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8/16/2019 Presentacion Norton

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2©1999 The Balanced Scorecard Collaborative, Inc. All rights Reserved.BSCC – 00029–2/18/99

How does one

measurebusinessstrategy?

How does oneexecute businessstrategy?

How does HRmeasure its

contribution tobusinessstrategy?

How doesanyone measuretheir contribution

to businessstrategy?


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“Less than 10% of strategies

effectively formulated are

effectively executed”

Fortune

“Business Strategy is now the

single most important issue…

and will remain so for the next

five years”

Business Week


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ManagementControl

StrategicEnterprise

Management

From

To

The economy is in the midst of a transition …from the Industrial Age to the Knowledge Age.This shift creates pressures to change the waywe manage.

q Instability – the annual budget whichmoves incrementally from the last year isno longer adequate. Companies mustmanage to visions and strategies.

q Knowledge Workers – those withknowledge are the key to success.Strategy must be implemented from thebottom.

q Teams & Networks – the “chain of command” is being replaced by “self-governing teams”. New accountabilityapproaches are needed.

q Leaders – incremental change must giveway to dramatic transformation. Newapproaches to leadership are required.


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(USM&R)1993

#6 inprofitability

1995

1996

1997

1998

#1 in profitability

#1 in profitability

#1 in profitability

#1 in profitability

Mobil

1993

Property & Casualty

Retail Bank1993 Profits = $x

199419951996

Profits = $8xProfi ts = $13xProfi ts = $19x

Brown & Root Engineering

(Rockwater)

1993Losingmoney

1996

#1 in growthand

profitability

Profit Stock

$275M loss

Stock Price = $59

1994

1995199619971998

$15M

$60M$80M$98M$94M

$74

$114$146$205$249


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1. Leadership From the Top – Create the Climate for

Change

– Create a Common Focus for Change Activities

– Rationalize and Align theOrganization

3. Unlock and Focus Hidden Assets

– Reengineer Work Processes

– Create Knowledge SharingNetworks

2. Make Strategy Everyone’s Job – Comprehensive Communication

to Create Awareness

– Align Goals and Incentives

– Align Resources and Initiatives

4. Make Strategy a ContinuousProcess

– Strategic Feedback ThatEncourages Learning

– Executive Teams ManageStrategic Themes

– Testing Hypotheses, Adapting,and Learning

STRATEGY

FormulateFormulate

NavigateNavigateCommunicateCommunicate

ExecuteExecute


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ROI

Financial PerspectiveFinancial Perspective

“How do we look toour shareholders”

Learning & GrowthLearning & Growth

“How will wesustain our ability

to change andimprove”

Customer PerspectiveCustomer Perspective

“How do we look toour customers”

Business ProcessesBusiness Processes

“What businessprocesses must

we excel at”Budget










we excel at”

Customer










we excel at”People










we excel at”

Quality










we excel at”

ShareholderValue










we excel at”


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The Balanced Scorecard Translates Strategy intoTerms That Can Be Understood and Acted Upon

STRATEGY

FormulateFormulate


ExecuteExecute


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o Measurement is the

language that gives clarity

to vague concepts.

o Measurement is used to

communicate, not to

control.

o Strategy can be described

as a series of cause and

effect relationships

"If we succeed, how willwe look to our shareholders?”

The Strategy


"To achieve my vision,how must I look to my

customers?”


"To satisfy my customer,

at which processes mustI excel?”

Internal PerspectiveInternal Perspective

"To achieve my vision, howmust my organization learn

and improve?”

Organization LearningOrganization Learning


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q Operating Income Growth

q Same Store Sales Growth

q Inventory Turns

q Expense / Sales Growth Ratio

q Category Market Share

qCategory Margin

q Sales psf

q Quality / Returns

q Out of Stock

q Frequency of Purchase

q Units Per Transaction

q Transaction Size

q Customer Feedback

q Employee Climate Survey

qTurnover

q Strategic Skill Coverage

q Systems vs. Plan

FinancialFinancial Customer Customer

InternalInternal Learning & GrowthLearning & Growth


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The Revenue Growth Strategy““Achieve aggressive, profitable growth by

increasing our share of the customer’s closet”

The Productivity Strategy“Improve operating efficiency through real

estate productivity and improved inventorymanagement”

