balanced scorecard & strategic management. 2 strategic planning model 1. where are we now? 2....
TRANSCRIPT
Balanced Scorecard &
Strategic Management
2
Strategic Planning Model
1. Where are we now?
2. Where do we want to be?
3. How do we measure our progress?
4. How do we get there?
AND
5. How do we track our progress?
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Balanced Scorecard
Vision & Mission
Strategic Objectives
Key Performance
Indicators
InitiativesBudgets & Resources
Objectives & Measures Outputs and Outcome
SWOT Analysis
Strategic Planning Strategic Planning ModelModel
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Strategic Plan
Perspective
Strategy Map (Logic Model) Corporate Scorecard
Action Plan
Strategy Map Objective
Measure
Target
Initiative
Budget
Financial
Run the BusinessCustomer
Serve the customerInternal Process
Manage the processLearning & Growth
Build capacity
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Objective Measurement
Target Initiative
F1:Exceed market growthF2: Profitable growth
Sales growthMargin Growth
+2%+5 points
C1: Perceived value for moneyC2: Relationship at multiple levels
Customer survey
#contacts with targeted sponsors
Rated #1 by 75%
100%
Focus group program
Account penetration program
I1: Maximum retention
I2: Develop regional marketI3: Identify profitable new market
Win/loss rate
Potential revenue in sales pipeline#potential customers arrived first#surprises
Exceed 60% in targeted segmentsIncrease by 30%
Double current # in 2 yearsReduce by 50% in 2 years
Critical opportunity sales supportReference sell program
Pull marketing and image programTarget marketing program
L1: Develop marketing skillL2: Develop customer database
Percent of strategic skills availablePercent of customers with key attributes known
100% in 2 years
80% in 2 years
Selling skills program
Customer databaseSales learning system
Kaplan and Norton, 1996
Chem-Pro Corporate Scorecard
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Strategy Map A diagram describes how an
organization creates value by connecting strategic objectives in explicit cause-and-effect relationship with each other in the four BSC perspectives.
All of the information is contained on one page; this enables relatively easy strategic communication.
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Strategy Map
Financial Financial PerspectivePerspective
CustomerCustomerPerspectivePerspective
Internal ProcessInternal ProcessPerspectivePerspective
Learning &Learning &Growth Growth
Max. ProfitInc. Rev. Reduce Cost
Inc. rev New Cust Inc. rev per Cust
Cust Acquisition Cust Satisfaction
Product QualityFast ServiceOn-time Delivery
Production ProcessCust Mgt. Process Logistic Process
Skill PersonnelMotivated Culture Excellent IT/IS
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What are the main principles behind Strategy Maps?
Strategy balances contradictory forces. Strategy is based on a differentiated
customer value proposition. Value is created through internal
business processes. Strategy consists of simultaneous,
complementary themes. Strategic alignment determines the
value of intangible assets.www.valuebasedmanagement.net
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Strategy map
Kaplan and Norton, 2004
Strategic Alignment
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Strategic Alignment“Alignment is the essence of management” (Smith, Chairman of Federal Express, cited in Labovitz and Rosansky, 1997) Strategic Alignment—the process of linking
strategy with corporate vision, goals, objectives, and actions—fit and integration
Using Balance Scorecard to create corporate synergies
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STRATEGY
HUMAN RESOURCES
BUSINESS UNITS EXECUTIVE TEAM
INFORMATIONTECHNOLOGY
BUDGETS AND CAPITAL INVESTMENTS
The Balanced Scorecard process allows an organization to align and focus all its resources on its strategy
Question:How can complex organizations achieve results like this in such short periods of time?
Question:How can complex organizations achieve results like this in such short periods of time?
Answer:
Alignment!
Answer:
Alignment!
Kaplan and Norton, 2001
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Strategy-focused Organizations Operationalizing the strategy – use balanced
scorecard and strategy to map and identify significant strategies for creating sustainable competitiveness.
Aligning the organization to the strategy – align both strategic units and shared service units with organizational strategy.
Making strategy everyone’s everyday job – facilitate top down communication that helps employees understand how their day-to-day jobs contribute to strategy.
Making strategy a continual process – build double-loop process to manage strategy by (1) linking strategy to the budgeting process, (2) making effective management meeting to reviewing strategy, and (3) learning and adopting strategies as they evolve.
Mobilizing the leadership for change – leaders must enable their staff to understand why change is needed and lead them through the stated vision to its accomplishment.
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Translate the strategy to operational terms
Measurement is the language that gives clarity to vague concepts.
Measurement is used to communicate, not to control.
Building the scorecard develops consensus and teamwork throughout the organization
"If we succeed, how will we look to our shareholders?”
The Strategy
Financial Perspective
"To achieve my vision, how must I look to my
customers?”
Customer Perspective
"To satisfy my customer, at which processes must
I excel?”
Internal Perspective
"To achieve my vision, how must my organization
learn and improve?”
Organization Learning
#1
Kaplan and Norton, 2001
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Link and align the organization around its 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.
