microsoft people ready kaplan

8/14/2019 Microsoft People Ready Kaplan

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Terrence ThomasTerrence Thomas

Financial Executives InternationalFinancial Executives International


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People Improve OperationsPeople Improve Operations

Robert Kaplan, Ph.D.Robert Kaplan, Ph.D.

Baker Foundation Professor at theBaker Foundation Professor at theHarvard Business SchoolHarvard Business SchoolCoCo--developer of activitydeveloper of activity --based costingbased costing

and the Balanced Scorecardand the Balanced ScorecardImproving Operations PanelImproving Operations PanelModerator: Paul Houghton, MicrosoftModerator: Paul Houghton, MicrosoftSteven Hester, M.D., Norton HealthcareSteven Hester, M.D., Norton HealthcareFrankFrank ModrusonModruson, Accenture, Accenture

Mike Delgado, PanoramaMike Delgado, Panorama


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How People DriveHow People DriveOperational ImprovementsOperational Improvements

Robert S. KaplanRobert S. KaplanBaker Foundation ProfessorBaker Foundation Professor

Harvard Business SchoolHarvard Business School


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City of Indianapolis: ActivityCity of Indianapolis: Activity --BasedBasedCosting of Public ServicesCosting of Public ServicesGovernment should be measured t he same way every ot her ent erpr ise i s measured: By i t s results.

We shouldnt talk in terms of programs funded orsalaries paid, but rather in terms of neighborhoodsprotected and workers trained. If people arentgetting a dollars worth of service for every dollarthey pay in taxes, then government isnt helpingthem outits ripping them off.

Mayor Stephen Goldsmith guest column,The Indianapolis Business Journal , August 1992.


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Unit Cost = Cost of capacity supplied

Practical capacity of resources suppliedDepartmental cost = $72,000 per month (salaries, payroll taxes,supervision, assigned equipment, such as trucks, assigned support costs)20 employees do the front-line work (filling potholes, repaving roads, ).Each employee works 20 days per month (after weekends, holidays, andvacations), 7.5 hours per day, and 60 minutes per hour, or 9,000 minutes permonthThe practical capacity of an employee: after breaks and training, producesoutputs for 6 hours day (80% of theoretical capacity) or 7,200 minutes peremployee .

Unit Cost = $72,000 = $0.50 per minute7,200 * 20 = 144,000 minutes

R. S. Kaplan and S. Anderson,R. S. Kaplan and S. Anderson, TimeTime --Driven ActivityDriven Activity --Based Costing,Based Costing, Harvard Business Review (November 2004)Harvard Business Review (November 2004)

TimeTime --DrivenDriven ActivityActivity --Based Costing!Based Costing!First, calculate the cost per unit time of supplyingcapacity in processes or departments.


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Fill pothole 150 minutesPave 100 meters of road 500 minutesInstall traffic sign 90 minutes

Estimate the time required by each type of work performed:

Second, Calculate the Time Used toSecond, Calculate the Time Used toAccomplish Each Unit of Work byAccomplish Each Unit of Work bythe Departmentthe Department s Resourcess Resources


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Fill pothole 150*$0.50 $75/pothole

Pave 100 meters of road 500*$0.50 $250/100 metersrepaved

Install traffic sign 90*$0.50 $45/sign installed

Calculation of departments actual costs for work performed

Third, Calculate the DepartmentThird, Calculate the Department ssCost to Accomplish Work: MultiplyCost to Accomplish Work: MultiplyCapacity Cost Rates by StandardCapacity Cost Rates by Standard

(or Actual) Times(or Actual) Times


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Actions Taken by Indianapolis withActions Taken by Indianapolis withActivityActivity --Based Costs of CityBased Costs of City s Processess Processes

1.1. Establish competition for provision of city servicesEstablish competition for provision of city servicesCity employees bid for future work against private sectorCity employees bid for future work against private sectorcontractorscontractors

Compare city departmentCompare city department s costs against private sector bidss costs against private sector bids

2.2. Encourage process improvementsEncourage process improvementsCity employees attempt to reduce cost per minute of supplying thCity employees attempt to reduce cost per minute of supplying th eireirservices (eliminate excess supervisors, fewer trucks, reduce truservices (eliminate excess supervisors, fewer trucks, reduce tru ckckmaintenance costsmaintenance costs the $85 oil change)the $85 oil change)