Financial

ProfitableGrowth

Growth Productivity

Customer

ShoppingExperience

BrandImage

ConsistentQuality / Fit

FashionDesign

Price /Benefit

CompleteOffering

Availability

Right ProductBuilding Image Shopping Experience

Strategic Awareness

Staff Competencies

TechnologyInfrastructure

Internal

Learning

& GrowthGoal

Alignment

“Shopping

Experience” Pathway

“Fashion

Excellence”Pathway

“Achieving

BrandDominance”Pathway

“ Sourcing &

Distribution” Pathway


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Sourcing & DistributionPathway

ProfitabilityFinancial

Customer

Internal

Learning

RevenueGrowth

Measurement Target

• Operating Income

• Sales vs. Last Yr

• Return Rate – Quality – Other

• Customer Loyalty – Ever Active % – # units

• % of Merchandisefrom “A” factories

• Items in-Stock vs.

Plan

• % of StrategicSkills Available

Initiative

• LikesProgram

• CorporateFactoryDevelopmentProgram

• Strategic Skillsplan

• MerchantsDesktop

• 20% Increase

• 12% Increase

• Reduce by50% each yr

• 60%• 2.4 units

• 70% byyear 3

• 85%

• yr 1 50%yr 3 75%yr 5 90%Factory

RelationshipSkills

MerchandiseBuying / Planning

Skills

“A” ClassFactories

Line PlanManagement

ProductQuality

ShoppingExperience

• Qualitymanagement

• Customer loyalty


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1. Leadership From the Top – Create the Climate for

Change

– Create a Common Focus for Change Activities

– Rationalize and Align theOrganization

3. Unlock and Focus Hidden Assets

– Reengineer Work Processes

– Create Knowledge SharingNetworks

2. Make Strategy Everyone’s Job – Comprehensive Communication

to Create Awareness

– Align Goals and Incentives

– Align Resources and Initiatives

4. Make Strategy a ContinuousProcess

– Strategic Feedback ThatEncourages Learning

– Executive Teams ManageStrategic Themes

– Testing Hypotheses, Adapting,and Learning

STRATEGY

FormulateFormulate


ExecuteExecute


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Create Organization

Alignment by Linking

Scorecards

#1.

A Corporate Scorecard definesoverall strategic priorities.

#3.

Each Support Unit develops aplan for “best practice” sharing

to create synergies acrossSBUs.

LINE BUSINESSES SUPPORT UNITS

CORPORATE

SBU A

SBUB

SBUC

SBUD

CORPORATE SCORECARD(Shared Strategic Agenda)

Themes Measures

Convenience Store Marketing

Gasoline Marketing

Manufacturing Services

Supply Programs

Environment and Safety

Human Resources

1. Financial Growth

2. Delight the Consumer

3. Win-Win Relationship

4. Safe and Reliable

5. Competitive Supplier

6. Good Neighbor

7. Quality

8. Motivated and Prepared

xxx

xxx

xxx

xxx

xxx

xxx

xxx

xxx

xx

xx

xx

xx

xx

xx

xxxx

#2.

Each SBU develops along-range plan and BSCconsistent with corporate

strategic agenda.

#4.

Departments, teams andindividuals develop

scorecards consistent withSBU strategy.


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Align Goals and

Incentives

“Every month a high percentage of our people sit down with the card, look at how

we’ve done, and calculate their compensation. Just the doing of that calculations

forces everyone in this organization to look at the 15 or 20 things that are most

important to their business. I think that’s a very powerful thing to have happen.”

Brian Baker, Mobil Oil

TheRevenueGrow th Strategy

“Improvestabilitybybroadeningthesourcesofrevenuefromcurrentcustomers”

TheProductivity Strategy

“Improve operating efficiency by shifting customers to more cost-effective channels of distribution”

Improve Returns

Improve Operating

EfficiencyBroaden RevenueMix

Increase Customer Conf idenc e in O ur FinancialAdvice

IncreaseCustomer SatisfactionThrough Superior Execution

IncreaseEmployeeProductivity

Access to StrategicInformation

DevelopStrategicSkills

Align Persona lGoals

FinancialPerspective

Customer Perspective

InternalPerspective

Learning Perspective

Cr os s - S el l t he

Product Line

Shift to Appropriate

Channel

Provide Rapid

Response

Dev elop New

Products MinimizeProblems

Understand

Customer Segments

Creating a Holistic View of Strategy PermitsCreating a Holistic View of Strategy PermitsTeamwork and Knowledge SharingTeamwork and Knowledge Sharing

Them Them Them Them Them Them Them Them

Boss

BigBoss

Me

You

Traditional Approach to Job Definition and GoalTraditional Approach to Job Definition and GoalSetting Promotes Fragmentation and “ Silos”Setting Promotes Fragmentation and “ Silos”


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CASECASE

Leader inROCE

Meet cash flow

plan

Profit leader(margin)

Premiumpricing throughdifferentiation

Fair price

for value

Win-winalliances

Products are

easy to sell

Both make

money

Easy to dobusiness with

Anticipate marketneeds

Perfect OrderFulfillment

Effective customeradmin.

