Professional Documents
Culture Documents
Robert S. Kaplan
Marvin Bower Professor of Leadership Development
HARVARD BUSINESS SCHOOL
Chairman
BALANCED SCORECARD COLLABORATIVE
The Issue: Are Financial Measures Sufficient to Drive
Long-Term Performance?
•
• Occupancy cost per square foot
• Occupancy cost per person
• Square foot per person
• Property and occupancy costs:
% of total expenses
% of sales
• $ of vacant space
• Cost per move
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 2
The Balanced Scorecard – Financial and Nonfinancial
Measures Drive Long-Term Performance
September 1993
10 translations
underway
60% usage in Fortune 500
December 2003
Harvard Business Review “Hall of Fame” February 2004
60,000+ BSC on-line members
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 3
Organizations Use the Balanced Scorecard to Align and
Focus All Their Resources on Strategy Implementation
Financial Services
Engineering Polymers
North America
Marketing & Refining
UK Ministry of Defence
Royal Norwegian Air Force Saatchi & Saatchi
Information and
Communication Mobile
Commercial Vehicle Business Unit
US Army
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 5
Balanced Scorecard Hall of Fame Organizations Implement
Strategies and Achieve Breakthrough Results … Fast
+ $7b
Customer satisfaction = 70%
5 years
Public Official award
3 years
#1 in customer satisfaction
+ $3b 33% reduction in cost/case
2-5 years 3 years
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 6
We Know How They Do It:
SFO Best Practice Benchmarks
TRANSLATE STRATEGY TO MOBILIZE CHANGE THROUGH
OPERATIONAL TERMS EXECUTIVE LEADERSHIP
● Strategy refreshed Top leadership sponsorship
●
● Strategy map developed ● Case
for change clear
● Balanced Scorecard ● Leadership team engaged
● Targets established ● Vision and strategy clarified
● Initiatives rationalized ● New way of managing
● Accountability clear ● Change agent identified
STRATEGY-
ALIGN THE ORGANIZATION MAKE STRATEGY A
FOCUSED
TO THE STRATEGY CONTINUAL PROCESS
ORGANIZATION
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 7
Building your Strategy-Focused Organization starts
with a project; it evolves into a continual process.
3 - 6 month period devoted 6 month period in which new 12 - 24 month period where
to executive level momentum strategy is rolled out to top strategy is integrated into the
building levels of the organization day-to-day work and culture
of the organization
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 8
Phase 1: Mobilization, Getting Started
A variety of situations suggest the need for
a new and better way to manage strategy
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 9
Phase 2: Alignment -- Design and Cascade Balanced
Scorecards
The Strategy Map and Balanced
Scorecard are the central organizing
framework of a Strategy Focused
Alignment Phase Organization
Investment CRM
Align the organization to the Strategy Strategy
Strategy Map
strategy through building,
cascading and communicating G r o w tthh S tr
t raa te g y
Lo n g -Te rm
P r o d u c tiv ity
it y S tr a te g y
the BSC
S h a re h o ld e r V a lu e
N ew R e ven u e In c r e a s e Im p ro v e C o s t Im p ro v e A s s e t
S o u rc e s C u s to m e r V a lu e S tru c t u re U t iliz a t io n
C u s to m e r V a lu e P ro p o s i ti o n
Leadership Objective: O p e ra t io n a l P ro c e s s e s
P roce ss
• Communicate to workforce
• Rationalize initiatives IT Strategy Human
Capital
Strategy
The Strategy Map creates a “shared mental model” that aligns everyone in the
organization
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 10
The Strategy Map Aligns Processes and Intangible
Assets to Customer and Financial Outcomes
Sustained Shareholder Value
Financial
Perspective Productivity Strategy Revenue Growth Strategy
Customer
Perspective Price Quality Availability Selection Functionality Service Partnership Brand
CREATING CREATING
ALIGNMENT READINESS
Strategic Job Strategic IT Organization
Families portfolio Change Agenda
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 11
Customer Perspective: Who are your Targeted
Customers? Marine Construction Business Unit
Strategic Objective Measurement
Tier II C1-Pricing Index:
• Be price-competitive on all desirable Tier II tenders The percentage variance between our bid prices to
Tier II customers and those of our competitors
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 12
Defining the Customer Value Proposition:
Low Total Cost
“Deliver a combination of quality, price, and ease of purchase that
no one else can match”
Low Total Cost
Company Examples
Toyota
McDonalds
Dell Computer
Southwest Airlines
Vanguard Mutual Funds
Wal-Mart
Best Buy
Low Total
Cost Lowest cost Consistently Speedy, easy Appropriate
supplier high quality purchase selection
Customer
Objectives
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 13
Defining the Customer Value Proposition:
Product Leadership
“Continually develop products that offer superior performance for
customers”
Product Leadership
Company Examples
Sony
Mercedes
Merck, Johnson & Johnson
Intel
Best Product
Product
High performance Penetrate
Leadership products: speed, size,
First to
new product
Customer market
accuracy, weight, … segments
Objectives
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 14
Defining the Customer Value Proposition:
Complete Customer Solutions
“Build bonds with customers; provide them with the complete
bundle of products and services they need”
Customer Solutions
Company Examples
IBM (1960-80)
Goldman Sachs
Mobil
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 15
Use Scorecards to Link And Align The Organization
Around Its Strategy
#3.