City employees reduce the time required to perform work (betterCity employees reduce the time required to perform work (betterscheduling of work tasks, reduced idle time between jobs,scheduling of work tasks, reduced idle time between jobs,continuous improvement of work processes)continuous improvement of work processes)

In six weeks, city employees reduced the cost of filling potholeIn six weeks, city employees reduced the cost of filling pothole s bys by

35%35%


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$200

$250

$300

$350

$400

$450

$500

$550

82 84 86 88 90 92 94 96

Calendar Year

M i l l i o n s o

f T h e n - Y e a r

D o

l l a r

$529 M

$439 M

$283 M

Impact of Using ABC for CompetitionImpact of Using ABC for CompetitionCity of IndianapolisCity of Indianapolis


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Mayor Stephen Goldsmith on Impact onMayor Stephen Goldsmith on Impact onPeople after Using ActivityPeople after Using Activity --Based CostingBased Costingand Competition for City Servicesand Competition for City Services

ThereThere s a sense or reality now. City employeess a sense or reality now. City employeeshave redesigned their tools and their teams to thinkhave redesigned their tools and their teams to thinkin different ways, and they win. People who arenin different ways, and they win. People who aren ttcompetitive are moved out or their departments arecompetitive are moved out or their departments areeliminated. The ones that are left are convincedeliminated. The ones that are left are convincedthat they are good at what they do. They have athat they are good at what they do. They have asense of pride that they are better than the privatesense of pride that they are better than the private

sector. That makes a big difference in their wholesector. That makes a big difference in their wholeattitude towards work, the quality of the work theyattitude towards work, the quality of the work theydo, and, frankly, how the rest of the citizens thinkdo, and, frankly, how the rest of the citizens thinktoday about their city workers.today about their city workers.


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Using ABC to Reveal Hidden ProfitUsing ABC to Reveal Hidden Profitand Hidden Cost Customersand Hidden Cost Customers

Revenues

Costs

Apparent Profits H i d

d e

n C

o s t s

HiddenProfits

Customer

A

Traditional Costing Activity-Based Costing

Customer

B

Customer

A

Customer

B


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A Insurance Company ExampleA Insurance Company Example

C u m u

l a t i v e

E c o n o m

i c P r o f i t

Most ProfitableClients

Least ProfitableClients

0%

20%

40%

60%

80%

100%

120%

140%

160%

0 % 1 0 %

2 0 %

3 0 %

4 0 %

5 0 %

6 0 %

7 0 %

8 0 %

9 0 %

1 0 0 %


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How An Insurance Company ManagedHow An Insurance Company ManagedIts Customer ProfitabilityIts Customer Profitability

C u m u

l a t i v e

P r o

f i t s

( p e r c e n

t o f

t o t a l p r o

f i t s )

0%

20%

40%

60%

80%

100%

120%

140%

160%

0 % 1 0 %

2 0 %

3 0 %

4 0 %

5 0 %

6 0 %

7 0 %

8 0 %

9 0 %

1 0 0 %

Maintainand Grow

Process Improve

Transformor Remove

Most ProfitableClients

Least ProfitableClients


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The Balanced Scorecard Strategy MapThe Balanced Scorecard Strategy MapDescribes How the Enterprise CreatesDescribes How the Enterprise CreatesValue for Shareholders and CustomersValue for Shareholders and Customers

#1. Financial performance, a lag

indicator, measures the tangibleoutcomes from the strategy

#2. The customer value propositiondefines the source of value

#3. Strategic processes create valuefor customers and shareholders

Process

Financial

Customer Perspective

SustainedShareholder

Value

OperationsManagement

Processes

CustomerManagement

Processes

InnovationProcesses

Productivity Revenue Growth

Price Quality Time Function Relation Brand

Product/Service Attributes Relationship Image

Regulatory andSocial Processes

Learning & Growth

Human Capital

Information Capital

Organization Capital

#4. Aligned intangible assets driveimprovement in the strategic processes

Customer


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Low Total Cost Customer ValueProposition

Low Total CostLow Total Cost

Company ExamplesCompany Examples

ToyotaToyotaMcDonaldsMcDonaldsDell ComputerDell ComputerSouthwest AirlinesSouthwest AirlinesVanguard Mutual FundsVanguard Mutual FundsWalWal --MartMart

