
Return On Investment
Productivity Strategy Revenue Strategy
Asset Utilization
Strategy
Cost Strategy
Consideration of risk management strategies is critical
Financial Objectives – Examples
• Increase product portfolio
• Establishing new services
• Reduce cost
• Improve asset utilization
• Increase revenue (organic/ inorganic)
• Improve productivity
The Customer Perspective
The Customer Perspective
Market Share
Customer
Retention
Customer
Acquisition
Customer
Satisfaction
Customer
Profitability
Enhancing Customer Value
Relationship
Image
Customer
Value
Product / Service Attributes
Functionality
Quality
Price
Schedule
Basic Differentiators
Customer Objectives – Examples
• Increase geographical reach
• Increase customer base
• Enhance brand image
• Build end to end solutions
• Enhance client relationships
• Providing value-added services
The Internal Process Perspective
Internal Process Perspective
Product
Service
Leadership
Customer
Intimacy
Operational
Excellence
Good
Neighbor
% New Product Sales
New Product Intro.
Vs Competitors’
Process Capability
Time to Market
Target Segment
Share
Contact
Management
Complaints
Quality
Cost
Schedule
Regulatory
Legal / Ethical
Community
Innovation
Management
Customer
Management
Supply Chain
Management
Regulatory
Management
Internal Process Objectives – Examples
• Improve supply chain performance
• Reduce waste
• Improve value creation
• Improve regulatory compliance
• Improve technology absorption
• Improve NPD performance (time to market/
success rate)
The Learning & Growth Perspective
Learning & Growth Perspective
Employee capability
Information systems
capability
Motivation, empowerment
and alignment
Technology
Infrastructure
Learning & Growth Objectives – Examples
• Enhance employee morale
• Develop leadership
• Improve knowledge management
• Build key/strategic competencies
• Improve communication
• Build required infrastructure
• Institutionalize strategic thinking
Building the Balanced Scorecard: Steps
Mission
Why we exist
Vision
What we want to be
Core Values
What we believe in
Strategy
Our game plan
Personal Objectives
What I need to do
Strategic Outcomes Strategic Outcomes
Strategic
Shareholders
Delighted
Customers
Effective
Processes
Motivated and
Prepared Workforce
Balanced Scorecard
Implementation and focus
Strategic Initiatives
What we need to do
Building the BSC
Translating the Mission and Vision into Desired Outcomes
Step 1: LT Goals – Definition
• Long Term Goals (LT Goals)
– Statements (quantitative/ qualitative) that give tangible
shape to aspirations based on the Vision
• 3 to 5 year time horizon
• Directional
• Will not include aspects of actions/ how to
– Example
• Achieve revenues of 1000 cr
• Be a global player/ number one in market
– Not a LT Goal
• Increasing sales
• Improve market share
• Enter a new market
Step 2: Strategic Objectives – Definition
• Strategic Objectives
– Provide a direction for meeting the Long-Term goals
– They are high level how's which can hold in there
umbrella a series of strategic initiatives
• Example
– Expanding geographical reach
– Entering into strategic alliances
– Deliver first time on time
• Not Objectives
– Open an office
– Appoint an agent
– Change a vendor
This assumes that
the strategy of the
organization is
articulated based
on which the
objectives can be
defined.
Step 3: Strategic Metrics – Definition
• Finalization of Strategic Metrics and Targets
– For each strategic objective
• The targets associated with each metric will need
to be finalized based on baseline performance
which will need to be ascertained
Types Of Strategic Measures
Lagging Measures
To Gauge Outcomes Of
Strategy
Strategic Objective
Outcome Measures
Common Measures
Across The Industry
Leading Measures
To Understand processes
And Activities
Performance Drivers
Strategy Dependent
Unique Measures
Selecting Measures
• Caution
• Do not select what “can” be
measured: select what “should” be
measured
• Counter balance the measures to
prevent strategy distortion
• Restrict the number of measures to
the level of control / action
Lag / Lead Existing /
New
Strategic
I mpact
Measure
Cycle
Degree Of
Diff
Cultural
Shift
Change
Quantum
Step 4: Strategic Initiatives – Definition
• Strategic Initiatives
– Specific actions which help realize the strategic objective
and achieve associated target
– Operationalize objectives on a daily work / project level
basis
– One or more initiatives will be typically needed for
achieving an objective
• Example
– Objective is: Improve project management
– Initiatives could be:
• Create project planning templates
• Establish method for tracking risks
• Establish method for interdependency management
LT Goals – Objective – Initiatives
Sales – 1.5 bn USD
Increase win-rate
LT Goals
Customer
Objective
• Hiring people from
customer/competition
• Influence design of tender
document so that it favours USP
of Organization
Initiatives
Quality Organization
& International
Standards on QHSE
Deliver first time on
time
Process
Objective
• Set up interdependency
management
• Reduce execution defects in
process
– 1 –
Identify
Initiatives
Marketing
Projects,
Activities, etc.
