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Balanced Scorecard TECMarch 62005
Balanced Scorecard TECMarch 62005
Balanced Scorecard TECMarch 62005
Balanced Scorecard Collaborative, Inc. • 55 Old Bedford Road • Lincoln, MA 01773 • Tel: 781.259.3737 • Fax: 781.259.3389 • bscol.com
Why Do Organizations Struggle So Hard With
Strategy?
1 in 10 organizations
execute their strategies
successfully
BSCol – 01497 COE Document – 02/18/03 ©2003 Balanced Scorecard Collaborative, Inc. • bscol.com 2
#5
MAKE STRATEGY A CONTINUAL PROCESS
The Problem:
The Strategic Management Process Is Missing in Most Organizations
STRATEGY
60% of organizations
don’t link strategy & update the test the 85% of management
budgets strategy hypotheses teams spend less than
Strategic Learning Loop one hour per month on
strategy issues
BALANCED
SCORECARD
BUDGET
BSCol – 01497 COE Document – 02/18/03 ©2003 Balanced Scorecard Collaborative, Inc. • bscol.com 3
Strategy Development or Strategy Execution?
Organizations Need Both
Missed Strategic
Strategic
Strategy Formulation
Opportunity Success
Success
Flawed
Doomed
Doomed From
From
At Risk
The
The Start
Start
Flawed Sound
Strategy Execution
Source: 1
Execution: The Discipline of Getting Things Done, by Larry Bossidy, 2002.
BSCol – 01497 COE Document – 02/18/03 ©2003 Balanced Scorecard Collaborative, Inc. • bscol.com 4
Strategy Execution Challenge
There are generally accepted tools to manage finances, customers,
processes, and people. But what about strategy?
?
TQM
Profitable
Wendy’s Growth City of Charlotte
International
• Mkt. Cap $2.5 --> $4b • Customer Satisfaction =
• Stock Price up 75% 70%
Customer • Public Official Award
Satisfaction
BSCol – 01497 COE Document – 02/18/03 ©2003 Balanced Scorecard Collaborative, Inc. • bscol.com 6
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 strategy
ORGANIZATION:
They mobilized their employees to act
in fundamentally different ways,
guided by the strategy
BSCol – 01497 COE Document – 02/18/03 ©2003 Balanced Scorecard Collaborative, Inc. • bscol.com 7
…Reflecting a “Natural Cause and Effect Logic”
of Business Performance
And Realize
the Vision
Financial
To Drive Financial
Results Success...
Customer
Benefits Needed to Deliver Unique
Sets of Benefits to Customers...
Internal
To Build the Strategic Capabilities..
Capabilities
BSCol – 01497 COE Document – 02/18/03 ©2003 Balanced Scorecard Collaborative, Inc. • bscol.com 8
The Balanced Scorecard Should Tell the Story
of the Strategy
Illustrative Example: Southwest Airlines
Strategic Theme:
Operating Efficiency
Financial
Profitability What will drive operating efficiency?”
More • More customers on fewer planes
Fewer planes
customers
Customer
How will we do that?
Flight Lowest
Is on time prices • Attract targeted customer segments who value
price and on time arrivals
Internal What must the internal focus be?
Fast ground
turnaround • Fast turnaround
Learning
Will our people do that?
Ground crew
alignment • Educate and compensate ground crew
regarding how they contribute to the firm’s
success
• Employee stockholder program
BSCol – 01497 COE Document – 02/18/03 ©2003 Balanced Scorecard Collaborative, Inc. • bscol.com 9
Let’s Take a Minute to Agree Upon Some
Common Vocabulary
Diagram of the cause and effect Statement of
relationships between strategic what
objectives (Strategy Map) strategy How success
must in achieving The level of Key action
Strategic Theme: achieve and the strategy performance programs
Operating Efficiency what’s will be or rate of required to
Financial critical to its measured and improvement achieve
Profitability success tracked needed objectives
More
Fewer planes
customers
Customer
Flight Lowest
Is on time prices
Learning
Ground crew
alignment
BSCol – 01497 COE Document – 02/18/03 ©2003 Balanced Scorecard Collaborative, Inc. • bscol.com 10
ASME Balanced Scorecard Strategy Map
Financial
to serve our core
indispensable to relevance to Industry
customers, such as
Young Engineers & Government
Academia
L2 Develop future
L1 Develop new product and business volunteer leaders
development capabilities through a
culture that is adaptive, continually L3 Strengthen
evolving (risk taking), entrepreneurial environmental L4 Share best
and agile scanning and practices and
competitive lessons learned
intelligence
BSCol – 01497 COE Document – 02/18/03 ©2003 Balanced Scorecard Collaborative, Inc. • bscol.com V 3.0 11/11/03 11