#1. Each Support Unit develops a
A Corporate Scorecard defines plan and BSC for “best
overall strategic priorities. practice” sharing to create
synergies across SBUs.
CORPORATE
• Information Technology
• Outsourcer Scorecard
#2. #4.
Each SBU develops a Plans and BSC’s define
long-range plan and BSC relationships with external
consistent with corporate partners consistent with
strategic agenda. SBU strategy.
Strategies Are Executed Through Business Units. The Strategies of the Business Units
Must Be Integrated If Organization Purpose and Synergies Are to Be Achieved.
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 16
Shared (Corporate) Services
Larry D. Brady
President FMC Corporation
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 17
Creating Value from Shared Services
SBU Shared Service Unit
3 Linkage Scorecard
2
Shared Service Unit
Scorecard
“A Business In a Business”
1 Service
Customer
Agreement
Financial Mission Internal
Customer
Satisfaction L&G
Feedback
4
Shared Service Unit strategies and scorecards must reflect the linkage to
its “internal customers”
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 18
A Strategy Map Template for a Real Estate/Facilities
Management Balanced Scorecard.
Business
Maximize
Results
Reduce Maximize
Reduce total
totalcost
cost of
of shareholder
Enhance
Enhanceemployee
employee
occupancy shareholderreturns
returns productivity
occupancy productivity
Competency
Competency Contribution
Contribution
Credibility
Customer
Values
Deliver
Deliverlow
lowcost
cost Deliver
Deliverquality
quality Create
Create facilities
facilities that
that
Do
Dothe
the right
right things
things
occupancy
occupancy service
service and
and enhance business
enhance business
at the right time
at the right time
solutions
solutions facilities
facilities unit
unitstrategies
strategies
Realize
Realize Deliver
Deliver Understand
Understand
Manage
Manage Effectively
Effectively
scale
scale on
on emerging
emerging occupancy
occupancy
service
service quality
quality support
support users
users
economies
economies schedule
schedule needs
needs
Leverage
Leverage technology
technology Understand
Understand business
business
for facility management
for facility management unit strategies
unit strategies
Develop
Strategic
Develop
Enablers
Attract
Attract and
and Focus
Focus on
on Promote
Promote aa uniform,
uniform,
retain people
retain people career
career culture
culture of
of comprehensive
comprehensive
with
with key
key skills
skills development
development innovation
innovation data
databases
bases
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 19
Shared Services Strategy Map
Directors, Management, and Staff agree that we effectively support the Company’s work
C1:
C1: “Maintains
“Maintains an
an Effective
Effective and
and C2:
C2: “Understands
“Understands Staff
Staff C3:
C3: “Is
“Is Easy
Easy to
to Do
Do C4:
C4: “Provides
“Provides New
New and
and
Efficient
Efficient Work
Work Environment”
Environment” and
and Company’s
Company’s Needs”
Needs” Business
Business With”
With” Innovative
Innovative Services”
Services”
Internal Processes
I1:
I1: Provide
Provide reliable
reliable and
and I3:
I3: Establish
Establish and
and maintain
maintain mutually
mutually agreed
agreed I5:
I5: Collaborate
Collaborate with
with customers
customers
consistent
consistent service
service upon
upon expectations
expectations to
to develop
develop new
new solutions
solutions
I6:
I6: Investigate
Investigate the
the potential
potential
I2:
I2: Deliver
Deliver specified
specified level
level of
of value
value of
of leading
leading edge
edge
service
service in
in the
the most
most cost-
cost- I4:
I4: Segment,
Segment, understand,
understand, and
and address
address technologies
technologies and
and work
work
effective
effective way
way possible
possible complex
complex customer
customer needs
needs practices
practices
Learning
Growth
L3:
L3: Provide
Provide the
the Appropriate
Appropriate Tools
Tools
L2:
L2: Nurture
Nurture aa Customer
Customer Focused,
Focused,
and
L1:
L1: Maintain
Maintain and
and Enhance
Enhance Skills
Skills and
and Information
Information to
to “Get
“Get the
the Job
Job
and
and Knowledge
Knowledge Solutions
Solutions Oriented
Oriented Culture
Culture Done”
Done”
Resources
F1:
F1: Strive
Strive to
to Maintain
Maintain aa Baseline