On time

On spec firsttime

As ordered

Documented &

invoiced properly

No returns due to

damages

Willing & able topay on time

Maximize volume:

balance profitable growth withasset utilization

Continuously improve

strategies

Best-in-class

sales

Best-in-class

distributionnetwork

Strategic supply

alliances

Skilled & focusedpeople

Optimize refineryprofitability

Win-win refineryrelationships

Cost-effectiveproduction

Cost-EffectiveSupplier

Efficient & fullyutilized assets

Trusted brandimage

Maintain thelevel of costsappropriate to

supportdifferentiation

Change the

culture

Empowerment Team buildingDemonstrate support

for change

Develop strategic skills and

competencies

Job gapanalysis

Cross-functionalexposure

Information technology

availability

Best practicesExperience

capture

FinancialPerspective

CustomerPerspective

InternalPerspective

Learning &Growth

Build the brandCustomer

driven productdevelopment


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CASECASE

F1 Leader in Return on CapitalF2 Meet Cash Flow PlanF3 Profit Leader F4 Meet Cost and Asset Utilization Plan

o ROCEo Cash flowo Integrated Incomeo Total Integrated Cost F

i n a n c i a l

C1 Innovative BrandC2 Mutually Profitable RelationshipsC3 Easy to Work WithC4 On Time / On Spec / As Ordered

o Market shareo Distributor Surveyo Customer Surveyo Number of customer / partner complaints C

u s t o m e r

&

P a r t n e r s

I n t e r n a l

L e a r n i n

g

&

G r o w t h

Strategic Measures

I1 Proactive Product DevelopmentI2 Build Superior Brand ImageI3 Develop Best-in-Class Distribution

NetworkI4 Achieve Perfect Order FulfillmentI5 Reduce Manufacturing CostI6 Effectively Utilize Assets

o Percent Revenue from new productso Price vs. competitiono Percent distributors meeting expectationso Percent perfect orderso Total manufacturing cost

L1 Demonstrate Support for change

L2 Develop strategic skills andcompetencies

L3 Ensure information technologyavailability

T o p 3

Competencies

I m p a c t s B S C

O b j e c t i v e s

P e r s o n a l

G r o w t h

Comments

1Effective

Communication

X X Need to communicate team results to other parts of Lubes

Delegates

Effectively

X X Anticipate turnover on team – need to develop coaching skills to speed growth

of new team members

Forward Thinking X Develop a 6 -12 month plan for technical ro ll-out . Focus on

Taking Initiative X New team – I have greatest knowledge of area. Manager has asked me to identify

new approaches to increase market share 8%

2 T eamwork X X On a new t eam – Need t o t ake a more act ive role in sharing my knowledge and

driving team success

3 Risktaker X I have one technical opportunity which could grow sales 14% instead of target 8%.

Must get team to review and critique plan.

Generates Results X X Have been seen as a technical idea person – not great follow through. Work with

Manager to set and meet more realistic goals

Strategic Objectives


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CASECASE

StrategicThemes

Baseline1995

1996 Actual ResultsPerf FacObjective Measure Freq.

Current YTD% of Target x Weight = Score

Financial

Leader In Return on Capital

Meet Cash Flow Plan

Profit Leader

Meet Cost Plan

ROCE (%)

Cash Flow ($MM)

Integrated Income ($MM)

Total Integrated Costs less ($MM

Customer

Fair Price for Value

Perfect Order Fulfillment

Win-Win Alliances

Easy to do Business With

Market Share - Finished

Percent Perfect Orders

Distributor Survey

Customer Survey

Internal

Continuous Improvement

Efficient & Fully Utilized Assets

Provide Safe Place to Work

Good Neighbor t

Cost Reduction ($MM)

