Balanced Score Card and Strategy

Strategic Management process
Balanced score card and strategy

Strategy maps and alignment Dr. R.Venkatesh Alliance university
Value proposition and strategies
Value creation = CDV + EDV Value creation strategy : CVP + EVP
Why the Balanced Scorecard?

The Organization will become more strategically focused . People at all levels have relied heavily on tactical performance measurements, such as number of maps submitted, and % of supply vendor contracts in place. Need more balanced approach to looking at performance, both tactical and strategic. Only 5% of a workforce tends to understand their companys strategy. 86% of executive teams spend less than one hour per month discussing strategy.
A Major Driver is . . .
The Organizations Information Resource Planning System (IRPS): - Enterprise wide system for how we will evaluate success division read outs, data turnarounds, global partnerships, etc. - Must be integrated into all agency components (such as region and global outlet offices) - Designed around the Balanced Scorecard framework The Balanced Scorecard will be the strategic view of performance for the agency, balancing out our current tactical view of performance which is already in place.
The enterprise value proposition

Financial Customer Internal process Learning and growth
Some Basic Principles

Quantifies the Strategy in measurable terms Strategy is summarized on a Strategy Map over four views of
performance (perspectives). Must capture a cause-effect relationship between strategic objectives over the four perspectives on the Strategy Map. Critical Components include: - Measurements - Targets - Initiatives Everything must be linked: Goals to Objectives, Objectives to Measurements, Measurements to Targets.
Building Alignment into the Planning Process

Corporate Support Units Enterprise Strategy Map
2
rocess
Board Board of Directors Of directors
Board Strategy Map
finance Enterprise Enterprise Strategy Update finance Strategy update
Enterprise Strategy Map

3
Finance IT
HR
Corporate Planning Process
Functiona Functional l Strategy Update Strategy update
Corporate Functional Strategy Map Enterprise Functional Strategy Map
Enterprise Strategy Map
SBU Strategy Map
Business Unit Functional Map
Corporate Support Units
customer Vendors/ 6 s Customers alliances

Vendors/ Alliances
7
SBU Strategy Map
SBU Strategy Update
Functional StrategyFinance update IT

HR
Business Planning Process
Functional Strategy Update Support Units
Support Unit Services
Four Views of Performance

Strategic Objectives
Strategy can be described as a
Stakeholders
If we succeed, how will we look to our stakeholders?
series of cause and effect relationships.

Provides a line of sight from
Internal Processes
To satisfy our customers, at which processes must we excel?
strategic to operational activity working on the right things.
Learning & Growth

"To execute our processes, how must our organization learn and improve?"
Agency Investments
In order to succeed, what investments in people and infrastructure must we make?
The Importance of Alignment

Complete Framework for IRPS
Strategy
Agency Department Team/ Individual
Objectives
Measures
Alignment all the Way Through

Goal: Improve environmental health Performance Gap: Less than Organization watershed water quality Initiative: Data Mining Resource
Innovation
Improved "Cause and Effect" Knowledge
Investment Management Business Processes

Improved Environmental Assessment Reports Justified Initiatives to Improve Water Quality Investments Available to be Allocated to Other Critical Areas
Financial Management
Decreased Litigation Costs
Relationship Management
Enhanced Public Confidence Increased Investment Accountability
Environmental Health
Improved Water Quality
Strategy Map: Capture a Cause Effect Relationship from the Bottom Up

Stakeholder More rapid and accessible services
Improved Returns on Investments
Internal Process
Economic Model Process
Reduce Re-Activities thru ABC
Establish Web Based Self Services
Learning & Growth
Expand Global Facility Reach
Leadership Development
Knowledge Management
Investments
Facilities and Fixed Assets
Human Capital
IT Infrastructure
Two Special Techniques for Building Strategy Maps

General Rule of Thumb to ensure strategy map is developed both vertically and horizontally
The 4 to 5 Rule
Weak
Strong
Splitting the Perspective
Way of pulling out both drivers and outcomes that match up against the core competencies of the business model
Customer Perspective Customer Growth Timely Delivery Retention Rate Pricing Quality
Customer Satisfaction
Service Reputation
Outcomes Drivers
Key Benefits of Strategy Maps

Articulates how the organization creates value for its constituents and
legitimizing authority Displays key priorities and relationships between outcomes (the "what") and performance enablers or drivers (the "how") Provides a clear view of "how I fit in" for sub-organizations, teams, and individuals "Cascading the scorecard throughout the organization, and clearly mapping the various units and functions back to the organization or agency-wide map is critical to leveraging and ensuring alignment"
Strategy Maps A Better Way to Communicate Strategy

Executive consensus and accountability: Building the map eliminates ambiguity and clarifies responsibility. Educate and Communicate: Build awareness and understanding of organization strategy across the workforce.
Promote Transparency: Ensure Alignment: Each sub-unit and individual link their objectives to the map. Communicate with and educate constituents, partners, oversight bodies, and the general public.
Aligning the Scorecards