Baseline F2:
F2: Manage
Manage Expenses
Expenses versus
versus
Budget
Budget Plan
Plan
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 20
Shared Services Balanced Scorecard
Objectives Measures
EFFECTIVE AND EFFICIENT OPERATIONS
C1 “Maintains an Effective and M1 Favorable responses to the statement “Shared Services helps me be
Efficient Work Environment” effective in my job”
Deliver specified level of service in M3 Per capita overhead / cost per Institution staff member
I2 the most cost-effective way
possible M4 Cost per unit for core services
C2 “Understands Staff and Company’s M5 Favorable responses to the statement “Shared Services understands what
Needs” I need to produce my work”
I3 Establish and maintain mutually M8 Share of core services with published service level expectations
agreed upon expectations
Core segments for which we have developed and are using a customized
I4 Segment, understand, and address M9 service plan
complex customer needs
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 21
Shared Services Balanced Scorecard
Objectives Measures
INNOVATIVE SERVICES AND SOLUTIONS
C4 “Provides New and Innovative M10 Favorable responses to the statement “Shared Services provides new
Services” or enhanced services, tools, and work methods”
I5 Collaborate with customers to develop new M11 Innovative services and solutions implemented
solutions
FINANCIAL RESOURCES
F1 Strive to maintain a baseline budget M18 Success in executing divisional Work Plans
F2 Manage expenses versus Plan M19 Variance between allocated budget and projected out-turn
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 22
Leaders Use Strategy Maps and the BSC to
Communicate The Strategy
Bulletin Boards
Videos
ED IT O RI AL
THE PUNY
PAYOFF FROM
OFFICE COMPUTERS
MA N AG EME NT'S
NE W E ST S TEP
C ove r Stor y
THE COMPUTER
SLUMP
Spe cial Re po rt
T HE HU MA N SID E OF AU TOM AT IO N
Newsletters
Classes Training Workshops
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 23
Royal Canadian Mounted Police V Division – Iqaluit
(Baffin Island)
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 24
Win/Win Relationship Good Neighbor
USM&R Strategic Themes ...
Improve Dealer/Wholesale Marketer profitability Protect the health and safety of our people, the
through customer-driven products and services communities in which we work, and the
will guide us to our vision and are defined
and by developing their business competencies. environment we all share.
above each graph. Environmental Index
• Composite of:
Dealer/Mobil Gross Profit
USM&R Strategic Measures ... • Total profit earned
- reportable
releases to air
at Mobil outlets and water
that will keep us focused on achieving and split between
- reportable spills
USM&R’s strategic themes are explained our
in the graphs and the bulleted text dealers/whole- - community
reported
accompanying them. sale marketers
incidents.
and Mobil. 1993 1994 Target
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 26
Managers Use the Scorecard to Select and Manage
Initiatives
—1—
Identify All Potential
Candidates for Development
Strategic Initiative MIS Projects, Projects,
Consideration Activities, etc. Activities, etc.
Site Selection
Projects, Other Projects,
Activities, etc. Activities, etc.
Criteri
a
P r i m a r y S t r a t e g ic O b j e c t iv e :
In itia tiv e : S t r a t e g ic T h r u s t (s ) :
C o n t i n u e L e a d e r s h i p i n S u p e r io r
E -B ill P r e s e n tm e n t A C /IR /R C P ro d u c ts
—2— A re a S c o re P o in ts C o m m e n ts
Screen Candidates to S tr a t e g ic Im p o r t a n c e 8
• T h e “ k ille r ” a p p lic a t io n
•X
Qualify as “Strategic” B e n e f it 4 •$
R e q u ir e d fo r O th e r
In i tia t iv e s /D e p e n d e n c ie s 1 •X
T i m e t o Im p le m e n t -2 • # m o n th s
O v e r a ll S c o r e 9 •X
—3—
AC/IR/RC
E-Bill Cont. Leadership in
1 9
Presentment Superior Products
Prioritized List of
2 A 9
Select Strategic
3 B 8
4 C 8
Initiatives 5
6
D
E
7
7 Strategic Initiatives
7 F 7
N G X
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 27
Strategy Maps and the Balanced Scorecard provide the link
between vision and strategy and short-term planning and
initiatives
Mission Vision Strategy and Map Objectives Measures Targets Initiatives Milestones Accountable Resource Alloc.