LINE BUSINESSES SUPPORT UNITS
CORPORATE
SBUA
SBUB
SBUC
SBUD
CORPORATE SCORECARD(Shared Strategic Agenda)
Themes Measures
EXTERNAL PARTNERS
• Customer Scorecards
• Distributor Scorecard
• Joint Venture Scorecard
• Vendor Scorecard
• New Venture Scorecard
• Outsourcer Scorecard
#1.
A Corporate Scorecard defines overall strategic priorities.
#3.
Each Support Unit develops a plan and BSC for “best
practice” sharing to create synergies across SBUs.
#2.
Each SBU develops a long-range plan and BSC consistent with corporate
strategic agenda.
#4.
Plans and BSC’s define relationships with external partners consistent with
SBU strategy.
1. Financial Growth
2. Delight the Consumer
3. Win-Win Relationships
4. Safe & Reliable
5. Competitive Supplier
6. Good Neighbor
7. Motivated & Prepared
8. Quality
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xx xx xxxx
• Finance
• Marketing
• Distribution
• Procurement
• Purchasing
• Safety
• Human Resources
• Information Technology
#2
Kaplan and Norton, 2001
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Top-Down “Bridging Process” To Share the Strategy & Align
the Workforce
Bottom-Up Process to Internalize &
Execute the Strategy
CORP
SBU
The Strategy Focused Workforce
• EDUCATION
• PERSONAL GOAL ALIGNMENT
• BALANCED PAYCHECKS
Make Strategy Everyone’s Everyday Job
#3
HR Processes Are Essential for Moving Strategy From the Top to the Bottom
Kaplan and Norton, 2001
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Strategy Deployment Who are responsible for the targets?
StrategicGoals
Measures
StrategicGoals
Measures
StrategicGoals
Measures
StrategicGoals
Measures
Unit
Team
Individual
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Issues on Strategy Deployment Corporate/Department KPI Matrix Cascade to department or staff Mandatory KPI How to Weight KPIs Routine/Administrative Job
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Making Strategy a Continual Process
Imbed the Strategy
in Ongoing Management
Processes
Integrate Strategy with Planning and
Budgeting
Introduce the New Reporting System
Conduct the New Management
Meeting
1
2
3
•Establish stretch targets; Select initiatives, Align operational improvement programs (TQM, Six Sigma, Activity Based Management); Allocate resources to projects•Develop systems for data collection, analysis, and reporting•Open discussion of performance shortfalls; team problem-solving; adapting and learning
#4
Kaplan and Norton, 2001
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To Succeed, the Executive Leader Must be Engaged in the Strategic Change Process…
Unfreeze ChangeBreakthrou
gh and Sustain
Achieve commitment and momentum at the
top
Align and focus the organization
on change
Institutionalize capabilities and
culture required for breakthrough
results“The Case for Change” “Early Wins” “Irreversible Momentum”
“A successful Balanced Scorecard program is a transformation process
not a “metrics” project.”
#5
Kaplan and Norton, 2001
Strategic Learning
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Learning as a new paradigm of control
Learn & Adapt
Command & Control
Ultimate intent of managing by measuring is not to control people but to influence them to make decisions and take actions that are likely to be consistent with organizational goals
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FinancialPerspective
CustomerPerspective
InternalPerspective
Strategy map
Learning Perspective
2. Strategy Management
Managing Operations Loop
OPERATIONS Output
Test the Hypothesis
1. Project ManagementResource
Inputs
Fin
anci
alC
ust
Inte
rnal
L&
G
Strategic Objectives
Financially Strong
Delight the Consumer
Win-Win Relationship
Safe & Reliable
Competitive Supplier
Motivated & Prepared
Strategic Measures
Return of Capital Employed
Mystery Shopper Rating
Dealer/Pioneer Gross Profit Split
Manufacturing Reliability Index
Days Away from Work Rate
Laid Down Cost vs. Best Competitive Ratable Supply
Strategic Competency Availability
Balanced Scorecard
Update the Strategy
Strategic Learning System
Review
Reporting
Kaplan and Norton, 2001
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Strategy Map as a Learning Device
Financial Financial PerspectivePerspective
CustomerCustomerPerspectivePerspective
Internal ProcessInternal ProcessPerspectivePerspective
Learning &Learning &Growth Growth
Max. ProfitInc. Rev. Reduce Cost
Inc. rev New Cust Inc. rev per Cust
Cust Acquisition Cust Satisfaction
Product QualityFast ServiceOn-time Delivery
Production ProcessCust Mgt. Process Logistic Process
Skill PersonnelMotivated Culture Excellent IT/IS
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Double Loop Learning SystemStrategic Management:
Strategic Planning + Strategy Implementation
Monitoring and LearningStrategy Content ManagementProject Management
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Management Cockpit A Dashboard—Management Information
System for effective making decision Information will be updated regularly and
presented in the clarity, summary, and predetermined and sequenced basis
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Management Cockpit
Source: Chulalongkorn University, Thailand
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Suwit SrimaiFaculty of Technology &
Management Prince of Songkla University,
Thailande-mail : [email protected]