Best BuyBest Buy

Lowest costLowest costsuppliersupplier

ConsistentlyConsistentlyhigh qualityhigh quality

Low TotalLow TotalCostCostCustomerCustomerObjectivesObjectives

Speedy, easySpeedy, easypurchasepurchase

AppropriateAppropriateselectionselection

Deliver a combination of quality, price, and

ease of purchase that no one else can match


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Operations Management Processes Deliver LowOperations Management Processes Deliver Low --priced,priced,

HighHigh

--quality, Easilyquality, Easily

--purchased Goods and Services forpurchased Goods and Services for

the Low Total Cost Value Propositionthe Low Total Cost Value PropositionFinancialPerspective

CustomerPerspective

InternalPerspective

Long-Term Shareholder Value

Productivity Strategy Growth Strategy

Enhance Customer ValueImprove Cost Structure Increase Asset Utilization Expand Revenue Opportunities

Learning &GrowthPerspective

Human Capital

Information Capital

Organization Capital

Culture Leadership TeamworkAlignment

Customer Value Proposition

Price Qua lity Speed Selection Functionality Service Partnership Brand

Product / Service Attributes Relationship Image

SupplyProductionDistributionRisk Management

OperationsManagement Processes

SelectionAcquisitionRetentionGrowth

Customer ManagementProcesses

Opportunity IDR&D PipelineDesign/DevelopRamp-Up

InnovationProcesses

EnvironmentSafety & HealthEmploymentCommunity

Regulatory & SocialProcesses


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F i n a n c i a

l

C u s t o m e r

Internal

Learning&growth

F1:Increase ROCEF2: Increase

customer base aboverequired rate of

profitability

F6: Becomeindustry cost

leaderF5: Maximize

assetutilization

F4: Build ExportBusiness above required

rate of profitability

C1: Preferred low cost full service provider of high value added products and services

L1:Create climate for action through

alignment and empowerment

L2:Build Competencies

L3:Integrate IT in all business

processes

C3: Provide value for money thru low costmanufacturing meeting world class quality &

delivery expectations

P5:Excel in new customerrelationship management

F3: Increasebusiness with

existing customersabove required rate

of profitability

P6: Build partner relationship fortechnology upgrade & business

expansion

P7: Improve capabilitiesin

-design, tooling ,testing

-project management

L4:Imbibe Values

P4:Optimise use ofassets & buildprocesses to

minimizeoperations cost

C2: Full program management atsignificantly lower costs and

shorter lead times

P2:Upgrade mfg.

Processes toachieve customerexpectations on

quality levels

P1:Build competencies tointegrate components toachieve module/systems

supplies

P3:Upgrade delivery process

capability to meet deliveryrequirements of Indian &overseas customers in a cost

effective manner

Tata Auto Plastics Systems (TAPS) Strategy MapTata Auto Plastics Systems (TAPS) Strategy Map


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Linking the Balanced Scorecard toLinking the Balanced Scorecard toQuality and Process Improvements:Quality and Process Improvements:Will These Lead to SuperiorWill These Lead to Superior

Customer and Financial Outcomes?Customer and Financial Outcomes?Will an increase in product quality reduceWill an increase in product quality reduceoperating costs and profits as a % of sales?operating costs and profits as a % of sales?

Will an increase in product or serviceWill an increase in product or service

quality lead to more growth in sales withquality lead to more growth in sales withtargeted customers?targeted customers?


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Objectives, Measures, Targets andObjectives, Measures, Targets andInitiatives Clarify and Focus the StrategyInitiatives Clarify and Focus the Strategy

Strategy Map

Objectives Targets

Target:The level of

performance orrate of improvement

needed

Initiative:Projects orprograms

required toreach the target

InitiativesMeasures

Measure: Howperformanceagainst theobjective ismonitored

Objective: Oneaspect of whatthe strategy is

trying to achieve

Section Of An Airline StrategyMap

Financial

People &Knowledge

GroundCrew

Alignment

PlaneUtilization

FastGroundTurnaround

Attract & RetainMore Customers

Customer

Internal

LowestPrices

Return on NetAssets

Fast groundturnaround

30 Minutes 90%

Six-Sigma non-maintenancecycle timereduction

On Ground Time On-Time Departure


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Objectives Targets

Target:The level of

performance or

rate of improvementneeded


required to reachthe target

InitiativesMeasures

Measure: Howperformanceagainst the

objective ismonitored


trying to achieve

Section Of An AirlineStrategy Map

Financial

People &Knowledge

GroundCrew

Alignment

PlaneUtilization

FastTurnaround

Time


Customer

Internal

LowestPrices

Return on NetAssets

Will a Six Sigma project close the

performance gap of the target?Target

Current

GAP

PURPOSE: Strategicinitiatives should beselected and fundedbecause they have a

direct impact onstrategy advancement.