• ‘05 xx%
To provide top-notch facilities to our
by 6/04 Team
facility’s survey rating wide survey
C2 • ‘06 xx%
needs
Internal
• Enhance staff •
L1 • % jobs ‘04 xx% training Schedule by
skills and staffed with programs 3/04 •Facilities HR
L2 • ‘05 xx%
knowledge requisite skills Group
• ‘06 xx% • Courses
completed, 6/05
Resource
Strategy Tactics
“Leadership” “Management”
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 28
Building your strategic management process evolves
from a project to a process.
“The Case for Change” “Early Wins” “Irreversible Momentum”
SFO #1. Mobilize Change through #2. Translate the Strategy #4. Motivate the Staff
Principle Executive Leadership #3. Align the Organization #5. Govern the Organization
Leadership • Achieve commitment at the top • Define and clarify the strategy • Focus the staff
Objective • Build the executive team • Specify long-term targets • Align accountability / rewards
• Build case for change • Communicate to workforce • Develop human capital
• Link business and support • Redefine governance process
units to the strategy • Get results
Methodology • Executive education (the need • Strategy Maps • Strategic job families
and Tools for strategic execution) • Balanced Scorecard • Personal scorecards
- Conference • Business unit and support • Competency development
- In-house group scorecards • Planning / governance process
- Readings • Communications program • BSC info system
• SFO Readiness Assessment • Initiative rationalization • New management meeting
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 29
Align Employees to the Strategy Through Personal
Scorecards and Incentive Programs
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 30
Management by Strategic Objectives (MBSO)
Corporate
VP Region
Strategy
Director
Tactics
Manager
Activities
Associate
“People got that scorecard out and did Mercer survey of compensation
the calculations to see how much practices in 214 companies
money they were going to get. We
could not have got the same focus on • 88% of responding companies
the scorecard if we didn’t have the link consider the use of balanced
to pay.” scorecard measures linked to
Brian Baker, Mobil reward systems to be effective.
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 32
Case Study: Making strategy everyone’s job at Hilton
Hotels
Education Personal Goals
Balanced Scorecard
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 33
A Balanced Scorecard Reporting System automates
data collection and reporting ...
Corporate Strategy Map
Corporate Measure
Corporate Initiatives
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 34
… and stimulates a new process of strategic learning at the
management meeting
Control Learning
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 35
In summary: A process of mobilization, alignment, and
sustainment produces breakthrough results
Ø1 Ø2 Ø3 Ø4 Ø5
Mobilize Translate Align Motivate Govern
√
Create case for √
Refresh strategy √
Corporate / SBU Communicate √ √
Monthly/Quarterly
change cascade to / educate strategic reviews
√ Create strategy
workforce
√
Develop vision
and strategy
√
map
Create top-level
√
Corporate / SBU
/ support unit
cascade objectives
√
Align personal
√
Develop info
system = $
BREAKTHROUGH
√
Executive team scorecards √
Link BSC to RESULTS
aligned √
External √
Align personal planning /
√
Set targets / linkages development budgeting
√
Create rationalize (customers / process
accountability initiatives suppliers) √
Align incentives
√
Link BSC to
operational mgmt.
√
Learning/
Adapting
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 36
SFO Best Practice Benchmarks:
Mobilize, Align, Sustain
TRANSLATE STRATEGY TO MOBILIZE CHANGE THROUGH
OPERATIONAL TERMS EXECUTIVE LEADERSHIP
● Strategy refreshed Top leadership sponsorship
●
● Strategy map developed ● Case
for change clear
● Balanced Scorecard ● Leadership team engaged
● Targets established ● Vision and strategy clarified
● Initiatives rationalized ● New way of managing
● Accountability clear ● Change agent identified
STRATEGY-
ALIGN THE ORGANIZATION MAKE STRATEGY A
FOCUSED
TO THE STRATEGY CONTINUAL PROCESS
ORGANIZATION
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 37
Why Do Organizations Fail to Get Results from Their
Balanced Scorecard Programs?
#1. No Executive Ownership
(done by middle management team only;
long development process)
Using It
RIGHT
#2. Scorecard Not Linked to
NOT Using It Strategy (no strategy map - just KPIs
Using WRONG in 4 perspectives; mostly financial
BSC measures; done as a systems project;
done only for compensation)
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 38
For Further Information
Our Mission:
“To facilitate the worldwide awareness,
use, enhancement, and integrity of the
Balanced Scorecard as a value-added
management process”
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 39
Creating the Strategy-Focused Asset Management
Organization
• QUESTIONS?
©2004 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 40