Once you have completed your strategy map, make sure it aligns with agencies or divisions you report up to. This overall alignment of scorecards throughout the entire Organization forms the Strategic Management System within IRPS. IRPS Organization Scorecard
Best Business Practices Expand Global Reach Expand the Skill Base
Functional Scorecard
Lean Processes
Improve Asian Footprint
Develop the Workforce
Agency Scorecard
Process Efficiency
Grow Globally
Highly Skilled Workers
Outlet Scorecard
Streamline Processes
Continue to Expand Range
Improve Employee Competencies
Extend the Map into Measurements, Targets and Initiatives
Stakeholder
Strategy Map
Faster Service Access Detailed statement of what is critical to successfully achieving the strategy How success in achieving the strategy will be measured and tracked The level of performance or rate of improvement needed Key action programs required to achieve objectives
Internal Process
Self Service Applications
Lean Processes
Objective Description
Eliminate waste, reworks, and other errors in our processes
Measure
Number of Reworks
Target
2 per setup per month each Outlet Office
Initiative
Lean / Six Sigma
Process and Value Map Analysis
L&G
Web Enable Technologies
Investments
Invest in IT
Alignment of Scorecard Components

Make sure the components of your scorecard fit together. We want to create a tight model for driving execution of your strategy.
Goal
Achieve Agency operational efficiencies with best practices in the private sector
Objective
Reduce Operational Service Costs by 50% over the next 5 years
Measurement
Cost per Outlet Office, Cost per Region, Cost per FTE
Target
5% - Year 1 10% - Year 2 15% - Year 3
Initiative
Activity Based Costing / Management
Reduce identified re-activities within primary processes by 80% over the next 3 years
Waste Volume Charts, Rework Tracking, Cycle Time End to End in S-LX (5 of 7 Regions)
Waste stream reductions of 5% each year, Reworks cut in half for next 3 years, cycle time cut by 75%
Lean / Six Sigma
Examples of Measurements by Perspective

Stakeholder / Customer
Current customer satisfaction level Improvement in customer satisfaction Customer retention rate Frequency of customer contact by customer service Average time to resolve a customer inquiry Number of customer complaints
Internal Processes
Number of unscheduled maintenance calls Production time lost because of maintenance problems Percentage of equipment maintained on schedule Average number of monthly unscheduled outages Mean time between failures
Learning and Growth

Percentage employee absenteeism Hours of absenteeism Job posting response rate Personnel turnover rate Ratio of acceptances to offers Time to fill vacancy
Investments
% of facility assets fully funded for upgrading % of IT infrastructure investments approved # of new hire positions authorized for filling % of required contracts awarded and in place
Making the connection to the Baldrige Criteria

Malcolm Baldrige
Leadership Human Resource Capital Business Results Process Management Strategic Planning
Balanced Scorecard
Learning & Growth Perspective Learning & Growth Perspective Measurements and Targets Internal Process Perspective Strategy Map
Customer Focus
Stakeholder / Customer Perspective
End of Chapter

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Strategic Management process

Balanced score card and strategy

Value proposition and strategies

Value creation = CDV + EDV Value creation strategy : CVP + EVP

Why the Balanced Scorecard?

The enterprise value proposition

Some Basic Principles

Building Alignment into the Planning Process

Board Board of Directors Of directors

Board Strategy Map

finance Enterprise Enterprise Strategy Update finance Strategy update

Enterprise Strategy Map

Corporate Planning Process

Functiona Functional l Strategy Update Strategy update

Corporate Functional Strategy Map Enterprise Functional Strategy Map

Enterprise Strategy Map

SBU Strategy Map

Business Unit Functional Map

Corporate Support Units

customer Vendors/ 6 s Customers alliances

SBU Strategy Map

SBU Strategy Update

Functional StrategyFinance update IT

Business Planning Process

Functional Strategy Update Support Units

Support Unit Services

Four Views of Performance

Strategy can be described as a

series of cause and effect relationships.

strategic to operational activity working on the right things.

Learning & Growth

The Importance of Alignment

Alignment all the Way Through

Investment Management Business Processes

Strategy Map: Capture a Cause Effect Relationship from the Bottom Up

Improved Returns on Investments

Economic Model Process

Reduce Re-Activities thru ABC

Establish Web Based Self Services

Learning & Growth

Expand Global Facility Reach

Facilities and Fixed Assets

Two Special Techniques for Building Strategy Maps

Splitting the Perspective

Key Benefits of Strategy Maps

Strategy Maps A Better Way to Communicate Strategy

Aligning the Scorecards

Improve Asian Footprint

Develop the Workforce

Highly Skilled Workers

Continue to Expand Range

Improve Employee Competencies

Extend the Map into Measurements, Targets and Initiatives

Self Service Applications

Process and Value Map Analysis

Web Enable Technologies

Alignment of Scorecard Components

Lean / Six Sigma

Examples of Measurements by Perspective