Investment Plan Status

Safety Incidents

Environmental Incidents

L & G

Skill & Competency Development

Leverage Workforce Inclusiveness

Demonstrate Support for Change

Employee Development Plan Status

Inclusiveness Plan Status

Cultural Change Program Status

Update Frequency: A = Annually; S = Semi-Annually; Q = Quarterly; M = Monthly ###

Plan

Q

S

Q

Q

Q

Q

Q

S

Q

A

Q

A

M

M

M

###

###

###

###

###

###

###

###

###

###

###

###

###

###

###

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

10%

10%

10%

5%

5%

5%

5%

5%

10%

5%

5%

5%

5%

10%

5%

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

––––

100%


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CompetenciesTechnology

R&D InboundLogistics

Manufac-turing

OutboundLogistics

Marketing& Sales

Reengineer Processes

ComprehensiveCommunication toCreate Awareness

Rationalize & Align theOrganization

Translate the Strategy

STRATEGY

Align Goals &Incentives

Align Resources& Initiatives

FormulateFormulate


ExecuteExecute

CreateKnowledge

Networks


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Create Knowledge

Sharing Networks

LINE BUSINESSES SUPPORT UNITS

CORPORATE

SBU A

SBUB

SBUC

SBUD

CORPORATE SCORECARD(Shared Strategic Agenda)

Themes Measures

Convenience Store Marketing

Gasoline Marketing

Manufacturing Services

Supply Programs

Environment and Safety

Human Resources

1. Financial Growth

2. Delight the Consumer

3. Win-Win Relationship

4. Safe and Reliable

5. Competitive Supplier

6. Good Neighbor

7. Quali ty

8. Motivated and Prepared

xxx

xxx

xxx

xxx

xxx

xxx

xxx

xxx

xx

xx

xx

xx

xx

xx

xxxx

Functions of a Knowledge Community

• Define shared mission• Define membership

• Communication infrastructure

• Acquire, edit, share relevantknowledge

• Share results and best practices

ObjectivesObjectives

• Reduce Manufacturing Cost

• Utilize “Best Practice”

Maintenance Operations

Instrumentation RefineryTurnarounds Machinery


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Continuous feedback and problem-solving

between review meetings drives performanceMeasures

Initiatives

Assessment

$

Q1 Q2 Q3

Target Marketing Effort f or Southwest Region

On schedule

On schedule

Delayed

Recent Performance in the Business Growth areahas been at or above performance for the past threequarters. The following assessments have beenprovided by initiative owners:

a. Anne Sullivan 9/25/96

b. John Dark 11/14/96

c. Marianne Ritchie 1/15/97

B e s t P r

a c t i c e

C a s e S t

u d y


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CompetenciesTechnology

R&D InboundLogistics

Manufac-turing

OutboundLogistics

Marketing& Sales


ComprehensiveCommunication toCreate Awareness

Rationalize & Align theOrganization


STRATEGY

Align Goals &Incentives

Align Resources& Initiatives

FormulateFormulate


ExecuteExecute

CreateKnowledge

Networks

Strategic FeedbackEncourages

Learning

Executive TeamsManage Strategic

Themes

Testing Hypotheses, Adapting & Learning


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VP Mfg.,Sales, R&DVP Mfg.,

Sales, R&D

SBUExecs.

VPCommunica-

tions

CKO

CIO

COO

STRATEGY

FormulateFormulate


ExecuteExecute

STRATEGY


Create Awareness

Align theOrganization


CEO

Testing, Learningand Adapting

VPStrategy

Create

KnowledgeNetworks

VP Mfg.,Sales, R&D

Align Humanand Financial

Resources

HRO

CFO


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• Strategic Partner – Accountable for the “Learning & Growth dimension of the strategy (competencies

and climate)

• Architect: “ Strategy Focused” Performance Management Process – Team-based / holistic

– Goal alignment: Board Room to Back Room

– Reward system: “Balanced Paycheck”

• CFO for Human Capital – Architecture for knowledge sharing

– Strategic competency development

• Coach: The Transformation Process

– Leadership: Not management – Cultural change

• Scorekeeper for Company Strategy – Custodian of performance management process

References: Dave Ulrich; Human Resource Champions / Corporate Leadership Council, HR and the New Math


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www.bscol.com

Tel: (USA)781.259.3737

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Implementation

Visit Our Website

Our Mission:

“To facilitate the worldwide

awareness, use, enhancementand integrity of the Balanced

Scorecard as a value-added

management process”

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