Development
Projects,
Activities, etc.
Quality
Projects,
Activities, etc.
Corporate
Projects,
Activities, etc.
– 2 –
Screen
Initiatives
Financial Financial
Perspective Perspective
Customer Customer
Perspective Perspective
Internal Internal
Perspective Perspective
Organization Organization
Learning Learning
Output: Short List of Strategically Aligned Initiatives Output: Short List of Strategically Aligned Initiatives
Prioritizing Strategic Initiatives
Managing Dependencies
XYZ Strategy Map
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LT Goals
Objective 1 Objective 2
Objective 1
Objective 2
Objective 3
Objective 1
Objective 2
Objective 2 Objective 3
Objective 3
Objective 1
Objective 4
Initiative 1
Initiative 2
XYZ Group Strategy Map
Financial
Learning & Growth
Business
Processes
Customer
Enhance Long-term
Shareholder Value
Double Sales In 4 Yrs No. 1, 2 or 3 Market Player Double Profits In 3 yrs
New Customers / Markets
Business Review Process
Strategic Thinking
Brand Equity
Reputation Management Business Excellence
Finance Review Process
Code Of Conduct Internal Communication
Company / Employee
Alignment
Talent Retention /
Mobilization
Leadership
Development
Customer loyalty / value
BSC – Example
Objective Initiative Owne
r &
Team
Lead
Metric
Target Lag Metric Target
Industry wise
focused selling
Identifying and
developing
industrial specialist
(Pilot in one area-
Power/ Defense )
a) % sales
increase /
industry
b) No of
application
s
transplante
d /
industry
a) 15%
b) 25 %
hit rate >
1L
business
a) No of new
applications
developed /
Industry b) No
of applications
shown for
transplant/
Industry
a) 5 /
industry
/ annum
b) 100
% where
applicabl
e
Enhance product
portfolio through
new agencies
Identification and
finalization of
agencies (> 100L
potential business )
Business
generated
through
new
agency
> 100 L /
annum
a) No of
agencies
interacted /
month b) No of
agencies
identified and
launched
a) 10 /
month
b) 2/
annum
Enhance business
by JV workshops
Formation of JVs % increase
in turnover
from JVs
Rs 50 L /
JV /
annum
No of JVs /
Division / Year
1/Annu
m
Cascading the BSC
Step 1.
A Corporate Scorecard
defines overall strategic
priorities and context
Step 2.
Each SBU develops
a long-range plan
and BSC consistent with the
corporate strategic agenda
Step 4.
Departments, teams
and individuals develop
scorecards consistent
with their organization’s
strategy
Corporate / Group Corporate / Group
SBU C SBU C
SBU SBU
B B
SBU SBU
A A
Teams and
Individuals
Support Functions Support Functions
Step 3.
Each Support Unit
develops a scorecard to
support the internal
customers
Align All Levels Of The Organization
Org Strategy Map Final Draft
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Target 2012
•XY bn USD Turnover
•12% + PBIT /Year
•ROCE – 40%
C1 - Focus on new
products, services and
regions
F1 - Increase
revenue
(international &
domestic)
Target 2012
•Major Player in rrr regions
•International standard on QHSE
•New products - mnp
F2 - Cost
competitiveness
P3 - Reduce cost and
time over-run
Indicate cause and effect linkage
Sample SBU - Strategy Map:
Cascaded from Corporate
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Target 2012
•ZZ Bn USD Turnover
•8% + PBIT /Year
•Best regional service provider
(MENA)
F1 - Establish the
presence in the segment
(grow revenue)
P3 - Improve
adherence to internal
project milestones
F3 – Cost
Competitiveness
Example of Strategic Initiatives for Procurement
1. Identify and source from low cost countries (including India)
for competitive sourcing, and establish and implement the
process
2. Create the infrastructure to make skids in-house
3. Develop alternate vendors in single source situation
P F1 Enable Cost
Competitiveness for
Organization
Strategic KRAs Routine KRAs
Performance
Planning for
Appraisal
Development
Planning
Strategic
Competencies
Other Skill
Gaps
Performance Appraisal Aligned to BSC
BSC
Routine Job
based on JD
BSC Tracking
BSC – Performance Tracking
Initiatives
Objectives
SBU/ J V/ BE BSC
Initiatives
Objectives
SBU/ J V/ BE BSC
Initiatives
Objectives
Corporate BSC
Validation of Assumptions
• Collect information on actual status on
assumptions made at the time of defining each
Objective/ initiative
• Ratify assumption
– Assumption incorrect
• Possibility of initiative failure
BSC – Performance Tracking
• Review mechanism
– Integrated with business review
– Coordinated by BSC coordinators
– Use of defined templates and presentations
– Compilation prior to review meet
• Outcomes
– Mid-course corrections
doc_362131880.pdf