30 Minutes 90% Six-Sigma non-maintenancecycle timereduction


Initiatives are where theInitiatives are where thestrategy gets executedstrategy gets executed


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Initiatives are where theInitiatives are where thestrategy gets executedstrategy gets executed

Objectives Targets

Target:The level of

performance orrate of improvement

needed

Six-Sigma non-maintenancecycle timereduction


required to reach

the target

InitiativesMeasures

Measure: Howperformanceagainst theobjective is

monitored


trying to achieve

Section Of An AirlineStrategy Map

Financial

People &Knowledge

GroundCrew

Alignment

PlaneUtilization

FastTurnaround

Time


Customer

Internal

LowestPrices

Return on NetAssets


30 Minutes 90%


Unload passengers 5:14 4:38Wait for cleaning crew to board 0:24 :18Clean airplane 10:48 7:40Wait for cabin crew to board 4:11 0Wait for first passenger to board4:06 0Load passengers 17:32 14:00Wait for passenger info list 1:58 :13

Close aircraft door :57 :09Detach boarding ramp 1:39 :43Total non-maintenance cycle time 48:18 29:11

Non maintenance activitiesCurrentminutesper step

Best practiceminutes perstep

Turnaround time between flights Lean techniques*

A.Stricter controls on carry-on bags,fewer passengers moving back inaisle to find bags

B.Cleaning crew in position aheadof time

C.Standardized workflow, timingand methods, such as prearrangedkits

D.Visual signal from cabin crew toagent when plane is ready toboard

E.Active management of overheadstorage bins by flight crew

F. Passenger information listdelivered by agent following lastpassenger on board

G.Agent ready at aircraft to close* Source: McKinsey Quarterly


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Improve to levels ofImprove to levels ofquality excellencequality excellence

Maintain highMaintain highquality levelsquality levels

Improve to minimumImprove to minimumacceptable qualityacceptable quality

levelslevels

Potential to cut backPotential to cut backcurrent investmentcurrent investment

Using the BSC and QualityUsing the BSC and QualityAssessment ModelsAssessment Models(Baldrige, EFQM) Together(Baldrige, EFQM) Together

Set pr ior i t i es f or invest ment and proj ect s Set pr ior i t ies f or invest ment and proj ect s

StrategicStrategic

BalancedBalancedScorecardScorecard

NonNon--StrategicStrategic

WeaknessesWeaknesses StrengthsStrengths

Quality Assessment ModelQuality Assessment Model

CompetitiveCompetitiveAdvantageAdvantage

HygieneHygiene


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BSC Adds to Total Quality ProgramsBSC Adds to Total Quality Programs

Makes Explicit the Causal Links fromMakes Explicit the Causal Links fromOperational ImprovementsOperational Improvements

To a CustomerTo a Customer --Based Value PropositionBased Value PropositionTo Productivity Gains and Financial OutcomesTo Productivity Gains and Financial Outcomes

Identifies Entirely New Processes forIdentifies Entirely New Processes forImprovementImprovement

Aligns Quality (six sigma) Initiatives toAligns Quality (six sigma) Initiatives toStrategic PrioritiesStrategic Priorities


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Top-Down BridgingProcess To Sharethe Strategy & Alignthe Workforce

Bottom-Up Processto Internalize &Execute the Strategy

CORPSBU

The Strategy Focused Workforce

COMMUNICATIONAND EDUCATION

PERSONAL GOAL ALIGNMENTALIGNED COMPENSATION

STRATEGIC COMPETENCIES

Leadership and Management Processes MoveLeadership and Management Processes MoveStrategy Between the Top and the BottomStrategy Between the Top and the Bottom

Make Strategy EveryoneMake Strategy Everyone s Jobs Job


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Leaders Must Communicate theLeaders Must Communicate theStrategy Seven Times Seven WaysStrategy Seven Times Seven Ways

Intranet

MonthlyMagazine

Town HallMeetings

ManagementManagementMeetingsMeetings

P e r s p ec ti veOb jec t i ve Mea su re F re q .Base l i n eCurrentPeriod AmountD a teP l an A m oun t D a t e

Target

Financial

Customer

Internal

Learning/Growth

1997 ActualResultsY TD 1 99 7

S C E N AR IO P L AN N IN G TECHNOLOGY

NBUSWITHW /SCORECARDSStrategicPartners

W /SCORECARDSINCENTIVE

COMPENSATION

INITIATIVES

Mobil NAM&RBalanced Scorecard

DigestTraining and Orientation

Bulletin Boards

Ask thePresident

Newsletters

Videos


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Monthly reviewsof our performance

versus scorecardtargets have become anintegral part of how we

manage the company.

