An Introduction to the Balanced Scorecard and the Strategy Focused Organization TEC March 6, 2005

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An Introduction to the Balanced Scorecard and the
Strategy Focused OrganizationTEC March 6, 2005
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Why Do Organizations Struggle So Hard With
Strategy?
1 in 10 organizations execute their strategies
successfully
Fortune Magazine, 1998
72 of CEOs believe that executing their chosen
strategy is more difficult than developing a good
strategy
Malcolm Baldrige CEO Survey, 2002
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MAKE STRATEGY A CONTINUAL PROCESS
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The Problem The Strategic Management Process
Is Missing in Most Organizations
STRATEGY
60 of organizations dont link strategy budgets
85 of management teams spend less than one hour
per month on strategy issues
test the hypotheses
update the strategy
Strategic Learning Loop
BALANCED SCORECARD
BUDGET
78 of organizations lock budgets to an annual
cycle 20 of organizations take more than 16
weeks to prepare a budget
reporting
funding
Management Control Loop
92 of organizations do not report on lead
indicators
PERFORMANCE
Output(Results)
Input(Resources)
Initiatives Programs
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Strategy Development or Strategy Execution?
Organizations Need Both
Strategic success requires going beyond
successful strategy formulation to successful
strategy execution
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Strategic Success
Missed Opportunity
Strategy Formulation
At Risk
Doomed From The Start
Flawed
Sound
Strategy Execution
Source 1Execution The Discipline of Getting
Things Done, by Larry Bossidy, 2002.
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Strategy Execution Challenge
There are generally accepted tools to manage
finances, customers, processes, and people. But
what about strategy?
Financial Management Tools EVA Balance
Sheets Income Statements Shareholder Value
Analysis
Process Management Tools Six Sigma Supply Chain
Integration Cycle Time Reduction TQM
Strategy Management Tools
?
Customer Management Tools Customer Satisfaction
Measurement Customer Relationship
Management Segmentation Analysis One-to-One
Marketing
People Management Tools Core Competencies Knowledg
e Management Pay for Performance HRIS
The Balanced Scorecard is the vehicle that fills
the Strategy Management Gap
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Balanced Scorecard Organizations Are Achieving
Breakthrough Results
BREAKTHROUGH RESULTS
Private Sector
Public Sector
Mobil
SMDC Health System

• From last to first in industry
• ROI 6 --gt 16

• Profitability up 23m
• Customer Satisfaction

City of Charlotte
Wendys International

• Mkt. Cap 2.5 --gt 4b
• Stock Price up 75

• Customer Satisfaction 70
• Public Official Award

UPS
Duke Childrens Hospital

• Revenues 9
• Net Income 33

• Customer Satisfaction 1
• Cost/Case 33

Defense Logistics Agency
Hilton Hotels

• Customer Loyalty 5
• EDITDA margins 3 above average

• 130MM in Savings in FY2002
• Processed 2.2B more requisitions for its
  customers

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How Did They Do It? They Created
Strategy-Focused Organizations
STRATEGY They made strategy the central
organization agenda FOCUSED They created
incredible focus on the strategy ORGANIZATION
They mobilized their employees to act in
fundamentally different ways, guided by the
strategy
Management
STRATEGY
Process
The Balanced Scorecard Is a Performance
Management Program That Puts Strategy at the
Center of the Process
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Reflecting a Natural Cause and Effect Logic
of Business Performance
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The Balanced Scorecard Should Tell the Story of
the Strategy
Illustrative Example Southwest Airlines
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Lets Take a Minute to Agree Upon Some Common
Vocabulary
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ASME Balanced Scorecard Strategy Map
F1 Grow revenue through new products and global
growth
Young Engineers
Industry / Government
Continue to serve our core customers, such as
Academia
C1 Become indispensable to Young Engineers
Customer
Financial
F3 Run a cost effective operation
F2 Sunset lower-value programs
Build Content / Knowledge
Build Communities
Advocate and Communicate
I6 Provide effective representation and advocacy
for the engineering profession
I7 Improve coordination and effectiveness of
corporate communications
I1 Enable self-forming communities of interest
I3 Increase Expand Market-Relevant Content
Internal
I2 Stimulate individual membership growth with
different membership models
I5 Accelerate time to market
I4 Digitize repackage content
L1 Develop new product and business development
capabilities through a culture that is adaptive,
continually evolving (risk taking),
entrepreneurial and agile
L2 Develop future volunteer leaders
Learning Growth
L3 Strengthen environmental scanning and
competitive intelligence
L4 Share best practices and lessons learned
V 3.0 11/11/03