All employeesshould strive to align

their performance goalsand target agreements

to business resultsdescribed in

the scorecard

Chrysler

Group


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President and CEO

Dieter Zetsche callsthe scorecard themain yardstick andan integral part ofhow we manage the

company.

President and CEO

Dieter Zetsche callsthe scorecard themain yardstick andan integral part ofhow we manage the

company.

February 8, 2002February 8, 2002


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Royal Canadian Mounted PoliceRoyal Canadian Mounted PoliceV DivisionV Division Iqaluit (Baffin Island)Iqaluit (Baffin Island)


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Use Extrinsic Motivation to RUse Extrinsic Motivation to R einforceseinforces

Desired Behavior and IncreaseDesired Behavior and IncreaseIntensity of Employee AwarenessIntensity of Employee AwarenessAlign Personal Objectives: All employees learnAlign Personal Objectives: All employees learn

how they fit into the overall game planhow they fit into the overall game planCorporate

Division

Business Unit

Department

Associate

Align Incentive Compensation: Link reward systems toAlign Incentive Compensation: Link reward systems toachievement of individual and organizational objectivesachievement of individual and organizational objectives


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NAME : CIF :AREA : PERIOD :FUNCTION :EVALUATOR :

CONCEPT :

TOTAL (1+2):

UNIBANCOS STRATEGIC THEMES Aggressive search for scale Continuous efficiency maximization Obtain excellence in Human Capital Management Effective domain of the credit and collect cycle

YOUR UNITS STRATEGIC THEMES

YOUR DEPARTMENTS OBJECTIVES

Unibanco Management Agreement with Employees

Unibanco: Aligning EmployeesUnibanco: Aligning EmployeesBest PracticeBest Practice

Management Agreement - Example

2002


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YOUR GOALS FOR THE YEAR %Self-

evaluationManager

evaluationFinal

evaluation

WORK PLAN

F i n a n c

i a l

C u s t o m e r s

P r o c e s s

P e o p

l e &

T e c

h n o

l o g y

Total

Management Agreement - Example2002

Unibanco: Aligning Employees Best PracticeUnibanco: Aligning Employees Best Practice


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BSC

(lead indicators)

Company's Visionachievement

(Sustainable earning per

share annual growth of 15%)

Total Compensat ion According to the

Unit's financialresults (lagindicators)

100%100%

FromFrom X% to + X%X% to + X%

FromFrom --Y to +Y%Y to +Y%

2003

BSC - Based Compensation Program

Human Capital Management Tools x BSC

Unibanco: EmployeeUnibanco: EmployeeCompensation SystemCompensation System


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Case Study: Making StrategyCase Study: Making StrategyEveryoneEveryone s Job at Hilton Hotelss Job at Hilton HotelsEducation

Communication

Personal Goals

Incentive Compensation

Balanced Scorecard


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Operational Efficiency PanelOperational Efficiency Panel

ModeratorModeratorPaul Houghton, Microsoft East Region VicePaul Houghton, Microsoft East Region VicePresidentPresident

PanelistsPanelists

Steven Hester, M.D., Chief MedicalSteven Hester, M.D., Chief MedicalInformation Officer, Norton HealthcareInformation Officer, Norton HealthcareFrankFrank ModrusonModruson, CIO, Accenture, CIO, Accenture

Mike Delgado, Vice President, PanoramaMike Delgado, Vice President, PanoramaRobert Kaplan, Ph.D., Marvin Bower ProfessorRobert Kaplan, Ph.D., Marvin Bower Professorof Leadership Development at Harvardof Leadership Development at Harvard

Business SchoolBusiness School


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Please Join Us for LunchPlease Join Us for Lunch

Turn in your event feedback formTurn in your event feedback formBookBook--signing by Robert Kaplan, Michaelsigning by Robert Kaplan, MichaelTreacy and other authorsTreacy and other authors

Thank you for attending!Thank you for attending!


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